<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 1998.
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
AERCO LIMITED
(Exact name of Registrant as specified in its charter)
JERSEY, CHANNEL ISLANDS
(Jurisdiction of organization)
7359
(Primary Standard Industrial Classification Code Number)
N/A
(I.R.S. Employer Identification Number)
AERCO LIMITED
22 GRENVILLE STREET
ST. HELIER
JERSEY, JE4 8PX
CHANNEL ISLANDS
ATTENTION: COMPANY SECRETARY
(01144 1534) 609 000
(Address and telephone number of Registrant's principal executive offices)
------------------------------------
CORPORATION SERVICE COMPANY
375 HUDSON STREET
NEW YORK, NY 10014-3666
(212) 463-2700
(Name, address and telephone number of agent for service)
Copy to:
THOMAS J. REID, ESQ.
DAVIS POLK & WARDWELL
1 FREDERICK'S PLACE
LONDON EC2R 8AB
ENGLAND
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
Notes due July 15, 2023................ $800,000,000 100% $800,000,000 $222,400
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The Information in this prospectus is not complete and maybe changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued , 1998
$800,000,000
Initial Principal Amount
Offer to Exchange Notes due July 15, 2023
for Any and All Outstanding Notes due July 15, 2023
of
AerCo Limited
The Exchange Offer will expire at 5:00 P.M., New York City time, on the 21st
business day following the commencement of the Offer on , 1998,
unless extended
------------------------
AerCo Limited is offering to exchange four subclasses of Notes due July 15,
2023 (the "New Notes") for each subclass of the issued and outstanding Notes due
July 15, 2023 of AerCo Limited (the "Old Notes" and together with the New Notes,
the "Notes"). The terms of the New Notes are identical to the Old Notes except
that the New Notes will be registered under the Securities Act of 1933, as
amended.
------------------------
THE OLD NOTES WERE LISTED ON THE LUXEMBOURG STOCK EXCHANGE ON JULY 15, 1998. THE
NEW NOTES WILL BE LISTED ON THE LUXEMBOURG STOCK EXCHANGE WHEN THEY ARE
ISSUED.
------------------------
INVESTING IN THE NEW NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
.
------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
, 1998
<PAGE> 3
AERCO HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") A REGISTRATION STATEMENT ON FORM F-4 (INCLUDING ALL AMENDMENTS,
EXHIBITS AND SCHEDULES, THE "REGISTRATION STATEMENT") WITH RESPECT TO THE NEW
NOTES. THIS PROSPECTUS IS PART OF THE REGISTRATION STATEMENT. WHEN THE
REGISTRATION STATEMENT BECOMES EFFECTIVE, AERCO WILL BECOME SUBJECT TO THE
INFORMATION REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). AERCO WILL ALSO MAKE CERTAIN MONTHLY AND QUARTERLY
REPORTS AVAILABLE TO HOLDERS OF THE NOTES. SEE "REPORTS TO NOTEHOLDERS" AND
"AVAILABLE INFORMATION".
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE ACTUAL RESULTS OF AERCO GROUP COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
MARKET DATA AND CERTAIN INDUSTRY FORECASTS USED THROUGHOUT THIS PROSPECTUS
WERE OBTAINED FROM PUBLICLY AVAILABLE INFORMATION AND INDUSTRY PUBLICATIONS.
INDUSTRY PUBLICATIONS GENERALLY STATE THAT THE INFORMATION CONTAINED IN THEM HAS
BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND
COMPLETENESS OF SUCH INFORMATION IS NOT GUARANTEED. SIMILARLY, SUCH INFORMATION,
WHILE BELIEVED TO BE RELIABLE, HAS NOT BEEN INDEPENDENTLY VERIFIED, AND NONE OF
AERCO, GPA, BABCOCK & BROWN OR ANY OF THEIR AFFILIATES MAKES ANY REPRESENTATION
AS TO THE ACCURACY OF SUCH INFORMATION. AERCO, HOWEVER, IS RESPONSIBLE FOR THE
CORRECT EXTRACTION AND REPRODUCTION OF SUCH INFORMATION IN THIS PROSPECTUS.
UNLESS OTHERWISE STATED, ALL MONETARY AMOUNTS ARE EXPRESSED HEREIN IN
UNITED STATES DOLLARS ("$"). VARIOUS PERCENTAGES SET OUT IN THIS PROSPECTUS HAVE
BEEN ROUNDED AND ACCORDINGLY MAY NOT TOTAL EXACTLY.
UNTIL , 1999 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
No person has been authorized to give any information or to make any
representations other than as contained herein, and, if given or made, such
information or representation must not be relied upon as having been authorized
by AerCo. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy by any Person in any jurisdiction in which it is unlawful for
such Person to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any time
subsequent to its date.
THE CONSENT OF THE JERSEY FINANCIAL SERVICES COMMISSION UNDER THE CONTROL
OF BORROWING (JERSEY) ORDER 1958 (AS AMENDED) (THE "1958 ORDER") HAS BEEN
OBTAINED TO THE ISSUE OF THE OLD NOTES AND NEW NOTES BY AERCO.
WHEN THIS DOCUMENT IS CIRCULATED THERE WILL HAVE BEEN DELIVERED A COPY
THEREOF TO THE REGISTRAR OF COMPANIES IN JERSEY IN ACCORDANCE WITH ARTICLE 6 OF
THE COMPANIES (GENERAL PROVISIONS) (JERSEY) ORDER 1992 AND THE CONSENT OF THE
REGISTRAR OF COMPANIES TO ITS CIRCULATION WILL HAVE BEEN GIVEN AND NOT
WITHDRAWN. IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GIVING THESE CONSENTS,
NEITHER THE REGISTRAR OF COMPANIES NOR THE JERSEY FINANCIAL SERVICES COMMISSION
TAKES ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF AERCO OR FOR THE
CORRECTNESS OF ANY STATEMENTS MADE, OR OPINIONS EXPRESSED, WITH REGARD TO IT.
AERCO HAS TAKEN ALL REASONABLE CARE TO CONFIRM THAT THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS TRUE AND ACCURATE IN ALL MATERIAL RESPECTS AND
THAT THERE ARE NO MATERIAL FACTS THE OMISSION OF WHICH WOULD MAKE MISLEADING ANY
STATEMENT HEREIN, WHETHER OF FACT OR OPINION.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary......................................... 4
Summary Consolidated Financial Data............. 23
Risk Factors.................................... 26
Consequences of Failure to Exchange........... 26
Risks Relating to AerCo and Certain Third
Parties..................................... 26
Aircraft Risks................................ 30
Lease Risks................................... 35
Risk of Lessee Default........................ 37
Inability to Terminate Leases or Repossess
Aircraft.................................... 39
Risks Relating to Payments on the Notes....... 40
Capital Markets Risks......................... 41
Certain Bankruptcy Considerations............. 41
Certain Income Tax Risks...................... 43
Loss of Certain Irish Tax Benefits............ 44
The Exchange Offer.............................. 45
Terms of the Exchange Offer; Period for
Tendering Old Notes......................... 45
Procedures for Tendering Old Notes............ 45
Acceptance of Old Notes for Exchange; Delivery
of New Notes................................ 47
Interest on the New Notes..................... 47
Book-Entry Transfer........................... 47
Guaranteed Delivery Procedures................ 47
Withdrawal Rights............................. 48
Certain Conditions to the Exchange Offer...... 48
Exchange Agent................................ 49
Fees and Expenses............................. 49
Transfer Taxes................................ 49
Consequences of Failure to Exchange........... 49
The Parties..................................... 51
AerCo......................................... 51
GPA........................................... 52
Babcock & Brown............................... 54
The Initial Aircraft, Related Leases and
Collateral.................................... 58
The Refinancing of ALPS 94-1 and Acquisition
of the Transferring Companies............... 58
Appraisers' Reports........................... 58
Portfolio Information......................... 59
AerCo Portfolio Analysis...................... 63
Acquisition of Additional Aircraft............ 63
Initial Leases................................ 64
Indemnification and Insurance of the
Aircraft.................................... 66
The Lessees................................... 68
The Commercial Aviation Industry................ 74
Demand for Aircraft........................... 74
New Aircraft Supply........................... 75
Used Aircraft Supply.......................... 76
Operating Leasing............................. 76
Role of Government............................ 76
Technical Regulation.......................... 77
Management of AerCo Group....................... 79
Directors..................................... 79
Beneficial Ownership of the Company........... 80
The Servicer.................................. 81
Corporate Management.......................... 87
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Consolidated Financial Data............ 90
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 93
General....................................... 93
Results of Operations -- Nine Months Ended
March 31, 1998 Compared with Nine Months
Ended March 31, 1997........................ 93
Results of Operations -- Year Ended June 30,
1997 Compared with Year Ended June 30,
1996........................................ 96
Results of Operations -- Year Ended June 30,
1996 Compared with Year Ended June 30,
1995........................................ 98
Financial Resources and Liquidity............. 100
Unaudited Pro-Forma Combined Financial
Information................................... 103
Description of the Notes........................ 110
General....................................... 110
Form.......................................... 111
Registration Requirements..................... 112
Payments and Distributions.................... 113
Assumptions................................... 114
Payment of Principal and Interest............. 122
The Subclass D-1 Notes........................ 149
The Subclass E-1 Notes........................ 150
The Cash Management Agreement................. 151
The Accounts.................................. 151
Reports to Noteholders.......................... 155
Available Information........................... 157
Book-Entry Registration, Global Clearance and
Settlement.................................... 158
Book-Entry Registration; Deposit Agreement.... 158
Global Clearance and Settlement............... 159
CUSIP, ISIN and Common Code Numbers........... 162
Tax Considerations.............................. 163
Irish Tax Considerations...................... 163
Irish Taxation of the AerCo Group............. 165
Certain Jersey Tax Considerations............. 165
United States Taxation........................ 167
ERISA Considerations............................ 169
Plan of Distribution............................ 169
Legal Matters................................... 170
Experts......................................... 170
Index to Financial Statements................... F-1
Independent Auditors' Report.................... F-2
Appendix 1. Index of Defined Terms.............. A-1
Appendix 2. Aircraft Types Data................. A-5
Appendix 3. Monthly Gross Revenues Based on the
Assumptions......................... A-6
Appendix 4. Assumed Portfolio Values for the
Initial Portfolio................... A-8
Appendix 5. Class A Class Percentages........... A-10
Appendix 6. Class B Class Percentages........... A-13
Appendix 7. Class C Target Principal Balances... A-16
Appendix 8. Class D Target Principal Balances... A-19
Appendix 9. Pool Factors........................ A-22
Appendix 10. Extended Pool Factors.............. A-25
</TABLE>
3
<PAGE> 5
SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the Notes and the financial statements
(including the notes) appearing elsewhere in this Prospectus. There are
capitalized terms in this Summary that we define elsewhere in the Prospectus.
You should refer to the index in Appendix 1 to this Prospectus to find where
these terms are defined.
TRANSACTION OVERVIEW
AerCo. AerCo is a special purpose vehicle that owns, directly and
indirectly through its subsidiaries, a portfolio of aircraft assets and related
leases (the "PORTFOLIO"). Our portfolio of aircraft assets consists of 35
aircraft and the related leases.
AerCo Assets. On July 15, 1998, we acquired the capital stock of Aircraft
Lease Portfolio Securitization 94-1 Limited, a Jersey limited liability company
("ALPS 94-1"), and, as a result, we own a portfolio of 25 aircraft (the "ALPS
AIRCRAFT") and the related leases. On July 15, 1998, we also acquired indirectly
10 aircraft (the "TRANSFERRING AIRCRAFT" and, together with the ALPS Aircraft,
the "INITIAL AIRCRAFT") and the related leases from GPA by acquiring the capital
stock of three wholly-owned subsidiaries of GPA Group plc ("GPA Group"). The
Initial Aircraft had an aggregate appraised value of $951.97 million as of March
1, 1998. As of September 30, 1998, all 35 Initial Aircraft were on lease to 26
operators based in 18 countries.
AerCo Notes. On July 15, 1998, we issued $800 million in aggregate
principal amount of the Old Notes in four subclasses: Subclass A-1, Subclass
A-2, Subclass B-1 and Subclass C-1. The terms of the New Notes and the Old Notes
are identical, except for transfer restrictions and registration rights and
special interest provisions relating to the Old Notes.
We also issued two additional subclasses of notes, the Subclass D-1 Notes
and the Subclass E-1 Notes, to GPA.
Servicer. Babcock & Brown Limited ("BABCOCK & BROWN") is the Servicer of
the Initial Aircraft. The Servicer markets the Initial Aircraft for lease or
sale. The Servicer also monitors whether our lessees are complying with the
terms of their leases and performs other aircraft services for us.
Additional Aircraft. We also intend to acquire additional aircraft assets
(the "ADDITIONAL AIRCRAFT" and, together with the Initial Aircraft, the
"AIRCRAFT") and any related leases ("ADDITIONAL LEASES") from various sellers,
which may include GPA. In this Prospectus, we refer to the Initial Leases and
any Additional Leases, together with leases that we may enter into in the future
("FUTURE LEASES"), as the "LEASES". Additional Aircraft may include aircraft,
engines and companies with an ownership or leasehold interest in aircraft or
engines. Additional Aircraft may also have a different servicer from Babcock &
Brown. Under the Servicing Agreement, we have the option to appoint Babcock &
Brown as servicer of Additional Aircraft on the same terms that apply to the
Initial Aircraft.
We will finance the acquisition of Additional Aircraft by issuing
additional notes ("ADDITIONAL NOTES") in up to five classes: Class A; Class B;
Class C; Class D; and Class E. Each class of Additional Notes may have one or
more subclasses. In this Prospectus, we refer to the Additional Notes, the
Notes, the Subclass D-1 Notes and the Subclass E-1 Notes as the "AERCO NOTES".
Each class of Additional Notes will rank equally in right of payment of
principal and interest with the same class of AerCo Notes then outstanding. We
will be able to acquire Additional Aircraft and issue Additional Notes only if
we meet various conditions in the Indenture. The main condition is that we must
receive confirmation from the Rating Agencies that the acquisition will not
result in the lowering or withdrawal of their current ratings of any subclass of
AerCo Notes.
Aircraft Dispositions. We may sell Aircraft pursuant to the exercise of
Purchase Options that have been granted to lessees. Otherwise, we may sell
Aircraft under the Indenture only if the sales proceeds meet target prices for
the Aircraft and the sale does not cause us to breach the Indenture's portfolio
concentration limits.
We may also make more limited dispositions of aircraft ownership. We may
make these more limited transfers with investors who wish to acquire the
depreciation and other tax benefits that may be available to
4
<PAGE> 6
owners of aircraft under the laws of the investor's jurisdiction. These
transactions may take many different forms and may be conducted in various
different jurisdictions at different times. Our ability to sell the tax benefits
related to an Aircraft is also subject to conditions in the Indenture. The main
condition is that we must receive confirmation from the Rating Agencies that the
sale will not result in the lowering or withdrawal of their current rating of
any subclass of AerCo Notes.
Subordination and Ranking. Under the Indenture, we must use the cash flows
we receive from the Initial Leases first to pay taxes and obligations we owe to
lessees and the Servicer, the Administrative Agent, the Cash Manager, the Swap
Providers and our other Servicer Providers. We must then use the remaining cash
flows to make payment of interest and principal due on the Notes according to
the order of priority in the Indenture. You should refer to "-- Overview of
Priority of Payments" and "Description of the Notes -- Payment of Principal and
Interest -- Priority of Payments" for a description of the order in which we
must make interest and principal payments.
Our Relationship with GPA. GPA Group and its subsidiaries own all of the
Subclass D-1 Notes and the Subclass E-1 Notes. We have taken steps to structure
our company and its subsidiaries so that they will be legally independent and
distinct from GPA. If GPA Group or its affiliates become bankrupt or insolvent
and these steps do not work, then a court could consolidate our assets with
those of GPA or we could otherwise be affected by the bankruptcy or insolvency.
In that case, we may not be able to make payments on the Notes.
On June 5, 1998, GPA Group entered into a nonbinding memorandum of
understanding with General Electric Capital Corporation ("GE CAPITAL") and GE
Capital Aviation Services Limited ("GECAS") in relation to a number of matters.
On August 21, 1998, GPA Group entered into definitive agreements with GE Capital
and GECAS in relation to the matters addressed in the memorandum of
understanding (the "1998 RESTRUCTURING"), including the restructuring of the
option granted to GE Capital in 1996 to acquire at any time until October 29,
2001 not less than 90% of the ordinary share capital of GPA Group (the "EXISTING
CALL RIGHT"). On November 4, 1998, GPA's ordinary shareholders approved the 1998
Restructuring. Upon completion of the 1998 Restructuring, GPA will conduct
business under a new name, AerFi Group plc. The 1998 Restructuring will result
in the restructuring of the Existing Call Right such that GE Capital will hold
an option to acquire a passive interest of up to 24.90% in GPA Group. GPA will
also transfer its Airplanes Group Class E Notes to GE Capital.
In connection with the 1998 Restructuring, GPA Group entered into an
Investment Agreement with TPG AerFi. Under the Investment Agreement, TPG AerFi
will acquire an investment in GPA Group consisting of both newly issued and
existing ordinary shares. See "The Parties -- GPA."
Management of AerCo. A majority of our directors are independent of GPA.
Under AerCo's governing documents, however, our directors must unanimously
approve certain important transactions. We have no employees or executive
officers. We therefore rely upon the Servicer, the Administrative Agent, the
Cash Manager and other service providers to provide the services we need to
operate our company.
Insurance. Under the Leases, the Lessees must obtain customary insurance
coverage for liabilities arising out of the operation of their Aircraft. The
Lessees must also obtain customary coverage for damage to Aircraft and the
replacement of spare parts. We also have a contingent liability insurance
program to cover liability both in excess of the coverage provided by a Lessee's
policy and where a Lessee's policy lapses for any reason.
THE EXCHANGE OFFER
Securities Offered......... Up to $800,000,000 initial principal amount of New
Notes. The terms of the New Notes and the Old Notes
are identical, except for transfer restrictions and
registration rights and special interest provisions
relating to the Old Notes.
The Exchange Offer......... Subject to the terms and conditions that we
describe in this Prospectus, we are offering to
exchange $1,000 principal amount of New Notes for
each $1,000 principal amount of Old Notes (the
"EXCHANGE OFFER").
5
<PAGE> 7
You should refer to "The Exchange Offer" for a
description of the procedures for tendering the Old
Notes.
Tenders, Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , unless we extend it.
At any time before the expiration date (the
"EXPIRATION DATE"), you may withdraw any Old Notes
that you have tendered in the Exchange Offer. If we
or the Exchange Agent do not accept any Old Notes
that you have tendered, we or the Exchange Agent
will return the Old Notes to you without expense as
soon as is practicable after the Exchange Offer has
expired or has been terminated.
Federal Income Tax
Consequences............... Neither you nor our company will recognize any
income, gain or loss for U.S. federal income tax
purposes because you exchange your Old Notes. See
"Certain U.S. Federal Income Tax Considerations."
Exchange Agent............. Bankers Trust Company is serving as Exchange Agent
("EXCHANGE AGENT") for the Exchange Offer.
CONSEQUENCES OF EXCHANGING OLD NOTES IN THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the Commission, we believe that any holder of Old Notes (other than
a broker-dealer, as set forth below, or any holder who is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who exchanges
its Old Notes for New Notes pursuant to the Exchange Offer may offer such New
Notes for resale, may resell such New Notes, or otherwise transfer such New
Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act IF:
- the holder acquires the New Notes in the ordinary course of its
business;
AND
- the holder has no arrangement or understanding with any person to
participate in the distribution of the New Notes.
If you wish to accept the Exchange Offer, you must represent to us in the
Letter of Transmittal that the two conditions described above have been met.
If you wish to accept the Exchange Offer, you must also make the following
representations:
- If you are not a broker-dealer, you must represent that you are not
participating in the distribution of the New Notes and that you do not
intend to participate in the distribution.
- If you are a broker-dealer who will not receive New Notes for your own
account, you must represent that neither you nor any person for whom you
receive the New Notes is participating in the distribution and that
neither you nor any such person intends to participate in the
distribution.
- If you are a broker-dealer who will receive New Notes for your own
account, you must represent that you acquired the Old Notes tendered by
you in your market-making or other trading activities. You must also
acknowledge that you will deliver a prospectus if you resell the New
Notes. By making this acknowledgement and delivering a prospectus, you
will not be deemed to admit that you are an "underwriter" within the
meaning of the Securities Act.
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register the New Notes prior to offering or
selling such New Notes. We have agreed to register or qualify the New Notes held
by broker-dealers for offer or sale under the securities or blue sky laws of
such jurisdictions as any such Holder reasonably requests in writing. Unless we
are requested, we do not intend to take any action to register or qualify the
New Notes for resale in any such jurisdictions.
6
<PAGE> 8
If you do not exchange your Old Notes for New Notes in the Exchange Offer,
your Old Notes will continue to be subject to the restrictions on transfer
contained in the legend on the Old Notes. Please refer to "Risk Factors --
Consequences of Failure to Exchange."
THE NOTES
The following table sets forth summary information regarding the Notes.
SUMMARY OF THE NOTES
<TABLE>
<CAPTION>
SUBCLASS A-1 SUBCLASS A-2 SUBCLASS B-1 SUBCLASS C-1
NOTES NOTES NOTES NOTES
------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Aggregate Initial Principal Amount......... $ 340,000,000 $ 290,000,000 $ 85,000,000 $ 85,000,000
Ratings:
DCR...................................... AA AA A BBB
Moody's.................................. Aa2 Aa2 A2 --
Standard & Poor's........................ AA AA A BBB
Interest Rate.............................. LIBOR + 0.19% LIBOR + 0.32% LIBOR + 0.60% LIBOR + 1.35%
Initial Loan to Value(1)................... 63.5% 63.5% 72.1% 80.6%
Initial Loan to Assumed First Year's Net
Revenue(2)............................... 5.97x 5.97x 6.78x 7.59x
Assumed Interest Coverage Ratio(3)......... 2.83x 2.83x 2.41x 2.01x
Assumed Debt Service Coverage Ratio(4)..... 1.78x 1.78x 1.75x 1.75x
Expected Average Life (Years).............. 2.0 3.8 7.7 10.5
Expected Final Payment Date................ July 15, 2000 December 15, 2005 July 15, 2013 July 15, 2013
Final Maturity Date........................ July 15, 2023 July 15, 2023 July 15, 2023 July 15, 2023
</TABLE>
- ---------------
(1) "INITIAL LOAN TO VALUE" represents the initial aggregate principal amount of
each subclass of Notes, plus the initial aggregate principal amount of any
other subclass of Notes that ranks equally or senior in priority of payment
("INITIAL LOAN"), expressed as a percentage of (i) the aggregate Initial
Appraised Value (as of March 1, 1998) of the Initial Aircraft plus $40
million, which is the amount of cash expected to be held by AerCo Group as
part of the liquidity reserve amount (the "LIQUIDITY RESERVE AMOUNT"), less
(ii) the amount of security deposits reimbursable to Lessees. The loan to
value ratio will fluctuate and may be higher or lower than the Initial Loan
to Value ratio. Acquisitions of Additional Aircraft and related issuances
of Additional Notes are not subject to loan to value ratio conditions. An
acquisition of Additional Aircraft may therefore result in an increase in
loan to value ratios to levels in excess of the Initial Loan to Value
percentages above.
(2) "INITIAL LOAN TO ASSUMED FIRST YEAR'S NET REVENUE" means the ratio of
Initial Loan to AerCo Group's assumed Gross Revenue for the 12 months
ending July 9, 1999 less AerCo Group's assumed leasing costs, Servicer
fees, Administrative Agent fees, Cash Manager fees, and other general and
administrative costs assumed to be incurred by AerCo Group in the 12 months
ending July 9, 1999 in accordance with the Assumptions ("ASSUMED FIRST
YEAR'S NET REVENUE"). See "Description of the Notes -- Assumptions". In
calculating Assumed First Year's Net Revenue, we have assumed that AerCo
Group's maintenance expenditures will exactly equal AerCo Group's
maintenance reserve receipts from the Initial Lessees. However, actual net
revenues may be significantly lower than assumed net revenues because,
among other things, the amounts payable under the Leases may not be paid,
and our expenses may be higher than assumed (including as a result of
maintenance expenditures being greater than anticipated). The ratios in
effect for actual periods may therefore be significantly lower than the
ratios above.
(3) "ASSUMED INTEREST COVERAGE RATIO" means Assumed First Year's Net Revenue
expressed as a ratio of First Year's Interest. "FIRST YEAR'S INTEREST"
means (i) the interest assumed to be payable on each subclass of Notes and
each subclass that ranks equally with such subclass in accordance with the
Assumptions for the 12 months ending July 9, 1999 plus (ii) the interest
and minimum principal payments assumed to be payable on each subclass of
Notes that ranks senior in priority of payment to the relevant subclass of
Notes in accordance with the Assumptions for the 12 months ending July 9,
1999. For the same reasons as discussed above in Note 2, the ratios in
effect for actual periods may be significantly lower than the ratios set
forth above. See "Description of the Notes -- Assumptions".
7
<PAGE> 9
(4) "ASSUMED DEBT SERVICE COVERAGE RATIO" means Assumed First Year's Net Revenue
expressed as a percentage of First Year's Interest and Minimum and
Scheduled Principal. "FIRST YEAR'S INTEREST AND MINIMUM AND SCHEDULED
PRINCIPAL" means (i) the interest and minimum and scheduled principal
payments on each subclass of Notes in accordance with the Assumptions for
the 12 months ending July 9, 1999 plus (ii) the interest and minimum and
scheduled principal payments assumed to be payable on each subclass of
Notes that ranks equally or senior in priority of payment with or to the
relevant subclass of Notes in accordance with the Assumptions for the 12
months ending July 9, 1999. For the same reasons as discussed above in Note
2, the ratios in effect for actual periods may be significantly lower than
the ratios set forth above. See "Description of the Notes -- Assumptions".
RATINGS OF THE NOTES
The ratings of the Notes address the likelihood of the timely payment of
interest and the ultimate payment of principal and premium, if any, on the
Notes. Under the Indenture, we can make interest and principal payments on each
subclass of the Notes (i) only after we pay or provide in full for our Expenses
and (ii) only to the extent that we have sufficient Available Collections after
making any payments with a higher priority. Also, the Rating Agencies have not
rated our ability to pay Step-Up Interest on any subclass of Notes or the full
principal amount of any subclass on the Expected Final Payment Date for that
subclass (as indicated in the table above). The ratings assigned to the Notes do
not address the effect of any withholding tax that may be imposed on any
payments under the Leases, the Notes or otherwise. See "Risk Factors -- Certain
Income Tax Risks" and "Tax Considerations".
A rating is not a recommendation to buy, sell or hold Notes since ratings
do not comment as to market price or suitability for a particular investor and
may be subject to revision, suspension or withdrawal at any time by the
assigning Rating Agency. If any Rating Agency subsequently lowers, suspends or
withdraws the rating it has assigned to a subclass of Notes, neither we nor
anyone else has an obligation to obtain or provide any additional support or
credit enhancement for the Notes.
8
<PAGE> 10
THE INITIAL AIRCRAFT AND LESSEES
The following pie charts summarize our exposure as of September 30, 1998 to
various types of Initial Aircraft, Lessees, ages of Initial Aircraft, the
regions and countries in which Lessees are based, and noise restrictions
applying to the Initial Aircraft. We have calculated all percentages by
reference to the Initial Appraised Value (as of March 1, 1998) of the Initial
Aircraft.
[Exposure to Type of Aircraft] [Exposure to Year of Aircraft Manufacture]
[Exposure to Region in which Lessees are Based] [Exposure to Individual Lessees]
[Exposure of Aircraft to Noise Restrictions]
[Exposure to Countries in which Lessees are Based]
9
<PAGE> 11
PAYMENT FLOWS(1)
[CHART -- PAYMENT FLOWS]
- ---------------
(1) Assumes that we do not acquire any Additional Aircraft. See "Summary
Description of the New Notes -- Acquisition of Additional Aircraft".
10
<PAGE> 12
OVERVIEW OF PRIORITY OF PAYMENTS
The following chart summarizes the order of priority of payments on the
Notes, the Subclass D-1 Notes and the Subclass E-1 Notes and other obligations
of AerCo as described in more detail in "Description of the Notes -- Payment of
Principal and Interest -- Priority of Payments".
[Chart -- Overview of Priority of Payments]
11
<PAGE> 13
OWNERSHIP STRUCTURE(1)
[CHART -- OWNERSHIP STRUCTURE]
- ---------------
(1) We may establish additional direct and indirect subsidiaries for the purpose
of directly or indirectly leasing Aircraft from other AerCo subsidiaries
and sub-leasing them to operators where commercial or other reasons make it
desirable to do so.
(2) GPA may dispose of all or a portion of the Class D Notes and Class E Notes
held by it.
(3) We may establish or acquire additional direct and indirect subsidiaries for
the purpose of acquiring Additional Aircraft from various sellers, which
may include GPA. Our acquisition of Additional Aircraft may take the form
of (i) the acquisition of individual Additional Aircraft directly by AerCo
or indirectly by one or more existing or newly-formed subsidiaries
(including ALPS 94-1 and any of its subsidiaries) or (ii) the acquisition
of the shares of one or more aircraft-owning subsidiaries of GPA or other
sellers directly by AerCo or indirectly by one or more of its existing or
newly-formed subsidiaries (including ALPS 94-1 and any of its
subsidiaries).
12
<PAGE> 14
SUMMARY DESCRIPTION OF THE NEW NOTES
AerCo...................... AerCo or the Company means AerCo Limited, a special
purpose limited liability company incorporated
under the laws of Jersey with its registered office
located at 22 Grenville Street, St. Helier, Jersey,
JE4 8PX, Channel Islands, telephone
(+44-1534-609-000). See "The Parties -- AerCo" and
"Management of AerCo Group." AerCo will be resident
in Ireland for tax purposes and will be entitled to
certain corporate tax benefits for Shannon, Ireland
certified companies.
AerCo Group................ AerCo and its subsidiaries, including ALPS 94-1 and
the Transferring Companies. See "The Parties --
AerCo."
Payment Dates.............. We must pay interest monthly in arrears on the
fifteenth day of each month (each a "PAYMENT
DATE"). If the fifteenth day of a month is not a
Business Day, the relevant Payment Date will be the
first following day which is a Business Day.
"BUSINESS DAY" means a day on which (i) U.S. dollar
deposits may be dealt in on the London inter-bank
market and (ii) commercial banks and foreign
exchange markets are open in New York, New York and
London, England.
Record Date................ On each Payment Date, we will make payments of
interest, principal and premium (if any) on each
subclass of Notes to each holder of that subclass
on the Record Date. The Record Date for each
Payment Date is the close of business on the day
that is 15 days prior to such Payment Date, whether
or not such day is a Business Day. See "Description
of the Notes -- Payments and Distributions."
Interest Accrual Period.... An Interest Accrual Period is each period that
begins on a Payment Date and ends on (but excludes)
the next Payment Date. The final Interest Accrual
Period will end on but will exclude the Final
Maturity Date (or, if earlier for any subclass of
Notes, the date such subclass of Notes is paid in
full). See "Description of the Notes -- Payments
and Distributions."
Reference Date............. For the purpose of calculating the interest rate
payable on the Notes, Bankers Trust Company as
Reference Agent will determine LIBOR for the
relevant Interest Accrual Period on the Reference
Date. The Reference Date for each Payment Date is
the day that is two Business Days before the
Payment Date on which such Interest Accrual Period
begins. See "Description of the Notes -- Payment of
Principal and Interest -- Reference Agency
Agreement."
Calculation Date........... Accrued interest will be calculated on outstanding
principal balances (and other amounts on which we
must pay interest) as of the Calculation Date. The
Calculation Date for each Interest Accrual Period
is the fourth Business Day immediately preceding
the Payment Date on which the Interest Accrual
Period begins.
Accrued Interest........... Accrued interest (including Step-Up Interest) that,
as a result of the allocation of Available
Collections, we do not pay on any Payment Date will
bear interest at the then current interest rate of
the relevant Notes.
Sources of Note Payments... Our only source of payment for the Notes and our
other obligations of AerCo Group will be:
- the payments made by the Lessees under the
Leases
13
<PAGE> 15
- proceeds from dispositions, if any, of our
assets
- net payments, if any, under the Swap Agreements
and our other hedging instruments
- interest earned on investments of cash in the
Accounts and
- net cash proceeds received from the sale of
Refinancing Notes.
We will make payments of interest, principal and
premium (if any) only to the extent of amounts on
deposit in the Collection Account on the
Calculation Date relating to each Payment Date net
of (i) Expenses (other than Permitted Accruals in
respect of Modification Payments) then due and
payable or reasonably anticipated to become due and
payable during the next Interest Accrual Period
(the "REQUIRED EXPENSE AMOUNT") and (ii) other
amounts set forth in "Description of the Notes --
Payment of Principal and Interest -- Priority of
Payments" (the "AVAILABLE COLLECTIONS").
Ratings of the Notes....... The Subclass A-1, A-2 and B-1 Notes received
ratings from Duff & Phelps Credit Rating Co.
("DCR"), Moody's Investors Service, Inc.
("MOODY'S") and Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc.
("STANDARD & POOR'S" and, together with DCR and
Moody's, the "RATING AGENCIES") as described above.
The Subclass C-1 Notes have been rated by DCR and
Standard & Poor's. See "Description of the Notes --
General -- Ratings."
Listing.................... The Notes were listed on the Luxembourg Stock
Exchange on July 15, 1998. The New Notes will be
listed subject only to notice of issuance. See
"Listing and General Information."
Form....................... The New Notes will be represented by Global Notes,
each of which will be issued in bearer form only.
The Notes of each subclass will be represented by a
single Global Note. AerCo will deposit the Global
Notes with Bankers Trust Company as Book-Entry
Depositary pursuant to a deposit agreement dated as
of July 15, 1998 (the "DEPOSIT AGREEMENT") between
AerCo and the Book-Entry Depositary. For each
subclass of New Notes, the Book-Entry Depositary
will issue to DTC or its nominee a certificateless
depositary interest representing the principal
amount of the Global Note for such subclass.
Beneficial interests in the CDIs ("BOOK-ENTRY
INTERESTS") will be shown only on, and transfers of
Book-Entry Interests will be effected only through,
records maintained in book-entry form by DTC or its
nominee and its participants (including Euroclear
and Cedel). In this Prospectus, we refer to the
holders of Book-Entry Interests as "HOLDERS". No
person who owns a Book-Entry Interest will have the
right to receive a Definitive Note except under
very limited circumstances. See "Description of the
Notes -- Form" and "Book-Entry Registration, Global
Clearance and Settlement."
Denominations.............. The Book-Entry Interests of each subclass will be
available in minimum denominations of $100,000 and
integral multiples of $1,000 in excess thereof. See
"Description of the Notes."
Status of Notes;
Security................... The New Notes will be direct obligations of AerCo.
Neither the Trustee nor the Holders has any
security interest, mortgage, charge or other
similar interest in any of the Aircraft.
14
<PAGE> 16
Under the Security Trust Agreement dated as of July
15, 1998 among AerCo and its subsidiaries, Bankers
Trust Company, as Security Trustee (the "SECURITY
TRUSTEE"), the Trustee and the service providers
named therein and certain other related security
agreements (collectively, the "SECURITY TRUST
AGREEMENT"), the Security Trustee acquired a
security interest in all of the issued and
outstanding capital stock of ALPS 94-1, AerCo
Ireland, AerCo Ireland II, AerCo USA and certain
other subsidiaries. The Security Trustee also
acquired a security interest, directly or
indirectly, (i) in the interests of each AerCo
Group member in the Leases and in leases within
AerCo Group relating to the Aircraft, (ii) in any
loans extended by AerCo to ALPS 94-1 and its other
subsidiaries and (iii) in any cash (including
investments made with such cash) contained in the
Accounts other than the Tax Defeasance Account. In
addition, AerCo has opened the Accounts (except the
Tax Defeasance Account and, in the case of the
other Accounts, where local legal or regulatory
reasons do not permit) in the name of the Security
Trustee.
Refinancing Notes.......... We will have the ability in certain circumstances
to refinance the Notes by issuing new notes (the
"REFINANCING NOTES"). Such Refinancing Notes will
rank equally with the subclasses of refinanced
Notes and will never rank higher in priority than
the Class A Notes. See "Description of the Notes --
Payment of Principal and Interest -- Indenture
Covenants -- Limitation on Indebtedness".
Principal Payments......... We have determined the expected principal payments
on the Notes based on certain assumptions (such
assumptions, as set forth under "Description of the
Notes -- Assumptions", the "ASSUMPTIONS"),
including, (i) assumptions regarding the timing and
amount of payments under the Initial Leases, (ii)
assumptions regarding the terms of and payments
under Future Leases and (iii) assumptions regarding
our ability to refinance maturing Subclass A-1
Notes by issuing Refinancing Notes. It is highly
likely that the Assumptions will not correspond to
actual experience and as a result the actual
principal payments received by the Holders are
likely to vary from the expected principal payments
in respect of such subclass of Notes. The actual
maturity of any subclass of Notes is also likely to
occur earlier or later than its Expected Final
Payment Date. See "Description of the Notes --
Priority of Payments", "Risk Factors -- Risks
Relating to Payments on the Notes" and "Risk
Factors -- Capital Markets Risks".
Step-Up Interest........... If we do not repay the Subclass A-1 Notes on or
before their Expected Final Payment Date, the
Subclass A-1 Notes will accrue interest thereafter
at a rate equal to the stated interest rate
therefor plus 0.50% per annum ("STEP-UP INTEREST").
We may also issue subclasses of Additional Notes
and may issue Refinancing Notes that by their terms
will accrue Step-Up Interest after their Expected
Final Payment Date. Payments of Step-Up Interest
will be subordinated to certain other obligations
of AerCo, including payment of Scheduled Principal
Payment Amounts with respect to the Notes and the
Class D Notes. The Rating Agencies will not rate
our ability to pay Step-Up Interest. See
"Description of the Notes -- Payment of Principal
and Interest -- Interest".
15
<PAGE> 17
Redemption of the Notes.... Subject to the conditions described in "Description
of the Notes -- Payment of Principal and Interest
-- Redemption", we may redeem each subclass of
Notes on any Payment Date (after giving effect to
Available Collections), in whole or in part, at the
Redemption Price plus accrued but unpaid interest.
If we redeem any subclass of Notes in part, we will
apply the Redemption Price to redeem the Notes in
that subclass pro rata.
The "REDEMPTION PRICE" of the Subclass A-1,
Subclass A-2, Subclass B-1 and Subclass C-1 Notes
will equal:
- the product of the applicable Redemption Premium
set out below for such subclass and the
outstanding principal balance (the "OUTSTANDING
PRINCIPAL BALANCE") of the subclass being
redeemed if we use funds other than Available
Collections (including proceeds from Refinancing
Notes and from third parties) to make the
redemption.
- the Outstanding Principal Balance of the amount
of the subclass of Notes being redeemed, without
premium if we use Available Collections to make
the redemption.
<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PREMIUM
--------------- ---------------------------------------------
SUBCLASS SUBCLASS SUBCLASS SUBCLASS
A-1 NOTES A-2 NOTES B-1 NOTES C-1 NOTES
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
After July 15, 1998........................ 100.50% 101.00% 101.50% 102.50%
On or after July 15, 1999.................. 100.25% 100.75% 101.25% 102.25%
On or after July 15, 2000.................. 100.00% 100.50% 101.00% 102.00%
On or after July 15, 2001.................. -- 100.25% 100.75% 101.75%
On or after July 15, 2002.................. -- 100.25% 100.50% 101.50%
On or after July 15, 2003.................. -- 100.25% 100.25% 101.25%
On or after July 15, 2004.................. -- 100.25% 100.25% 101.00%
On or after July 15, 2005.................. -- 100.00% 100.25% 100.75%
On or after July 15, 2006.................. -- -- 100.25% 100.50%
On or after July 15, 2007.................. -- -- 100.25% 100.25%
On or after July 15, 2008.................. -- -- 100.25% 100.25%
On or after July 15, 2009.................. -- -- 100.00% 100.25%
On or after July 15, 2010.................. -- -- -- 100.25%
On or after July 15, 2011.................. -- -- -- 100.00%
</TABLE>
We may also redeem each subclass of Notes on any
Payment Date, in whole, but not in part, without
premium, if certain adverse tax events affecting
AerCo occur. In that case, the Redemption Price
will equal the Outstanding Principal Balance of the
subclass being redeemed, plus accrued and unpaid
interest. See "Description of the Notes --
Redemption".
Subclass D-1 Notes......... We have also issued Subclass D-1 Notes in an
aggregate principal amount of $80 million. The
Subclass D-1 Notes are direct obligations of the
Company under the Indenture and accrue interest for
each Interest Accrual Period at the rate of 8.50%
per annum, payable monthly in arrears on each
Payment Date.
GPA Group acquired all of the Subclass D-1 Notes in
a transaction exempt from the registration
requirements of the Securities Act. In connection
with the issuance of the Subclass D-1 Notes, AerCo
granted to GPA Group registration rights with
respect to the Subclass D-1 Notes for the purpose
of reselling such notes under the Securities Act.
16
<PAGE> 18
Payments of interest, principal and premium (if
any) on the Subclass D-1 Notes rank junior in
priority of payment to certain payments on the
Notes, including the Minimum Principal Payment
Amount on the Notes, and certain other obligations
of the Company. See "Description of the Notes --
Payment of Principal and Interest -- Priority of
Payments" and "-- The Subclass D-1 Notes".
Subclass E-1 Notes......... We have also issued the Subclass E-1 Notes in an
aggregate principal amount of approximately $112
million. The Subclass E-1 Notes are direct
obligations of the Company under the Indenture and
accrue interest at an inflation-adjusted rate of
20% per annum. Interest on the Subclass E-1 Notes
is payable in two separate amounts -- the "CLASS E
NOTE PRIMARY INTEREST AMOUNT" (15% per annum to the
extent of available cash flows) and the remaining
accrued and unpaid interest on the Class E Notes
(the "CLASS E NOTE ACCRUED INTEREST AMOUNT").
Payments of the Class E Note Primary Interest
Amount rank junior in priority of payment to
payments of interest and certain payments of
principal, including the Minimum Principal Payment
Amounts and the Scheduled Principal Payment
Amounts, on the Notes and the Class D Notes. We
cannot make any payment of the Class E Note Accrued
Interest Amount or any principal or premium (if
any) on the Subclass E-1 Notes until all amounts
outstanding under the Notes and the Class D Notes
have been repaid in full. GPA Group acquired 100%
of the aggregate principal amount of the Subclass
E-1 Notes in a transaction exempt from the
registration requirements of the Securities Act.
See "Description of the Notes -- Payments of
Principal and Interest -- Priority of Payments" and
-- The Subclass E-1 Notes".
Capital Stock.............. AerCo has an authorized share capital of 10,000
ordinary shares, $1 par value per share ("CAPITAL
STOCK"), of which 20 shares have been issued. Juris
Limited and Lively Limited, each a Jersey limited
liability company, (together, the "NOMINEES"), hold
19 shares of the issued Capital Stock for the
benefit of the trustees of AerCo Holding Trust, a
charitable trust established under the laws of
Jersey (the "CHARITABLE TRUST"). GPA Group holds
the remaining share of issued Capital Stock (which
amounts to a 5% interest in AerCo) in order to
assist AerCo and certain of its subsidiaries in
obtaining certain corporate tax benefits for
Shannon, Ireland certified companies.
Appraised Value............ GPA has obtained from Aircraft Information
Services, Inc., BK Associates, Inc. and Airclaims
Limited (the "APPRAISERS") three desktop appraisals
(the "APPRAISALS") of the value of each of the
Initial Aircraft as of March 1, 1998. The
Appraisers ascertained the value of each Aircraft
on the basis of an open, unrestricted, stable
market environment with a reasonable balance of
supply and demand. The Appraisers fully considered
each Aircraft's "highest and best use", presuming
an arm's-length, cash transaction between willing,
able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable
period of time available for marketing. The
Appraisers also adjusted this value to account for
the maintenance status of each Aircraft (with
certain assumptions as to use since the last
reported status). Each value that the Appraisers
ascertained for the Aircraft is a "BASE VALUE".
None of the Appraisals attributes any value to the
17
<PAGE> 19
relevant Lease, the Maintenance Reserves, the
Security Deposits or the Related Collateral (if
any) related to the particular Aircraft.
The aggregate Initial Appraised Value of the
Portfolio as of March 1, 1998 was approximately
$951.97 million. As used in this Prospectus,
"INITIAL APPRAISED VALUE" means the average of the
Base Values of each of the Aircraft, determined in
the case of the Initial Aircraft as of March 1,
1998. In the case of any Additional Aircraft, the
Initial Appraised Value will be determined as of a
date not more than six months prior to the closing
date for the issue of the relevant Additional
Notes.
An appraisal is only an estimate of value and you
should not rely upon it as a measure of realizable
value. The proceeds we receive upon a sale of any
Aircraft are likely to be less than, and may be
significantly less than, the Initial Appraised
Value thereof. See "Risk Factors -- Aircraft Risks
-- Risks of Decline in Appraised Values" and "The
Initial Aircraft, Related Leases and Collateral --
Appraisers' Reports".
Leases..................... As of September 30, 1998, the average remaining
term to release, weighted by Initial Appraised
Value (without giving effect to Purchase Options,
early termination options or extension options), of
the Initial Leases was approximately 33 months. All
of the Initial Leases will expire under their terms
on or prior to November 21, 2007. Therefore, we
must re-lease all of the Initial Aircraft one or
more times before the last Final Maturity Date
(except for Aircraft that we sell before the Final
Maturity Date). Each Initial Lease is an operating
lease for a fixed term under which we retain title
to the Aircraft and substantially all of the risks
and rewards associated with ownership, including
the residual value of the Aircraft (although, as of
September 30, 1998, six of the Initial Leases
contained, and a certain portion of the Future
Leases may contain, Purchase Options). See "Risk
Factors -- Lease Risks -- Inability to Re-Lease
Aircraft on Favorable Terms", "Risk Factors --
Aircraft Risks -- Risk of Failed Deliveries", and
"The Initial Aircraft, Related Leases and
Collateral -- Initial Leases".
Related Collateral......... AerCo Group holds (either directly or through its
agents) (i) security deposits, including cash,
letters of credit and commitment fees that serve as
security, that the Lessee must pay or provide under
the relevant Lease (collectively, "SECURITY
DEPOSITS") and (ii) letters of credit, third party
guarantees or bank guarantees or their cash
equivalent required under the Initial Leases
(collectively, "RELATED COLLATERAL").
Lessees.................... As of September 30, 1998, there were 26 lessees
(the "INITIAL LESSEES" and, together with the
lessees under the Additional Leases and Future
Leases, the "LESSEES") of the Initial Aircraft
pursuant to the Initial Leases in 18 countries.
At September 30, 1998, one of the Lessees (Spanair)
accounted for more than 10% of the Initial Aircraft
by Initial Appraised Value (11.05%). As of the same
date, Lessees (including Spanair) each accounted
for more than 5% of the Initial Aircraft by Initial
Appraised Value, representing in aggregate
approximately 40.88% of the Initial Aircraft by
Initial Appraised Value.
18
<PAGE> 20
Certain Lessees are in a weak financial condition
and some face or have recently faced serious
financial difficulties. As of September 30, 1998,
one Lessee (Canadian Airlines) was being allowed
deferrals of Rental Payments and miscellaneous
payments totaling approximately $0.90 million under
the terms of a restructuring agreement entered into
with ALPS 94-1. At September 30, 1998, $0.43
million of rent and maintenance payments and $0.30
million in respect of security deposits were
outstanding with respect to another North American
Lessee which has been in arrears since May 1998
(representing 3.28% of the Portfolio by Initial
Appraised Value). In addition, Philippine Airlines,
Inc. ("PAL") (representing 4.61% of the Portfolio
by Initial Appraised Value), which has been in
arrears since July 1998, has begun proceedings
before the Philippines Securities and Exchange
Commission for the purpose of rescheduling or
restructuring its payment obligations to its
creditors, including AerCo Group.
As of September 30, 1998, the total amount of
Rental Payments, maintenance reserves and other
miscellaneous amounts (net of agreed deferrals or
other restructurings, default interest and certain
cash in transit) in arrears was approximately $4.97
million (of which $3.90 million was in arrears for
more than 30 days). See "Risk Factors -- Risks of
Lessee Default" and "Risk Factors -- Aircraft Risks
-- Risk of Failed Deliveries".
Collection Account;
Liquidity Reserve Amount... The "COLLECTION ACCOUNT" is the account into which
all Collections received by or on behalf of AerCo
Group in the course of conducting its business,
including payments made by Lessees under the Leases
(including payments by Lessees of Additional
Aircraft) are deposited. Except as noted below, we
must maintain the Collection Account at a balance
at least equal to the Liquidity Reserve Amount.
Currently, the Liquidity Reserve Amount is $40
million plus the amount of Security Deposits. We
currently fund the Liquidity Reserve Amount
entirely with cash from the Collection Account. In
the future, we may also fund the Liquidity Reserve
Amount with amounts drawn under letters of credit
or other credit facilities meeting certain
eligibility requirements under the Indenture.
The purpose of the Liquidity Reserve Amount is to
provide a source of liquidity for (i) AerCo Group's
maintenance obligations, (ii) AerCo Group's
obligation to repay Security Deposits, (iii)
certain other contingencies in respect of the
Aircraft and (iv) payments of interest and
principal on the Notes. The balance of funds in the
Collection Account, together with the amount
available for drawing under any eligible credit
facilities, may fall below the Liquidity Reserve
Amount at any time. If this happens, we may
continue to make all payments which rank prior to
or equal with payments of the Minimum Principal
Payment Amount on the Class D Notes and we may draw
on any eligible credit facility to fund such
payments. See "Description of the Notes -- The
Accounts". As of October 9, 1998, the "MINIMUM
LIQUIDITY RESERVE AMOUNT" was $40 million. The
balance of funds in the Collection Account may fall
below the Minimum Liquidity Reserve Amount at any
time. If this happens, we may continue to pay (i)
Expenses, (ii) interest on the most senior class of
AerCo Notes then Outstanding to avoid an Event of
19
<PAGE> 21
Default and (iii) Swap Payments. See "Description
of the Notes -- Payment of Principal and Interest
-- Priority of Payments".
Expense Account............ The "EXPENSE ACCOUNT" is the account into which the
Cash Manager deposits the Required Expense Amount
(other than certain Expenses transferred directly
to payees from the Collection Account) on each
Payment Date. See "Description of the Notes -- The
Accounts".
Servicer................... Babcock & Brown is the lease and aircraft manager
and the re-leasing and marketing agent for the
Initial Aircraft under the Servicing Agreement. We
have the option to appoint Babcock & Brown as
servicer of Additional Aircraft on the same terms
that apply to the Initial Aircraft. Babcock & Brown
has agreed to perform its services pursuant to the
Servicing Agreement with a view towards maximizing
the present value of the cash flows derived from
the sale or lease of Initial Aircraft, subject to
certain conditions. If a conflict of interest
arises regarding Babcock & Brown's management,
servicing or marketing of Initial Aircraft and
other assets owned, managed, serviced or marketed
by Babcock & Brown, Babcock & Brown has agreed to
perform the services in good faith and without
unreasonable discrimination. See "Risk Factors --
Risks Relating to AerCo and Certain Third Parties
-- Conflicts of Interest of Babcock & Brown".
Cash Manager............... GPA Cash Manager II Limited, a wholly owned
subsidiary of GPA Group ("GPA CASH MANAGER II"),
acts as Cash Manager (the "CASH MANAGER") under a
Cash Management Agreement, dated as of July 15,
1998, among AerCo and its subsidiaries, GPA Cash
Manager II, GPA Group, the Trustee and the Security
Trustee (the "CASH MANAGEMENT AGREEMENT"). The Cash
Manager invests the funds held by AerCo Group in
the Accounts other than the Tax Defeasance Account
in certain prescribed investments on permitted
terms.
Administrative Agent....... GPA Administrative Services Limited, a wholly-owned
subsidiary of GPA Group ("GPA ADMINISTRATIVE
SERVICES") acts as Administrative Agent (the
"ADMINISTRATIVE AGENT") under an Administrative
Agency Agreement, dated as of July 15, 1998, among
AerCo and its subsidiaries, GPA Group and the
Administrative Agent (the "ADMINISTRATIVE AGENCY
AGREEMENT"). The Administrative Agent provides
corporate administrative, accounting and treasury
services to AerCo Group. In addition, it monitors
the performance of the Servicer (including the
Servicer's compliance with the Servicing Agreement)
and reports on such performance to AerCo. See
"Management of AerCo Group -- Corporate
Management".
Additional Aircraft........ Cash flows we derive from the Additional Aircraft,
if any, and the related leases will be available to
satisfy our obligations, including payments of
interest, principal and premium, if any, on the
Notes and any Additional Notes. There is no limit
on the value of Additional Aircraft that we may
acquire. For purposes of acquiring Additional
Aircraft, three independent appraisers will
determine the Initial Appraised Value of such
Additional Aircraft in a manner substantially
similar to that used for calculating the Initial
Appraised Value of the Initial Aircraft. See "Risk
Factors -- Aircraft Risks -- Additional Aircraft
Risks", "The Parties -- AerCo", "The Initial
Aircraft, Related Leases and Collateral --
Acquisition of Additional Aircraft" and
"Description of the Notes -- Payment of
20
<PAGE> 22
Principal and Interest -- Indenture Covenants --
Limitation on Aircraft Acquisitions".
Issuance of Additional
Notes...................... We will finance the acquisition of Additional
Aircraft, if any, by issuing Additional Notes. Each
class of Additional Notes will rank equally in
right of payment of principal and interest with the
same class of AerCo Notes then outstanding. We will
be able to acquire Additional Aircraft and issue
Additional Notes only if we meet various conditions
in the Indenture. The main condition is that we
must receive confirmation from the Rating Agencies
that the acquisition will not result in the
lowering or withdrawal of their current rating of
any subclass of AerCo Notes. See "Description of
the Notes -- Payment of Principal and Interest --
Indenture Covenants -- Limitation on Indebtedness".
Dispositions of Aircraft --
Related Tax Benefits..... AerCo Group may also make more limited dispositions
of aircraft ownership. AerCo Group may engage in
these more limited transfers with investors who
wish to acquire the depreciation and other tax
benefits available to owners of aircraft under the
laws of the investor's jurisdiction. These
transactions ("TAX-RELATED DISPOSITIONS") may take
many different forms. In transactions where the
investor holds title to the Aircraft for any period
of time, AerCo Group may lease the Aircraft back
from the investor. AerCo Group will also take other
measures to ensure that it can recover title to the
Aircraft or use the Aircraft if the investor
becomes insolvent.
We will deposit the proceeds from the sale of any
Aircraft or incidents of aircraft ownership in a
Tax-Related Disposition in the Tax Defeasance
Account. The portion of this amount that must be
repaid to an investor or held on behalf of such
investor pending such a transfer of title will
remain in the Tax Defeasance Account for the
benefit of the investor and will not be available
to pay interest or principal on the Notes. The
remaining portion of such purchase price or other
proceeds will be transferred to the Collection
Account in the relevant month and will form part of
Available Collections for such month.
Our ability to sell the tax benefits related to an
Aircraft is also subject to conditions in the
Indenture. The main condition is that we must
receive confirmation from the Rating Agencies that
the sale will not result in the lowering or
withdrawal of their current rating of any subclass
of AerCo Notes.
Under the Indenture, AerCo's liability to an
investor under any representations, warranties,
covenants or indemnities (including those relating
to taxation matters) that it makes in connection
with any Tax-Related Disposition may only be (i) an
obligation that is subordinated in priority of
payment to all payments of interest, principal and
premium, if any, on the Class A, Class B, Class C
and Class D Notes or (ii) an Expense obligation
that has been fully counter-indemnified by a person
whose senior, unsecured indebtedness has received a
rating by each of the Rating Agencies that is no
lower than the current rating of the most senior
subclass of AerCo Notes then outstanding. AerCo
Group's liability to any person providing such
counter-indemnity must also be subordinated to all
payments of interest, principal and premium (if
any) on the Class A, Class B, Class C and Class D
Notes. AerCo Group will
21
<PAGE> 23
not be responsible for professional and other
expenses incurred in connection with the
structuring and negotiation of any Tax-Related
Dispositions. See "Risk Factors -- Aircraft Risks
-- Risks Relating to Dispositions of
Aircraft-Related Tax Benefits" and "Description of
the Notes -- Payment of Principal and Interest --
Indenture Covenants -- Limitation on Aircraft
Sales".
Operating Covenants........ We may not enter into any Future Lease (other than
a renewal, extension or restructuring of any Lease)
unless, after we enter into the Future Lease, we
are in compliance with, geographic and other
concentration limits and certain other guidelines
(the "RE-LEASING GUIDELINES"). However, we may
enter into a Future Lease not meeting such criteria
if the Rating Agencies have confirmed in writing
that entering into the Lease will not result in the
lowering or withdrawal by them of their current
ratings on any subclass of AerCo Notes then
outstanding. See "Description of the Notes --
Payment of Principal and Interest -- Operating
Covenants".
Certain Taxation Matters... We have no obligation to make any additional
payments on the Notes for any withholding or
deduction from payments on the Notes that must be
made under applicable law. If any withholding or
deduction is required on the Notes and we do not
redeem the Notes, the net amount of interest paid
on the Notes will be reduced by the amount of such
withholding or deduction. Also, none of our
subsidiaries has any obligation under any
intercompany loans to make any additional payments
for any withholding or deduction that must be made
from payments on the intercompany loans under
applicable law. See "Tax Considerations".
ERISA Considerations....... The Notes are eligible for purchase under certain
circumstances by an employee benefit plan or other
plan subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
and/or Section 4975 of the United States Internal
Revenue Code of 1986, as amended (the "CODE"). See
"ERISA Considerations".
22
<PAGE> 24
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below (THE "ALPS 94-1
SUMMARY CONSOLIDATED FINANCIAL DATA") have been extracted or derived from the
audited consolidated financial statements of ALPS 94-1 for each of the fiscal
years ended June 30, 1995, 1996 and 1997, which have been audited by Arthur
Andersen, independent chartered accountants, included elsewhere in this
Prospectus (the "ALPS 94-1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS") and the
unaudited interim consolidated financial statements of ALPS 94-1 for the nine
months ended March 31, 1997 and 1998 included elsewhere in this Prospectus (the
"ALPS 94-1 INTERIM CONSOLIDATED FINANCIAL STATEMENTS" and, together with the
ALPS 94-1 Audited Consolidated Financial Statements, the "ALPS 94-1 CONSOLIDATED
FINANCIAL STATEMENTS"). Accordingly, such summary consolidated financial data
include data relating to the 27 aircraft originally acquired by ALPS 94-1 from
GPA in August 1994 (the "ORIGINAL ALPS 94-1 AIRCRAFT") but do not include
financial data relating to the Transferring Aircraft (other than the A300-B4-200
aircraft purchased by GPA from ALPS 94-1 which was sold to AerCo Group as one of
the Transferring Aircraft). Moreover, the ALPS 94-1 Summary Consolidated
Financial Data include data relating to the Boeing 767-300ER aircraft that was
purchased by GPA from ALPS 94-1 prior to the closing of the Offering and is not
among the Initial Aircraft. AerCo believes that the ALPS 94-1 Summary
Consolidated Financial Data set forth below are an appropriate presentation
because: (i) AerCo was incorporated principally for the purpose of effecting the
refinancing and assuming ownership of ALPS 94-1, (ii) the Initial Aircraft
include 26 of the 27 Original ALPS 94-1 Aircraft and the ongoing aircraft
leasing activities of AerCo Group will be substantially similar to those
conducted by ALPS 94-1 and (iii) the Initial Aircraft of ALPS 94-1 (including
the A300-B4-200 aircraft referred to above) represent approximately 79% by
Initial Appraised Value of the Initial Aircraft of AerCo Group. Such data
exclude financial data relating to nine of the Transferring Aircraft and
therefore such data are not indicative of, and will not be comparable with, the
consolidated financial results of AerCo Group during periods since July 15,
1998.
Financial statements for the Transferring Aircraft (excluding the
A300-B4-200 aircraft referred to above, the "NINE TRANSFERRING AIRCRAFT") for
the year ended June 30, 1997 and for the nine months ended March 31, 1998 are
included elsewhere in this Prospectus. Such financial statements for the year
ended June 30, 1997 have been audited by Arthur Andersen, independent chartered
accountants. See "Experts". Such financial statements for the nine months ended
March 31, 1998 have not been audited. Such financial statements are presented on
the basis that the Nine Transferring Aircraft have been operated separately from
GPA for all periods presented. Investors should note, however, that the
companies owning the Nine Transferring Aircraft did not conduct any independent
business operations in the periods presented.
Also included elsewhere in this Prospectus is certain unaudited pro forma
combined financial information for AerCo Group for the fiscal year ended June
30, 1997 and the nine months ended March 31, 1998. Such pro forma combined
financial information give effect, among other things, to the issuance by AerCo
of the AerCo Notes, the refinancing of ALPS 94-1, the sale of the Boeing
767-300ER and certain other transactions described herein. Such pro forma
combined financial information has not been audited. See "Unaudited Pro Forma
Combined Financial Information".
ALPS 94-1
The ALPS 94-1 Summary Consolidated Financial Data set out below have been
extracted or derived from the ALPS 94-1 Consolidated Financial Statements. ALPS
94-1 did not conduct any business operations prior to its acquisition of the
Original ALPS 94-1 Aircraft from GPA in 1994. Accordingly, the financial data
for the fiscal year ended June 30, 1995 only includes trading data for the
approximately ten-month period from August 24, 1994 to June 30, 1995. These
financial statements have been prepared in accordance with generally accepted
accounting principles in the United Kingdom ("U.K. GAAP") which differ in
certain significant respects from generally accepted accounting principles in
the United States ("U.S. GAAP"). For a discussion of the principal differences
and a reconciliation from U.K. GAAP to U.S. GAAP of shareholders' equity and net
income or loss at and for the fiscal years ended June 30, 1995, 1996 and 1997
and at March 31, 1998 and for the nine months ended March 31, 1997 and 1998, see
Notes 20, 21, 22 and 23 to the ALPS 94-1 Audited Consolidated Financial
Statements and Notes 1, 2 and 3 to the ALPS 94-1 Interim Consolidated Financial
Statements.
23
<PAGE> 25
ALPS 94-1 CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
---------------------------- -----------------
1995(2) 1996 1997 1997 1998
------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Revenues
Aircraft leasing........................ 86,803 102,022 102,121 76,263 76,098
Expenses
Depreciation............................ (18,158) (17,978) (38,062) (28,569) (28,569)
Additional depreciation................. -- -- (34,385) (34,385) --
Provision for permanent diminution in
aircraft value....................... -- (12,000) -- -- (8,720)
Net interest expense.................... (64,206) (73,576) (71,037) (53,816) (52,340)
Other expenses.......................... (3,702) (5,581) (5,053) (4,123) (4,278)
Operating profit/(loss)................... 737 (7,113) (46,416) (44,630) (17,809)
Reduction in indebtedness................. -- 6,647 46,273 44,630 17,824
Profit/(Loss) before taxes................ 737 (466) (143) -- 15
Taxes..................................... (69) (200) 143 -- (15)
Dividends................................. (2) -- -- -- --
Net income/(loss)......................... 666 (666) -- -- --
U.S. GAAP(3)
Depreciation.............................. (16,442) (32,338) (32,339) (24,254) (24,254)
Provision for permanent diminution in
aircraft value.......................... -- (12,000) -- -- (520)
Reduction in indebtedness................. -- -- 5,258 5,258
Net loss.................................. (14,850) (22,028) (907) (672) (5,309)
</TABLE>
ALPS 94-1 CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30(1) MARCH 31(1)
-------------------------------- -----------
1995(2) 1996 1997 1998
--------- --------- -------- -----------
($ THOUSANDS)
<S> <C> <C> <C> <C>
U.K. GAAP
Aircraft, net of accumulated depreciation and
provision for permanent diminution in
aircraft value............................. 957,021 927,043 854,596 818,440
Total assets................................. 1,038,691 1,019,671 949,033 911,522
Indebtedness............................... (976,494) (946,729) (871,495) (830,321)
Provision for maintenance.................. (29,405) (39,544) (46,247) (46,516)
Total liabilities............................ (1,038,025) (1,019,671) (949,033) (911,522)
Shareholders' equity......................... 666 -- -- --
U.S. GAAP(3)
Aircraft, net of accumulated depreciation and
provision for permanent diminution in
aircraft value............................. 811,149 766,811 734,472 710,831
Indebtedness................................. (976,494) (953,376) (919,157) (895,807)
Shareholders' equity......................... (162,438) (184,466) (185,373) (190,682)
</TABLE>
24
<PAGE> 26
ALPS 94-1 CONSOLIDATED STATEMENT OF CASH FLOWS AND OTHER DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
----------------------------- -----------------
1995(2) 1996 1997 1997 1998
-------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Cash paid in respect of interest......... (51,147) (64,002) (59,872) (45,952) (42,975)
Net cash provided by operating activities
(after payment of interest)............ 66,526 45,532 45,119 29,371 36,109
Net cash used in investing activities.... (953,859) -- -- -- (1,133)
Net cash provided by(used in) financing
activities............................. 967,496 (36,025) (43,494) (31,909) (35,690)
Net movements in cash.................... 80,163 (25,803) (2,886) (6,808) 1,026
</TABLE>
SELECTED RATIOS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
----------------------------- -----------------
1995(2) 1996 1997 1997 1998
-------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Ratio of Combined Earnings to Combined
Fixed Charges(4)....................... 1.011 0.994(5) 0.998(5) 1.000 1.000
U.S. GAAP
Ratio of Combined Earnings to Combined
Fixed Charges(4)(5).................... 0.770 0.703 0.985 0.988 0.900
</TABLE>
- ---------------
(1) The financial statements of ALPS 94-1 are stated in U.S. dollars which is
the principal operating currency of ALPS 94-1 and the aviation industry.
(2) ALPS 94-1 did not conduct any business operations prior to its acquisition
of aircraft from GPA in August 1994. Accordingly, the financial data for the
year ended June 30, 1995 only includes trading data for the approximately
10-month period from August 24, 1994 to June 30, 1995.
(3) For a discussion of the differences between ALPS 94-1's results of
operations and financial position under U.S. GAAP compared with U.K. GAAP,
see Notes 20, 21, 22 and 23 to the Audited ALPS 94-1 Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- Year Ended June 30,
1996 Compared With Year Ended June 30, 1995 -- Differences between U.K. GAAP
and U.S. GAAP".
(4) Earnings include pretax income from continuing operations plus fixed
charges. Fixed charges are the total of (i) interest, whether expensed or
capitalized, (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized and (iii) such
portion of rental expense as can be demonstrated to be representative of the
interest factor in the particular case.
(5) Ratio of less than one indicates that earnings are inadequate to cover fixed
charges. The amount by which fixed charges exceeded earnings (i) for the
years ended June 30, 1996 and 1997 under U.K. GAAP was $0.47 million and
$0.14 million, respectively, and (ii) for the years ended June 30, 1995,
1996 and 1997 and the nine months ended March 31, 1997 and 1998 under U.S.
GAAP was $14.78 million, $21.83 million, $1.05 million, $0.67 million and
$5.29 million, respectively.
25
<PAGE> 27
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, we may not be able to make the required payments on the Notes either
at or before maturity. In addition, it is possible that the rental payments
under the Leases may not be adequate to make the required payments on the Notes.
This Prospectus also contains forward-looking statements that involve risks
and uncertainties. In most cases, you can identify forward-looking statements by
terminology such as "may", "should", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential" or "continue" or the negative
of such terms or similar terminology. Our actual results could differ materially
from those anticipated in these forward-looking statements. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined below.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your Old Notes for New Notes under the Exchange
Offer, then you will continue to be subject to the transfer restrictions on the
Old Notes as set forth in the Offering Memorandum distributed in connection with
the offering of the Old Notes. In general, the Old Notes may not be offered or
sold, unless they are registered or exempt from the Securities Act and
applicable state securities laws. We do not intend to register the Old Notes
under the Securities Act. You should refer to "Summary -- Consequences of
Exchanging Old Notes in the Tender Offer" and "The Exchange Offer" for
information about how to tender your Old Notes.
The tender of Old Notes under the Exchange Offer will reduce the principal
amount of the Old Notes outstanding, which may have an adverse effect upon, and
increase the volatility of, the market price of the Old Notes due to a reduction
in liquidity.
RISKS RELATING TO AERCO AND CERTAIN THIRD PARTIES
RELIANCE ON SUBSIDIARIES TO MAKE PAYMENTS
Substantially all of AerCo's own assets are loans to ALPS 94-1 (which owns
25 Aircraft), AerCo Ireland (which owns 7 Aircraft), AerCo Ireland II (which
owns 1 Aircraft) and AerCo USA Inc. (which owns 2 Aircraft) (collectively, the
"AIRCRAFT-OWNING SUBSIDIARIES") and the shares of ALPS 94-1 and the other
Aircraft-Owning Subsidiaries. If AerCo Group acquires Additional Aircraft, it
may do so indirectly by acquiring additional aircraft-owning subsidiaries.
Accordingly, our ability to make payments on the Notes will be affected by the
imposition of withholding or other taxes on payments within AerCo Group,
principally on payments by ALPS 94-1 to us or our other subsidiaries on any
inter-company loans and the payment by our various subsidiaries of amounts due
to other creditors, including lessees and tax authorities. There is a
significant risk that we will be unable to make payments on the Notes will be
adversely impacted if obligations to lessees and other creditors exceed our
expectations or unforeseen and significant tax liabilities arise.
LACK OF SECURITY INTEREST IN THE AIRCRAFT
Neither of the Trustee, the Security Trustee nor any Noteholder has any
security interest, mortgage, charge or other similar interest in any of the
Aircraft. If there is an Event of Default, they will not have available to them
certain rights would have been available if they had a security interest in the
Aircraft.
POSSIBLE CONTINGENT LIABILITIES OF ALPS 94-1 AND OTHER SUBSIDIARIES
We own the Initial Aircraft and Initial Leases through the ownership of
100% of the issued and outstanding capital stock of ALPS 94-1 and the other
Aircraft-Owning Subsidiaries. We and, in the case of
26
<PAGE> 28
the Transferring Companies, GPA have taken steps to ensure that there are no
material contingent liabilities related to the Aircraft-Owning Subsidiaries or
any other subsidiary acquired. However, it is possible that pre-transfer
liabilities will be identified after the date of acquisition of such subsidiary.
The vendor of the capital stock of ALPS 94-1 made no representations and
warranties regarding any actual or contingent liabilities, of ALPS 94-1 in
connection with the acquisition of the capital stock of ALPS 94-1 by us. GPA
Group will indemnify AerCo Group against certain losses suffered by AerCo Group
(including any Transferring Company or any of their directors) as a result of
the breach of GPA Group's representations and warranties in the Stock Purchase
Agreement. Many of the representations and warranties are qualified by standards
relating to their materiality in relation to AerCo Group. The maximum amount
that may be recovered from GPA Group as a result of the indemnification or the
breach of representation or warranty contained in the Stock Purchase Agreement
will be approximately $185 million. In addition, GPA Group's representations and
warranties contained in the Stock Purchase Agreement will survive until the
third anniversary of the closing date of the Stock Purchase Agreement.
DELEGATION OF RESPONSIBILITIES
Except to the limited extent described in this Prospectus, neither the
Trustee nor any Noteholder has any right to participate in the management of
AerCo Group. In particular, they cannot supervise the functions relating to the
Leases and the re-lease of the Aircraft, which have been delegated to the
Servicer under the Servicing Agreement. See "Management of AerCo Group --
Corporate Management", "Description of the Notes -- Payment of Principal and
Interest -- Indenture Covenants" and "-- Events of Default and Remedies".
We have no executive management resources of our own (although we have a
Board of Directors. We therefore rely upon the Servicer, the Administrative
Agent, the Cash Manager and other service providers for all asset servicing,
executive and administrative functions under the service provider agreements. We
have retained Babcock & Brown as the Servicer and wholly owned subsidiaries of
GPA Group as the Administrative Agent and Cash Manager. However, we can give no
assurance that we will continue our arrangements with these organizations or
that the organizations will continue their relationship with us until the Notes
are paid in full. Failure of these service providers to perform their
contractual obligations could have an adverse effect on AerCo Group's
operations. As a result, we may not be able to repay the Notes. If the Servicer,
the Administrative Agent or the Cash Manager resigns or is terminated, we cannot
give any assurance that suitable replacement service providers could be found,
or found in a timely manner. Even if we found suitable replacement service
providers, we may not be able to engage them on suitable terms. Additionally,
our appointment of a replacement service provider may cause a lowering or
withdrawal in the then current rating relating to the Notes. The loss of the
Servicer, the Administrative Agent or the Cash Manager under these circumstances
could have an adverse effect on our ability to make payments on the Notes.
The Servicing Agreement, unless extended, expires in 2008, which is five
years before the Expected Final Payment date of the last Notes to be repaid. If
we cannot extend the existing Servicing Agreement or find a replacement
servicer, we may be unable to re-lease or sell aircraft. As a result, we may be
unable to make payments on the Notes.
CONFLICTS OF INTEREST OF BABCOCK & BROWN
Babcock & Brown may have conflicts of interest in performing its
obligations to provide management, servicing, marketing and other services to us
because it also provides management, servicing, marketing and other services to
others, including its affiliates.
Such conflicts may be particularly acute in situations involving Nomura
Babcock & Brown Co., Ltd. ("NBB"), in which Babcock & Brown's affiliate, Babcock
& Brown Inc., held, until March 31, 1998, a 20% interest. Babcock & Brown and
its affiliates (the "BABCOCK & BROWN GROUP") will have trading, marketing and
investment arrangements with NBB in the future. Babcock & Brown Group expects to
acquire additional aircraft for investment groups organized by NBB and for
itself and/or NBB. The Babcock & Brown Group
27
<PAGE> 29
will likely continue providing advisory services to other parties, including
airlines and aircraft lessors. The objectives of the members of the Babcock &
Brown Group in the marketing of aircraft for re-lease or sale may be in conflict
with our objectives. Babcock & Brown has not agreed to give preference to our
Aircraft over the aircraft it manages, services or markets for others or that it
may own in the future.
As of September 30, 1998, the portfolio owned or managed by Babcock & Brown
and its affiliates ("SERVICER MANAGED PORTFOLIO") contained 63 aircraft. The
Babcock & Brown Group is likely to own or manage additional new and used
aircraft and may provide other aircraft services to various third parties. The
Babcock & Brown Group may also manage, form or sponsor other aircraft or
equipment and ownership or leasing programs, some of which may have investment
objectives that are the same as, or similar to, ours. The aircraft in these
programs may compete with our Aircraft when they are being marketed for re-lease
or sale, and may create additional conflicts of interest.
As of September 30, 1998, nine of our Lessees leased other aircraft from
other aircraft owners or investors whose aircraft are managed by the Babcock &
Brown Group. The Babcock & Brown Group also arranges financings and leases and
provides advisory and other aircraft services to many airlines around the world,
including future lessees. These multiple relationships with a Lessee or future
lessee may affect Babcock & Brown's performance as Servicer or the relationship
between us and the Lessees or future lessees.
The conflicts of interest resulting from the management, servicing,
marketing and other services provided by the Babcock & Brown Group to others may
be irreconcilable in certain circumstances.
Babcock & Brown has agreed to perform its services with reasonable care and
diligence as if it were the owner of the Initial Aircraft and in a manner
consistent with the customary commercial practice of a prudent international
aircraft lessor in the management, servicing and marketing of commercial jet
aircraft and related assets (the "BABCOCK & BROWN SERVICES STANDARD"). If a
conflict of interest arises regarding Babcock & Brown's management, servicing or
marketing of (a) any two Initial Aircraft or (b) any Initial Aircraft and other
assets then owned, managed, serviced or marketed by the Babcock & Brown Group,
Babcock & Brown is required to notify us and perform the services in good faith.
If (a) the two particular Initial Aircraft or (b) the Initial Aircraft and other
assets then owned, managed, serviced or marketed by Babcock & Brown are
substantially similar in terms of objectively identifiable characteristics that
are relevant for purposes of the particular services to be performed, Babcock &
Brown will not discriminate (i) among the Initial Aircraft or (ii) between any
of the Initial Aircraft and any other aircraft then owned, managed, serviced or
marketed by Babcock & Brown on an unreasonable basis (the "BABCOCK & BROWN
CONFLICTS STANDARD").
Where a conflict of interest arises regarding a particular Initial Aircraft
or Lease, Babcock & Brown is entitled to propose solutions to the conflict of
interest. The proposed solutions may include the withdrawal of Babcock & Brown
as Servicer for the Initial Aircraft or Lease during the negotiation of the
transaction where the conflict of interest originated. If Babcock & Brown
withdraws, we will appoint an independent representative to act on our behalf
during the negotiation. If we cannot resolve the conflict to our satisfaction
after negotiating with Babcock & Brown in good faith, we may terminate it as
Servicer for the relevant Initial Aircraft or Lease.
LIMITATION ON THE SERVICER'S LIABILITY
Babcock & Brown is not liable to any person, other than AerCo Group to the
limited extent described below, for any damages, losses, liabilities or expenses
(including reasonable legal fees, expenses and related charges and costs of
investigation but excluding management time or overhead expenses) ("LOSSES")
relating to
(i) the sale, lease or purchase of an Initial Aircraft on less favorable
terms than might have been achieved at any time, so long as such
transactions were entered into on the basis of a commercial decision or
recommendation of Babcock & Brown in accordance with the Babcock & Brown
Services Standard,
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<PAGE> 30
(ii) Babcock & Brown's obligation to apply the Babcock & Brown Conflicts
Standard in performing its services, except, in either of case (i) or
(ii), where the Losses are finally adjudicated to have been caused
directly by their negligence, recklessness, wilful misconduct or
fraud,
(iii) the ownership, operation, maintenance, acquisition, leasing,
financing, refinancing or sale of any Initial Aircraft, or any
action, or failure to act on the part of any person at any time,
prior to the effective date of the Servicing Agreement,
(iv) any action that AerCo, the Cash Manager or the Administrative Agent,
instructs Babcock & Brown to take, limit or terminate despite Babcock
& Brown's contrary recommendation,
(v) the refusal by AerCo Group to take any action that Babcock & Brown
recommends,
(vi) circumstances where any person within AerCo Group has received amounts
sufficient to cover such Losses, or
(vii) the gross negligence, recklessness, fraud or wilful misconduct of any
person within AerCo Group.
AerCo Group will indemnify Babcock & Brown and its affiliates and
representatives on an after-tax basis for any Losses that may be asserted
against them relating to:
(a) Babcock & Brown's performance under the Servicing Agreement,
(b) errors in judgment or omissions by Babcock & Brown or any action
taken, limited or terminated in accordance with AerCo's, the Cash
Manager's or the Administrative Agent's instructions, except where the
Losses are finally adjudicated to have been caused by Babcock &
Brown's negligence, recklessness, fraud or wilful misconduct in
performing its obligations, or
(c) any of the circumstances under which Babcock & Brown would not be
liable to AerCo as described above.
Babcock & Brown will indemnify AerCo Group on an after-tax basis for Losses
arising from the performance of its services, where the Losses are finally
adjudicated to have (i) been caused directly by the negligence, recklessness,
fraud or wilful misconduct of Babcock & Brown or any of its affiliates or
delegates in respect of its obligations to apply the Standard of Care or the
Conflicts Standard in connection with the performance of the Services or (ii)
directly resulted from a breach by Babcock & Brown of the express terms and
conditions of the Servicing Agreement. Babcock & Brown's obligation to indemnify
AerCo shall exclude circumstances where any person within AerCo Group has
already received an amount sufficient to cover such Losses and shall be limited
to a maximum amount of $21 million in the aggregate with respect to any and all
Losses, except for Losses arising from fraud on the part of Babcock & Brown, for
which Babcock & Brown will have unlimited liability.
The duties and obligations of Babcock & Brown are limited to those
expressly set forth in the Servicing Agreement and they will not have any
fiduciary or other implied duties or obligations to us or any other person,
including any Noteholder.
CONFLICTS OF INTEREST OF GPA
GPA Group or a GPA subsidiary holds all of our Subclass D-1 and Subclass
E-1 Notes and may acquire additional subclasses of Class D and Class E Notes in
connection with the acquisition of Additional Aircraft. GPA Administrative
Services acts as Administrative Agent and GPA Cash Manager II acts as Cash
Manager for AerCo Group. GPA also acts as administrative agent and cash manager
for Airplanes Limited and Airplanes U.S. Trust (collectively, "AIRPLANES
GROUP"). GPA currently holds approximately 96% of Airplanes Group's Class E
Notes which entitles GPA Group to certain residual value benefits of the fleet
of 214 aircraft owned by Airplanes Group. Completion of the 1998 Restructuring
will result in GE Capital acquiring GPA's outstanding Airplanes Group Class E
Notes. GPA also owns and leases a significant fleet of aircraft for its own
account See "The Parties -- GPA".
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GPA Administrative Services may have conflicts of interest in performing
its obligations to AerCo Group resulting from GPA's interests in its and
Airplanes Group's aircraft or its activities as administrative agent and cash
manager to Airplanes Group. For example, there may be a conflict of interest
when GPA Administrative Services advises us on our annual budget and our
decisions to re-lease or sell Aircraft.
GPA Administrative Services is obligated to devote the same amount of time
and exercise the same level of skill and care in performing its services, as it
would if it were acting on its own behalf (the "ADMINISTRATIVE AGENT'S SERVICES
STANDARD"). If any conflicts of interest arise regarding GPA Administrative
Services' role as Administrative Agent, it must report such conflict promptly to
us and to treat us equally with the entities giving rise to the conflict of
interest. In addition, GPA Administrative Services may not violate the
Administrative Agent's Services Standard or any of its covenants under the
Administrative Agency Agreement.
GPA Cash Manager II has limited discretion in its role as Cash Manager.
Therefore, it is unlikely that conflicts of interest in connection with its
services will arise relative to GPA's other interests.
CONFLICTS OF INTEREST OF THE BOARD OF DIRECTORS
Our directors may have conflicts of interest resulting from other
relationships in the aviation industry. See "Management of AerCo Group --
Directors".
LACK OF SEPARATE REPRESENTATION
We are represented by the same Jersey, Irish and United States legal
counsel to GPA Group, and we expect that the multiple representation will
continue in the future. Since we do not have independent legal representation,
the terms of the agreements and other arrangements negotiated between us and GPA
Group could disproportionately benefit one party over the other. If a
significant dispute arises in the future between us and GPA or any of our
affiliates, we will retain separate counsel to represent us in these matters.
AIRCRAFT RISKS
CYCLICALITY OF SUPPLY OF AND DEMAND FOR AIRCRAFT
GENERAL FACTORS CAUSING FLUCTUATION IN SUPPLY AND DEMAND. The aircraft
leasing market is affected by various factors that are outside our control, such
as:
-- interest rates, credit availability, fuel costs and other general
economic conditions affecting lessee operations;
-- manufacturer production levels;
-- passenger demand;
-- retirement and obsolescence of aircraft models;
-- manufacturers merging or exiting the industry or ceasing to produce
aircraft types;
-- re-introduction into service of aircraft previously in storage; and
-- governmental regulation and air traffic control infrastructure
constraints.
The supply of commercial jet aircraft for lease or sale has historically
undergone periodic cycles of oversupply and undersupply, producing sharp
decreases and increases in aircraft values and lease rates. At the times when
the Aircraft are being marketed for re-lease or sale, conditions in the market
for commercial jet aircraft may not allow re-lease or sale on satisfactory
terms. Furthermore, there currently exists an oversupply of certain types of
used Stage 3 aircraft, especially certain older widebody aircraft such as the
Airbus A300-B4-200 and Boeing 747-200B. There is one of each aircraft type among
the Initial Aircraft representing approximately 1.40% and 3.28% of the Initial
Aircraft by Initial Appraised Value.
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FLUCTUATION OF SUPPLY AND DEMAND DUE TO ISOLATED EVENTS. The value of
specific aircraft will depend on a number of other factors that are not within
our control, such as:
-- the maintenance and operating history of the aircraft;
-- the number of operators using a type of aircraft and the supply of such
type of aircraft; and
-- whether the aircraft is subject to a Lease and the regulatory and legal
requirements that must be satisfied before the aircraft can be leased or
sold.
Changes in the competitive and financial position of commercial aircraft
manufacturers, the withdrawal of manufacturers from a market or unexpected
manufacturing defects may depress aircraft values. For example, the bankruptcy
of Fokker N.V. in 1996 and the discontinuation of its aircraft manufacturing
operations have resulted in significant reductions of values and lease rates for
Fokker aircraft. Five Fokker 100s represent 8.38% of the Initial Aircraft by
Initial Appraised Value. Additionally, following the merger between Boeing and
McDonnell Douglas Corporation, Boeing announced on November 3, 1997 that it will
discontinue production of MD-83 aircraft in mid-1999. This is likely to
adversely affect the value and rental rates of AerCo Group's MD-83 Aircraft.
Three MD-83s represent in aggregate 6.83% of the Initial Aircraft by Initial
Appraised Value.
Currently, a significant threat to used commercial aircraft values and
lease rates is the supply effect of the significant numbers of new aircraft
ordered recently from Boeing and Airbus at discounted prices. Competition
between Boeing and Airbus has resulted in decreases in the price of new aircraft
when adjusted for inflation. This price decrease has led airlines and others to
order increasing quantities of new aircraft. Assuming that most of the aircraft
currently on order from Boeing and Airbus are delivered, the lower price of such
new aircraft may depress used aircraft values and lease rates, especially in
regions like Asia where there is excess commercial aircraft capacity. Since the
most recent cyclical low of 483 new aircraft delivered in 1995, Boeing and
Airbus have both announced and implemented increased production levels. This
means that new jet aircraft production levels are likely to increase to
approximately 900 newly delivered aircraft by 1999. This level of production is
above the long-term requirement implied by industry forecasts, including those
published by Boeing and Airbus, and assumes aircraft retirements significantly
in excess of past retirements. Decreases in the values and rental rates
achievable on used commercial aircraft as a result of the above factors may have
a material adverse effect on our operations and cash flows.
RISKS OF DECLINE IN APPRAISED VALUES
You should not place undue reliance on appraised Base Values as an accurate
representation of market or realizable values at any one point in time. The
Initial Appraised Value of the Initial Aircraft and the appraised values
expected to be obtained for the Initial Aircraft going forward assume an "open,
unrestricted stable market environment with a reasonable balance of supply and
demand" and certain other factors set out in the definition of Base Value. As
discussed above, at any point in the aircraft leasing market cycle, there will
be imbalances of aircraft supply and demand generally and there may be
particularly pronounced imbalances for specific aircraft types. Accordingly,
given the current peak in the cycle, certain of the Initial Aircraft may have
current market values approximating appraised Base Values while others, such as
Fokker aircraft and older Airbus equipment, have current market values that
remain below, and in certain cases significantly below, appraised Base Values.
At a cyclical low, the current market value of most aircraft types is likely to
be less than, and in many cases significantly less than, appraised Base Values.
The Scheduled Principal Payments payable on the Class A Notes will be
accelerated if there is a significantly greater decline in Base Values (based on
our annual appraisals) than what we have assumed. See "Description of the Notes
- -- Payment of Principal and Interest -- Principal Amortization". These
accelerated principal payments on the Class A Notes may have the effect of
suspending Scheduled Principal Payments on more junior Notes and extending the
weighted average lives of such junior Notes. You should note that aircraft
appraisers have recently been reducing their appraised values for aircraft,
reflecting the supply effects of new aircraft orders, manufacturers' price
discounting and more specific factors for certain aircraft types such as Fokker
aircraft and older widebody aircraft. See "-- Cyclicality of Supply of and
Demand for
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Aircraft". There is a significant risk that aircraft appraisers will reduce
appraised values of the Aircraft significantly in the future. Such reductions
could have material adverse effect on the expected average lives of the
Company's more junior Notes.
Any reduction in Aircraft values or rental rates may adversely affect AerCo
Group's rental rates and may adversely affect our ability to make payments on
the Notes.
TECHNOLOGICAL RISKS
AerCo Group's ability to lease or sell the Aircraft may be adversely
affected by the availability of newer, more technologically advanced aircraft or
the introduction of increasingly stringent noise or emissions regulations which
may make the Aircraft less competitive. This risk is particularly significant
for us given our need to repay principal and interest on the Notes over a
relatively long period. This will require that many of the Aircraft are leased
or sold close to the end of their useful economic life. Furthermore, we expect
that the extent to which we are able to manage these technological risks through
modifications to Aircraft and sale of Aircraft will be limited and any sales of
Aircraft will depend on our ability to satisfy the criteria set forth under
"Description of the Notes -- Payment of Principal and Interest -- Indenture
Covenants -- Limitation on Aircraft Sales".
YEAR 2000 RISK
Many existing computer systems use only two digits to identify a year in
the date field. These systems were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. AerCo Group has recently begun a process of assessing the potential impact
of the Year 2000 issue on its operations. Since all of its operational functions
have been delegated to the Servicer, Administrative Agent and Cash Manager,
AerCo Group will have no information systems of its own. It may, however, suffer
a material adverse impact on its business and results of operations if
information technology upon which the Servicer, Administrative Agent and Cash
Manager rely is not Year 2000 compliant.
The Servicer has assessed, and continues to assess, its computer and
information systems to determine the extent of its exposure to Year 2000 risks.
The Servicer believes that its computer and information systems are Year 2000
compliant, except for certain features of its e-mail and voicemail systems and
certain of its routers and phone switches. The Servicer expects to complete all
material Year 2000 modifications and replacements in early 1999 or earlier.
However, the potential interruptions or costs incurred to upgrade or replace
certain of the Servicer's computer and information systems may have a material
adverse effect on its ability to perform its services under the Servicing
Agreement. The Administrative Agent and Cash Manager are reviewing their Year
2000 exposure and identifying the steps that will need to be taken to ensure
that their systems are Year 2000 compliant.
AerCo Group may also suffer an adverse impact on its business and results
of operations if its suppliers, financial advisors, technical advisors, Lessees
and others with which it conducts business are not Year 2000 compliant. The
Servicer is currently contacting the third parties with which it deals on our
behalf to determine the extent of such third parties exposure to Year 2000 risks
and the status of their Year 2000 compliance efforts.
Aircraft and traffic control infrastructure also depend heavily on
microprocessors and software technology. If the systems employed by the Aircraft
are not Year 2000 compliant, it could have a material adverse effect on AerCo
Group's business and results of operations. Major manufacturers, including
Boeing and Airbus, have begun a Year 2000 review of the systems employed on
their aircraft and are expected to advise owners, operators and service
providers of the steps to be taken to address any Year 2000 problems that are
identified. Among the aircraft systems that have been identified as being
susceptible to Year 2000 problems are certain on-board aircraft management and
navigation systems. The nature and the extent of the risks posed by potential
failure of aircraft and aircraft control systems because of Year 2000 problems
has not been fully determined because the Year 2000 review efforts are still at
an early stage. It is not clear whether or
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to what extent manufacturers, owners or lessees will be responsible for the
costs necessary to bring aircraft systems into Year 2000 compliance.
Any losses that AerCo Group may incur because of Year 2000 losses may not
be covered under existing insurance, because some insurers have taken the
position that Year 2000 losses may be denied under existing policies. In
addition, insurers in the London market have recently adopted recommendations to
exclude Year 2000 losses from future aviation policies, subject to purchase of a
specific endorsement.
We are currently unable to make any estimate of the amount that we may be
required to spend to correct Year 2000 problems because the assessment of our
Year 2000 risks is still at an early stage. However, the expenditures could have
an adverse impact on our ability to make payments on the Notes.
AIRCRAFT TYPE CONCENTRATIONS
The Initial Aircraft include 11 aircraft types, five of which represent
over 10% of the current Portfolio by Initial Appraised Value: Boeing 737-400s
(19.33%), Airbus A320-200s (16.24%), Boeing 757-200s (13.36%), Boeing 767-300ERs
(13.19%) and Boeing 737-300s (12.41%). Also, narrowbody Aircraft constituted
approximately 82.12% of the current Portfolio by Initial Appraised Value. See
"The Initial Aircraft, Related Leases and Collateral -- Portfolio Information".
At September 30, 1998, four Aircraft, or 17.88% of the Portfolio by Initial
Appraised Value, were widebody aircraft. These widebody Aircraft include two
Boeing 767-300ERs (13.19% of the Portfolio by Initial Appraised Value), one
Boeing 747-200B (3.28% of the Portfolio by Initial Appraised Value) and one
Airbus A300-B4200 (1.40% of the Portfolio by Initial Appraised Value).
ADDITIONAL AIRCRAFT RISKS
AerCo Group may acquire Additional Aircraft and related Additional Leases.
We expect that the principal source of funds to make payments on the Notes and
Additional Notes will be the cash flows we receive from Additional Aircraft,
Additional Leases, Initial Aircraft, Initial Leases and Future Leases. The cash
flows from Additional Aircraft may become a more important source of payment
than the cash flows from the Initial Aircraft if we exercise our ability to
acquire Additional Aircraft under the Indenture. However, since the Additional
Aircraft have not been identified as of the date of this Prospectus, the
statements contained under "-- Aircraft Risks", "-- Lease Risks" and "-- Risk of
Lessee Default" are based primarily on risks associated with the Initial
Aircraft and the related Leases and the Lessees.
We expect that most, if not all, of the risks described above will be
relevant, and may be even more relevant to any Additional Aircraft that AerCo
Group acquires. The issuance of Additional Notes to finance the acquisition of
Additional Aircraft is subject to conditions that are designed to protect our
ability to meet our obligations under the Notes. Despite these protections, we
can give no assurance that the acquisition of Additional Aircraft and Additional
Leases will not intensify some or all of the identified risks or expose our
company to other unidentified risks. These intensified or additional risks could
adversely affect our ability to make payments on the Notes.
RISKS RELATING TO DISPOSITIONS OF AIRCRAFT-RELATED TAX BENEFITS
In addition to outright and permanent dispositions of legal and beneficial
ownership of Aircraft, we may also make more limited transfers of aircraft
ownership (including legal title) to investors who wish to acquire the
depreciation and other tax benefits that may be available to aircraft owners
under the laws of the investor's jurisdiction. The terms of Tax-Related
Dispositions are not generally standardized, but tend to be heavily negotiated
on a case-by-case basis to reflect the tax position of the investor and the
legal requirements for the realization of the desired tax benefits under the
laws of the investor's jurisdiction, which are subject to change.
Under the Indenture, Permitted Tax-Related Dispositions are subject to
conditions that are designed to protect our ability to meet our obligations
under the Notes. Despite these protections, if we enter into any Permitted
Tax-Related Dispositions, we will be exposed to the credit risk of the investor,
including the risk that we will not be able to recover legal title to the
Aircraft (or other aspect of ownership transferred to the
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investor) in the event of the investor's insolvency. Moreover, because the terms
of Permitted Tax-Related Dispositions are likely to vary widely from case to
case and the legal background against which such transactions are negotiated may
change, we cannot identify with any certainty the nature and the level of the
risks to which we would be exposed in connection with such transactions.
Consequently, there can be no assurance that any Permitted Tax-Related
Dispositions would not (i) intensify some or all of the risks that the relevant
conditions under the Indenture were designed to address or (ii) expose us to
other risks not addressed by such conditions. These intensified or additional
risks could adversely affect our ability to make payments on the Notes.
RISK OF OPERATIONAL RESTRICTIONS AFFECTING AERCO GROUP'S ABILITY TO COMPETE
We may encounter competition in re-leasing of the Aircraft from other
aircraft leasing companies (including GPA), airlines, aircraft manufacturers,
aircraft owners, financial institutions, aircraft brokers, special purpose
vehicles and public and private limited partnerships and funds with investment
objectives similar to ours. We are subject to restrictions in the Indenture and
our constituent documents that impair our operational flexibility. For example,
we are not able to grant privileged rental rates to airlines in return for
equity investments in order to place aircraft on lease and minimize the number
of aircraft on the ground. Certain competing aircraft lessors enter into similar
arrangements with troubled lessees in order to restructure the obligations of
those lessees while maximizing the number of aircraft remaining on viable leases
to such lessees and minimizing the overall cost. In addition, certain competing
aircraft lessors have access to financial resources substantially greater than
ours, have lower overall cost of capital and provide financial services or other
inducements to potential lessees that we cannot provide. We are also subject to
certain limitations as to eligible Lessees and geographic diversification of the
Lessees that must be satisfied in order to maintain the ratings of the Notes.
Our competitors may not be subject to such limitations.
EXERCISE OF PURCHASE OPTIONS AT PRICES BELOW ESTIMATED FAIR MARKET VALUE
As of September 30, 1998, five Lessees with respect to six Initial
Aircraft, representing approximately 23.10% of the Initial Aircraft by Initial
Appraised Value, had Purchase Options. There are no purchase options exercisable
at prices below the assumed Note Target Prices. If we have not repaid the
principal on the Notes, in line with the Assumptions, when a Purchase Option is
exercised, the proceeds may be less than the applicable Note Target Price that
is realized from the exercise of the Purchase Option. This discrepancy between
the proceeds and the Note Target Price will affect the amount and timing of
principal payments to certain Noteholders and may extend the average lives of
the Notes.
LESSEE DEFAULTS RESULTING IN LIENS ON AIRCRAFT
Liens which secure the payment of airport taxes, customs duties, air
navigation charges (including charges imposed by Eurocontrol), landing charges,
crew wages, repairer's charges or salvage ("LIENS") attach to the Aircraft in
the normal course of operation. The amounts which such Liens secure may be
substantial and may exceed the value of the Aircraft that the Lien is asserted
against. In some jurisdictions, a holder of aircraft Liens may have the right to
detain, sell or cause the forfeiture of the Aircraft. Until they are discharged,
the Liens may adversely affect AerCo Group's ability to repossess, re-lease or
sell the Aircraft. The Lessees may not comply with their obligations under the
Leases to discharge Liens arising during the terms of the Leases.
FAILURE TO MAINTAIN REGISTRATION OF AIRCRAFT
All of the Aircraft which are or will be operated must be registered with
an appropriate aviation authority. If an Aircraft is operated without a valid
registration, the Lessee operator or, in some cases, the owner or lessor, may be
subject to penalties which may result in a Lien being placed on the Aircraft.
Loss of registration could have other adverse effects, including grounding of
the Aircraft and loss of insurance, which may have an adverse effect on our
ability to make payments on the Notes. Generally, if a Lessee fails to maintain
the registration of any Aircraft it would be in default under the applicable
Lease, entitling us to exercise various
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rights and remedies. However, we cannot give any assurance that Future Leases
will contain these terms or that Lessees will comply with them.
GOVERNMENT REGULATION
In addition to the general requirements regarding maintenance of the
Aircraft, aviation authorities sometimes issue Airworthiness Directives ("ADS")
requiring the operators of aircraft to take particular maintenance actions or
make particular modifications on all aircraft of certain types. Certain
manufacturer recommendations may also be issued. AerCo Group may have to bear or
share the cost of AD compliance if the Lessee fails to perform the AD required
to maintain its Certificate of Airworthiness or if the Aircraft is not subject
to a Lease. Other governmental regulations on noise and emissions levels may be
imposed in jurisdictions where Aircraft are registered and operate. A number of
jurisdictions have adopted, or are in the process of adopting, noise regulations
which will require all aircraft to comply with the most restrictive current
standards. These regulations restrict the future operation of aircraft that do
not meet Stage 3 noise requirements and will prohibit the operation of the
aircraft in the relevant jurisdictions early in the next century (December 31,
1999 in the case of the United States). Although all of the Initial Aircraft
meet Stage 3 requirements, certain of the Additional Aircraft may not meet Stage
3 requirements. Certain organizations and jurisdictions are now considering
tightening noise and emissions certification requirements for newly manufactured
aircraft. Finally, new ADs or noise or emissions reduction requirements may be
adopted in the future that could cause us to incur significant costs. Such
requirements could depress the value of Aircraft and impair our ability to
re-lease Aircraft.
LEASE RISKS
INABILITY TO RE-LEASE AIRCRAFT ON FAVORABLE TERMS
Upon termination of any Lease, the Servicer has an obligation to re-lease
the Initial Aircraft on AerCo Group's behalf. However, AerCo Group may not be
able to obtain Rental Payments and lease terms (including maintenance and
redelivery condition agreements) comparable to those contained in the Initial
Leases. AerCo Group's ability to re-lease Aircraft, and obtain comparable Rental
Payments and lease terms, may be adversely affected by restrictions imposed by
the Indenture, the economic condition of the airline industry, the supply of
competing aircraft, the demand for particular types and competition from other
lessors.
The expected number and types of Initial Aircraft that AerCo Group must
place with Lessees, through December 31, 2002 is presented in the table below.
It also shows the years in which the Leases are contracted to expire (including
expirations of Leases that are assumed to result from letters of intent). The
table assumes that no Initial Lease terminates prematurely and that there are no
sales of Initial Aircraft or purchases of Additional Aircraft. See "-- Risk of
Lessee Default" and "-- Inability to Terminate Leases or Repossess Aircraft"
below. More Initial Aircraft may need to be re-leased if such Initial Aircraft
become available through premature terminations of Leases.
AERCO GROUP LEASE PLACEMENT REQUIREMENT AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
TO DECEMBER 31,
-----------------------------------------
AIRCRAFT TYPE 1998 1999 2000 2001 2002
------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
A300............................................. -- -- -- 1 --
A320............................................. -- 1 1 -- 1
B737............................................. -- 6 2 3 2
B747............................................. -- -- -- -- --
B757............................................. -- -- -- -- 1
B767............................................. -- -- 1 1 --
DC8.............................................. -- -- -- -- --
F100............................................. -- -- 1 -- 1
MD83............................................. -- -- -- -- 1
</TABLE>
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As illustrated by the table above, the terms of the Initial Leases for 7
and 22 of the Initial Aircraft, representing approximately 18.50% and 66.39% of
the Portfolio by Initial Appraised Value, are scheduled to expire before
December 31, 1999 and December 31, 2002. AerCo Group may not be able to re-lease
the Aircraft or any other Initial Aircraft upon the expiration of the Initial
Leases or any Future Leases without incurring significant downtime. Re-leasing
may also affect the rental rates we are able to obtain and may adversely affect
our ability to make payments on the Notes, especially when there is lesser
demand for aircraft on operating lease.
FAILURE TO PERFORM AIRCRAFT MAINTENANCE
The standards of maintenance observed by the various Lessees and the
condition of the Aircraft at the time of sale or lease may affect the future
values and rental rates for the Aircraft. Under the Initial Leases, the Lessee
has the primary responsibility to maintain the Aircraft and to comply with all
governmental requirements applicable to the Lessee and the Aircraft. AerCo Group
has agreed to share the cost of complying with certain ADs and manufacturer
service bulletins in certain cases. If a Lessee fails to perform required or
recommended maintenance on an Aircraft during the term of such Lease, the
Aircraft may be grounded and AerCo Group may incur substantial costs to restore
the Aircraft to an acceptable maintenance condition before sale or re-lease.
AerCo Group, as lessor, may have an obligation to reimburse the Lessee for
maintenance performed on the Aircraft, based on formulae tied to the Lessee's
maintenance reserve payments. In some cases, AerCo Group is obliged to
contribute to the cost of maintenance work performed by the Lessee.
Operational cash flow and available liquid resources may not be sufficient
to fund maintenance requirements, particularly as the Aircraft age. Actual
rental and maintenance payments by Lessees and other cash received by AerCo
Group may be significantly less than projected. These variations may adversely
affect our ability to make payments on the Notes because AerCo Group's
maintenance obligations are an Expense that ranks senior to all payments on the
Notes.
LIABILITY, LOSS AND INSURANCE
The Lessees are required under the Initial Leases to indemnify the related
lessor for, and insure against, liabilities arising out of use and operation of
the Initial Aircraft, including third party claims for death or injury to
persons and damage to property for which AerCo Group may be liable. Insurance
proceeds received by AerCo Group for such claims will be paid first to the
applicable lessor in the event of loss of the Aircraft to make repairs or in the
case of liability insurance, for indemnification of third party liabilities,
with the balance, after deducting any amounts due and payable by the Lessee
under the applicable lease, being paid to the Lessee. The Lessees are also
required to maintain public liability, property damage and hull all risks
insurance on the Aircraft at agreed levels subject to standard market hull
deductibles based on aircraft type which generally range from $250,000 to
$1,000,000. There can be no assurance that one or more catastrophic events will
not exceed coverage limits. Any inadequate insurance coverage or default by the
Lessees in fulfilling their indemnification or insurance obligations will affect
the proceeds that would be received upon an event of loss under the respective
Leases or claim under the relevant liability insurance.
AerCo Group may arrange separate political risk repossession insurance for
its own benefit, covering:
- confiscation, nationalization and requisition of title of the Aircraft
by the government of the country of registry and denegation and
deprivation of legal title and rights, and
- the failure of the authorities in that country to allow de-registration
and export of the Aircraft.
REQUIREMENT FOR CERTAIN LICENSES AND APPROVALS
A number of Leases require specific licenses, consents or approvals for
different aspects of the Leases. These include consents from governmental or
regulatory authorities to certain payments under the Leases and to the import,
re-export or de-registration of the Aircraft. There is a significant risk that
subsequent legal and administrative changes will increase such requirements or
that a consent, once given, will be withdrawn.
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Furthermore, consents needed in connection with future re-leasing or sale of an
Aircraft may not be received. Any such event could have an adverse impact on
AerCo Group's ability to re-lease or sell aircraft.
RISK OF WITHHOLDING TAX ON LEASE RENTALS
AerCo Group seeks to structure its Leases in such a way that there are
either no withholding taxes on payments by the Lessees, or the Lessees are
obliged to pay additional amounts to compensate for the withholding tax.
However, we can give no assurance that Leases to which AerCo Group is a party,
or may become a party as a result of re-leasing the Aircraft, will not result in
the imposition of withholding or other taxes in circumstances where the Lessee
has not agreed to, or is unable to, pay compensatory additional amounts.
RISK OF LESSEE DEFAULT
DETERIORATION IN FINANCIAL CONDITION OF LESSEES
The ability of each Lessee to perform its obligations under its Lease will
depend primarily on its financial condition. A Lessee's financial condition may
be affected by various factors beyond our control, including competition, fare
levels, passenger demand, operating costs, the cost and availability of finance,
economic conditions in the countries where the Lessees operate and environmental
and other governmental regulation of the air transportation business. Many of
our Lessees are in a weak financial position. Investors should expect this to be
the case with future Lessees. As a result, a large proportion of Lessees may
consistently be significantly in arrears in their Rental Payments or maintenance
payments. There can be no assurance as to the ability of Lessees to perform
their financial and other obligations under the Leases.
As of September 30, 1998, 10 Initial Lessees who had a combined total of 14
Aircraft on lease at that date were in arrears. The amounts outstanding and
overdue for Rental Payments, Maintenance Reserves, and other miscellaneous
amounts due under the Initial Leases (net of agreed deferrals or other
restructurings, default interest and certain cash in transit) for these 10
Initial Lessees was approximately $4.97 million (of which $3.90 million was in
arrears for more than 30 days). One Lessee, Canadian Airlines, deferred $0.90
million of rent and miscellaneous payments, as of September 30, 1998, under a
restructuring agreement with ALPS 94-1. Of the $4.97 million of outstanding and
overdue amounts, $0.73 million is owed by another North American Lessee
(representing 3.28% of the Portfolio by Initial Appraised Value). In addition,
PAL, the Lessee of two Aircraft representing 4.61% of the Portfolio by Initial
Appraised Value, has recently suffered severe financial difficulties. On June
19, 1998, PAL filed a petition for Approval of a Rehabilitation Plan with the
Philippine SEC and subsequently the Philippine SEC appointed an Interim
Receiver. PAL was instructed by the Philippine SEC to submit a Rehabilitation
Plan within thirty days. Following a number of applications for extension of
this time limit, PAL currently has until November 20, 1998 to file a
Rehabilitation Plan with the Philippine SEC.
At September 30, 1998, $2.02 million (of which $1.48 million was in arrears
for more than 30 days) was outstanding from PAL. The Servicer is in negotiations
with PAL regarding repayment of its arrearages. There can be no assurance,
however, that PAL will ultimately repay its arrearages or be able to pay future
lease rentals. AerCo Group may encounter delays or difficulties in recovering
possession of the Aircraft (which are currently operated in the Philippines) or
terminating such Leases. If the Aircraft are recovered, the technical costs
required to ensure the Aircraft are in suitable condition for re-leasing may be
significant. See "-- Inability to Terminate Leases or Repossess Aircraft".
In addition to the deterioration of their financial conditions, some
Lessees may experience periodic difficulties in meeting their maintenance
obligations resulting from:
- the lack of a well established maintenance program,
- adverse environmental conditions in the locations where the Aircraft is
operated, or
- financial and labor difficulties.
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If a Lessee continuously fails to maintain an Aircraft, the Aircraft may be
grounded, which may affect its market value. If AerCo Group decides to re-lease
the Aircraft it may incur substantial cost to restore it to acceptable
maintenance condition.
The environment for commercial aircraft operators in most geographic
regions has been extremely favorable in the past few years. Therefore, the
current level of defaults and Lessee arrears should not be seen as
representative of future defaults and arrears as economic conditions
deteriorate. We can give no assurance that defaults and amounts in arrears will
not increase as the market for aircraft on operating lease experiences further
cyclical downturns, particularly in regions such as Asia which is experiencing
acute economic difficulties. Increasing levels of Lessee defaults and arrears
will adversely affect our ability to make payments on the Notes.
RISK OF REGIONAL ECONOMIC DOWNTURNS AFFECTING LESSEES FINANCIAL CONDITION
EUROPEAN CONCENTRATION. At September 30, 1998, 50.32% of the Initial
Aircraft by Initial Appraised Value were leased by operators based in Europe
with 36.90% based in "developed" European markets, principally the United
Kingdom and Spain, and 13.42% based in "emerging" European markets, principally
Turkey. One Lessee, (Spanair) leased 11.05% of the Initial Aircraft by Initial
Appraised Value. As of September 30, 1998, 47.51% of the Initial Aircraft by
Initial Appraised Value were leased to charter operators in the tourism
industry, principally in the United Kingdom (17.12% of the Initial Aircraft by
Initial Appraised Value). See "Description of the Notes -- Payment of Principal
and Interest -- Operating Covenants -- Concentration Limits".
The commercial aviation industry in Europe is very sensitive to general
economic conditions. Since air travel is largely discretionary, the industry
tends to suffer severe financial difficulties during slow economic periods. As a
result, the financial prospects for European Lessees will depend on the level of
economic activity in Europe and in the specific countries where they operate. A
recession or other worsening of economic conditions in any European country may
adversely affect the European Lessees' ability to meet their financial and other
obligations. For example, the Russian economy has recently experienced severe
difficulties, including significant devaluation of the ruble against the dollar.
The downturn in Russia's economy may undermine business confidence and reduce
demand for air travel in other emerging market countries. Competitive pressures
from continuing deregulation of the airline industry by the EU may also
adversely affect European Lessees' operations and their ability to meet their
obligations under the Leases.
ASIA PACIFIC CONCENTRATION. At September 30, 1998, 21.33% of the Initial
Aircraft by Initial Appraised Value were leased by operators in "emerging"
markets in the Asia Pacific region, including China, the Philippines, South
Korea and India. One Lessee, Asiana, leased 5.76% of the Initial Aircraft by
Initial Appraised Value.
Trading conditions in Asia's civil aviation industry have been adversely
affected by the severe economic and financial difficulties experienced recently
in the region. The economies of the region have experienced acute difficulties
resulting in many business failures, significant depreciation of local
currencies against the dollar, downgrading of sovereign and corporate credit
ratings and internationally organized financial stability measures. Several
airlines in the region, including a Lessee, recently announced their intention
to reschedule their aircraft purchase obligations, eliminate certain routes and
reduce employees. This downturn in the region's economies may undermine business
confidence, reduce demand for air travel and adversely affect the Asian Lessees'
operations and their ability to meet their obligations. See "-- Deterioration in
Financial Condition of Lessees".
LATIN AMERICAN CONCENTRATION. At September 30, 1998, 17.79% of the Initial
Aircraft by Initial Appraised Value were leased by operators in "emerging
markets" in Latin America, principally Brazil, Chile and Colombia. One Lessee,
Lan Chile, leased 6.56% of the current Portfolio by Initial Appraised Value.
The financial prospects for Lessees in Latin America will depend on the
level of political stability and economic activity and policies in the region.
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Developments in other "emerging markets" may also affect the economies of
Latin American countries and the entire region. For example, in December 1994 a
decrease in capital inflow to Mexico coupled with a large current account
deficit led to diminishing foreign exchange reserves which ultimately forced
Mexico to allow the peso to float freely. The subsequent devaluation of the peso
led to a currency crisis in Mexico which dampened investor confidence and
resulted in lower levels of foreign investment in Latin America in general. The
downturn in Asia and in Russia has recently begun to undermine business
confidence in Latin America and to have an adverse effect on the economies of
Latin American countries.
More recently, Brazil has experienced significant downturns in its
financial markets, with large decreases in financial asset prices and
considerable pressure for a devaluation of the currency. Three of the Initial
Lessees representing 5.17% of the Initial Aircraft by Initial Appraised Value
operate in Brazil. The loss of confidence in the Brazilian markets and currency
has been associated with the economic crises currently affecting "emerging
markets" in Asia. See "-- Asia Pacific Concentration" above. The Brazilian
government responded to these pressures with a series of austerity measures
including increased interest rates, public spending cuts and tax increases.
These measures led to widespread expectations that economic growth in Brazil
would be significantly reduced through at least 1998 with the real possibility
of a recession that could adversely affect the operations of AerCo Group's
Brazilian Lessees.
Similarly, the Chilean economy has recently suffered adverse effects as a
result of the continuing economic difficulties in Asia and lower market prices
for certain of Chile's exported commodities, especially copper, woodpulp and
fishmeal. In the past, Asia has accounted for a significant portion of Chile's
exports. Copper is Chile's principal export product. Copper prices have declined
dramatically over the past year, primarily as a result of Asia's economic
difficulties. See "-- Asia Pacific Concentration" above. Such economic
developments, especially if they continue or worsen, could lead to lower levels
of economic activity in Chile which could, in turn, adversely affect the
operations of AerCo Group's Chilean Lessee.
Several Latin American countries have experienced increased political
stability, overall increased economic growth, lower inflation rates and
revitalized economies in the past several years. However, there can be no
assurance that such progress can be maintained or that further progress will be
made.
NORTH AMERICAN CONCENTRATION. At September 30, 1998, 8.34% of the Initial
Aircraft by Initial Appraised Value were leased by operators in North America.
As in Europe, the commercial aviation industry in North America is highly
sensitive to general economic conditions. Since airline travel is largely
discretionary, the industry has suffered severe financial difficulties during
economic downturns. Over the last several years, nearly half of the major North
American passenger airlines have filed Chapter 11 bankruptcy proceedings and
several major U.S. airlines have ceased operations. One North American Lessee,
representing approximately 3.28% of the Portfolio by Initial Appraised Value,
has failed to pay $0.73 million under its Lease.
INABILITY TO TERMINATE LEASES OR REPOSSESS AIRCRAFT
AerCo Group has the right to terminate the Lease and repossess the Aircraft
if there is an event of default under the Lease.
However, AerCo Group's ability to terminate the Lease and repossess the
Aircraft may be limited by the following factors:
- a Lessee contesting AerCo Group's right to terminate the Lease and
repossess the Aircraft,
- where a jurisdiction requires a court ordered repossession,
- AerCo Group's inability to export, deregister and redeploy the Aircraft,
- legal restrictions on AerCo Group's ability to terminate or repossess
the Aircraft, and
- the appointment of a trustee in bankruptcy or similar officer in the
case of a bankrupt or insolvent Lessee.
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Even if AerCo Group is able to terminate the lease and repossess the
Aircraft, it will incur substantial costs, including:
- the direct costs associated with the termination of the Lease or
repossession of an Aircraft, including legal costs,
- the cost of returning the Aircraft to the appropriate jurisdiction,
- the payment of debts and taxes secured by Liens on the Aircraft that
were not paid by the Lessee,
- the costs of retrieving or recreating aircraft records that are required
for reregistering the Aircraft,
- costs to obtain a Certificate of Airworthiness for the Aircraft, and
- swap breakage costs incurred under its agreements with Swap Providers.
RISKS RELATING TO PAYMENTS ON THE NOTES
FACTORS AFFECTING THE AMOUNT AND TIMING OF PAYMENTS UNDER THE NOTES
The following factors outside our control will affect our ability to make
payments on the Notes:
- AerCo Group's ability to re-lease the Aircraft upon expiration or
termination of the Lease;
- lower than expected rental rates caused by early lease terminations and
re-leases; or
- exercise of Purchase Options, early termination options or extension
options.
CASH FLOW FROM AIRCRAFT AND LEASES NOT PREDICTABLE; FAILURE OF ACTUAL
EXPERIENCE TO MATCH THE ASSUMPTIONS
The Expected Final Payment Dates of the Notes described in this Prospectus
were based on the Assumptions. The Assumptions may be inconsistent with AerCo
Group's experience for numerous reasons. AerCo Group's inability to find
financially able and willing Lessees for the Aircraft at acceptable rental rates
will affect the timing and amount of proceeds realized from Leases of Aircraft.
In addition, we cannot predict other economic and political factors, such as
prevailing interest rates, credit availability and market demand for leased
aircraft. Rental Payments, insurance recoveries, maintenance reserve payments,
expenses and liabilities will often be dependent upon the actions of third
parties, which are difficult to predict and are generally not within our
control. Accordingly, collections and other realizations with respect to certain
Leases and Aircraft could occur at different times and levels than anticipated
and may not occur at all. As a result, we may not be able to repay the initial
Outstanding Principal Balance on any subclass of the Notes.
SUBORDINATION PROVISIONS
The Expenses and certain other payments are senior to the Notes and are
payable out of funds on deposit in the Collection Account before any payments
are made on the Notes. Under certain circumstances, the rights of a holder of a
subclass of Notes to receive payments of principal on the subclass of Notes and
to exercise remedies upon default will be subordinated to the rights of the
holder of the most senior class of Notes then outstanding. If an Event of
Default occurs, the Security Trustee, acting on behalf of the Noteholders of the
most senior class of Notes then outstanding and each other secured creditor
under the Security Trust Agreement, will have the exclusive right to direct the
Administrative Agent in the exercise of remedies. The Security Trustee will have
sole discretion as to the exercise and enforcement of all remedies regarding the
Notes and may take any permitted actions without regard to the interests of any
other Noteholder. Accordingly, if an Event of Default occurs and is continuing,
the holders of Notes will not be permitted to enforce certain rights with
respect to such default until all amounts owing under any outstanding senior
Notes and certain other amounts have been paid in full.
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CAPITAL MARKETS RISKS
ABSENCE OF PUBLIC MARKET
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued to a limited number of institutional investors. There is
currently no market for New Notes. We intend to list the New Notes only on the
Luxembourg Stock Exchange. We do not intend to seek approval for quotation
through any automated quotation system. We cannot give any assurance that an
active public market for the New Notes will develop. If a market for the New
Notes does develop, future trading prices will depend upon many factors,
including general economic conditions and our financial condition, performance
and prospects.
INABILITY TO REFINANCE CERTAIN NOTES
The Subclass A-1 Notes as well as certain subclasses of Refinancing Notes
and Additional Notes may reach their Expected Final Payment Dates before we have
received sufficient Available Collections to pay all of the principal on the
Notes. We will attempt to refinance the Subclass A-1 Notes and the subclasses of
Refinancing Notes and Additional Notes with the net cash proceeds realized from
public offerings and sales of Refinancing Notes. The Refinancing Notes will rank
equally with the remaining outstanding subclasses of Notes belonging to the same
class as the Notes being refinanced but our Directors will determine their
interest rate, average life, principal payment provisions, redemption provisions
and other economic terms at the time of issuance. These terms may be
substantially different from the terms of the Notes being refinanced. However,
we may not be able to refinance Notes in this manner. Any attempt to issue
Refinancing Notes may be adversely affected by general conditions in the capital
markets or the market's then current perception of the commercial aviation
industry, the operating lease business or AerCo Group. If we fail to sell
Refinancing Notes on acceptable terms at the required times we may not be able
to refinance the Subclass A-1 Notes and any similar subclass of Refinancing
Notes and Additional Notes. This may increase the overall cost of borrowing
under Refinancing Notes or Additional Notes, may affect the liquidity and market
prices of the Notes and may affect the timing of repayment of principal on lower
ranked Notes.
CERTAIN BANKRUPTCY CONSIDERATIONS
We have taken steps in structuring the transactions described in this
Prospectus to ensure that our assets and liabilities are not consolidated with
those of GPA if GPA becomes the subject of an application for relief under
applicable bankruptcy or insolvency laws. ALPS 94-1 took similar steps in
relation to its acquisition of the Original ALPS 94-1 Aircraft from GPA in 1994
and 1995 for the same purpose. These steps include:
- the creation of AerCo and ALPS 94-1 as separate legal entities outside
Ireland,
- the requirement that GPA hold none of the issued equity or voting share
capital of AerCo or ALPS 94-1 (other than the 5% of AerCo's Capital Stock
held in order to assist us and certain of our subsidiaries in obtaining
certain corporate tax benefits for Shannon, Ireland certified companies),
- the requirement that GPA not control the composition of AerCo's Board of
Directors, and
- the inclusion in various transaction documents of provisions requiring
that our business and affairs and the business and affairs of our
subsidiaries are at all times identifiable and separately managed from
those of GPA.
McCann FitzGerald, our Irish counsel, concluded in its opinion that:
- in any examination of GPA Group or any of its affiliates, an Irish
examiner would not be able to contend successfully that an examiner
should be appointed to any member of AerCo Group on the grounds that,
after the Closing Date, such member is a "related company" of GPA Group
or such affiliate and
- an Irish court should not treat GPA or any of its affiliates, on the one
hand, and any member of AerCo Group, on the other, as a single entity in
any winding up of GPA Group or such affiliate and order
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-- the pooling of any of the assets and liabilities of any member of
AerCo Group with those of GPA or
-- the contribution of any of the assets of any member of AerCo Group to
the repayment of the debts of GPA.
In the context of liquidation, examination or receivership of GPA Group or
any of its affiliates, a liquidator, receiver, examiner, creditor or shareholder
of GPA Group or any of its affiliates could take the position that the disposal
of the shares of any of the Transferring Companies pursuant to the Stock
Purchase Agreements constituted improper transfers or fraudulent conveyances and
could therefore seek the invalidation of such sales and the return to GPA of
such shares or proceeds of subsequent sales thereof. With respect to these
issues, we have received an opinion of Irish counsel, McCann FitzGerald,
concluding that, on the basis of certain assumptions and subject to certain
qualifications and reservations set forth in such opinion, an Irish court would
not regard the completed sale of the shares of the Transferring Companies
pursuant to the Stock Purchase Agreements as improper transfers or fraudulent
conveyances and order any such assets to be returned to GPA on such grounds.
GPA and AerCo have taken appropriate steps to transfer the shares of the
Transferring Companies to AerCo. A liquidator, receiver, examiner, creditor or
shareholder of GPA Group, any such seller or any relevant affiliate, however,
could seek to recharacterize the transfer of the shares of the Transferring
Companies as a pledge of collateral as security for a financing of GPA. A
successful recharacterization of the share transfers as a pledge or granting of
security could:
- in certain circumstances result in the complete forfeiture of the rights
of AerCo Group in the Transferring Aircraft or the shares of the
Transferring Companies, possibly resulting in AerCo Group being
considered a general unsecured creditor of GPA Group or the applicable
seller with a claim in an amount equal to the purchase price paid for
such Aircraft or such shares, or
- in other circumstances result in AerCo Group being a secured creditor of
GPA Group or the applicable seller or of the relevant affiliate. AerCo
Group, however, has received an opinion of McCann FitzGerald concluding
that, notwithstanding the uncertainty resulting from the lack of
substantive Irish case law on the issue of recharacterization, and
subject to the qualifications and reservations, including as to
difference of treatment of the sales for accounting purposes, and based
on the assumptions set forth in the opinion. These include the assumption
that both GPA and AerCo Group will, so far as permissible in accordance
with current accounting standards, act in a manner consistent with the
shares having been sold, the sales of the shares of the Transferring
Companies once completed would not be recharacterized as a pledge of such
assets to secure a loan from AerCo Group to GPA.
There can be no assurance, however, that the circumstances and assumptions
upon which counsel have based their opinion will not change, that a court of
competent jurisdiction would not decide differently from the views expressed in
such counsel's opinions or that such opinions will prove to be correct. Such
opinions represent only the best judgment of counsel and are not binding on the
courts. In particular, such opinions depend on certain factual assumptions and
the occurrence of different facts could lead a court to reach a different
conclusion.
AerCo Group will also take appropriate steps to structure the acquisition
of Additional Aircraft or shares in Additional Aircraft-owning subsidiaries of
any sellers, which may include GPA, to minimize the risk of recharacterization
described above. The nature and magnitude of such risk will depend largely on
the financial condition of the relevant seller and the bankruptcy and insolvency
laws of the jurisdiction or jurisdictions applicable to it and its assets. There
can be no assurance that a liquidator, receiver, examiner, creditor or
shareholder of the relevant seller could not seek to recharacterize the
acquisition of Additional Aircraft as described above or could not otherwise
seek to challenge the rights of AerCo Group in the Additional Aircraft or the
shares of the companies owning them.
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CERTAIN INCOME TAX RISKS
The tax consequences of the purchase of the Notes will depend to some
extent upon your individual circumstances. Ownership of the Notes entails
certain risks regarding the application of the tax laws of Ireland, the United
States, Jersey and the jurisdictions in which the members of AerCo Group and the
Lessees are organized, reside or operate.
We have received an opinion of Mourant du Feu & Jeune, our Jersey tax
counsel, that neither we nor ALPS 94-1 will be subject to Jersey income tax and
that payments on the Notes will not be subject to Jersey withholding tax.
In the opinion of KPMG, our Irish tax advisors, neither ALPS 94-1 nor AerCo
USA is subject to Irish income tax on its non-Irish source income. This opinion
is based on the assumption that the companies operate their businesses in
accordance with the operational provisions set forth in their organizational
documents (which were included for this purpose). ALPS 94-1 and AerCo USA do not
intend to be (and have taken steps designed to ensure that they will not be)
treated as doing business in Ireland. Therefore, ALPS 94-1 and AerCo USA do not
expect to be subject to Irish income tax. However, there can be no assurance
that ALPS 94-1 or AerCo USA will not be subject to Irish tax on some or all of
their income.
In the opinion of McCann FitzGerald, our Irish counsel, payments on the
Notes (excluding any Definitive Notes) will not be subject to Irish withholding
tax. This opinion is based on certain assumptions. See "Tax Considerations --
Irish Tax Considerations -- Irish Income and Withholding Taxes on Payments on
the Notes".
You should be aware, however, that these opinions represent only the best
judgment of counsel and are not binding on the applicable taxing authorities or
the courts. The opinions depend upon certain factual assumptions and the
existence of different facts could lead to circumstances not anticipated by
counsel.
We will not make any additional payments to Noteholders for any withholding
or deduction that is required under applicable law on payments on the Notes. If
we are required to make a withholding or deduction, we will use reasonable
efforts to avoid the application of withholding taxes. If we cannot avoid the
withholding taxes, we may redeem the Notes. If withholding taxes are imposed on
the Notes and we do not redeem them, we will reduce the amount of interest that
you will receive by the amount of the withholding taxes.
ALPS 94-1, AerCo Ireland, AerCo Ireland II and we do not expect to have any
material U.S. federal income tax liability. However, this conclusion may depend
in part on:
- the manner in which the Servicer performs its activities for AerCo, ALPS
94-1, AerCo Ireland or AerCo Ireland II, and
- the qualification of AerCo, AerCo Ireland and AerCo Ireland II for the
benefits of a recently ratified treaty between the United States and
Ireland (the "Treaty").
We can give no assurance that the Servicer's activities will not expose
AerCo, ALPS 94-1, AerCo Ireland or AerCo Ireland II to United States federal
income tax on their income. GPA and certain of its affiliates, with the support
of the Irish authorities, have sought a ruling from the United States under the
Treaty, that certain subsidiaries and affiliates of GPA Group will be eligible
for benefits under the Treaty. Based upon (i) the expected applicability of the
ruling when issued to affiliates of GPA Group formed after the date of the
ruling request with similar factual profiles to those GPA Group entities
specifically included in the ruling request and (ii) the structure of the AerCo
Group and the expected nature of its income and operations, we believe that if
and when a ruling is received it will apply to AerCo, AerCo Ireland and AerCo
Ireland II. However, we can give no assurance that a ruling will be obtained,
that AerCo, AerCo Ireland, or AerCo Ireland II would be covered by the ruling or
that such companies or ALPS 94-1 would not be subject to United States federal
income tax on some or all of their income with the result that the cash flow
available for payments on the Notes could be reduced.
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There is also a risk that the Servicer's future management of the Aircraft
may expose members of the AerCo Group to tax liabilities in other jurisdictions
outside Ireland.
LOSS OF CERTAIN IRISH TAX BENEFITS
AerCo, AerCo Ireland and AerCo Ireland II are entitled to certain corporate
tax benefits for Shannon, Ireland certified companies including a preferential
corporate taxation rate of 10% through December 2005. If GPA Group were
liquidated or were to cease to hold its 5% shareholding in AerCo, or if GPA
Group or GECAS were to reduce or relocate their respective operations for any
reason such that either party failed to maintain, among other things, certain
employment levels at Shannon, Ireland, or if GPA Administrative Services or GPA
Cash Manager II were to resign or be terminated as Administrative Agent or Cash
Manager, respectively, of AerCo Group, then AerCo, AerCo Ireland, and AerCo
Ireland II may become subject to Irish corporate taxation at general Irish
statutory rates (currently 32%).
Such a loss of tax benefits could lead to a downgrade in the then-current
ratings on the Notes and could affect our ability to make the required payment
on the Notes. See also "Irish Tax Considerations -- Irish Income and Withholding
Taxes on Payments on the Notes". GPA Group has agreed to use its best efforts to
maintain the Shannon corporate tax benefits for the benefit of AerCo Group.
When the Irish preferential 10% tax rate ends on December 31, 2005, AerCo
and the other Irish tax-resident members of the AerCo Group may become subject
to Irish corporate tax on their net trading income at a 12.5% rate as announced
by the Minister for Finance of Ireland on December 3, 1997. According to the
announcement, non-trading income will be taxed at 25%. We can give no assurance
that the announced rates will be adopted as law in Ireland or that, if adopted,
the rates will not be changed afterwards.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), AerCo will accept for exchange Old Notes which are properly tendered on
or prior to the Expiration Date and not withdrawn as permitted below. As used
herein, the term "Expiration Date" means 5:00 p.m., New York City time, on
1999. If AerCo, however, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term "Expiration Date"
means the latest time and date to which the Exchange Offer is extended.
This Prospectus, together with the Letter of Transmittal, is first being
sent on or about the date set forth on the cover page hereof to all Holders of
Old Notes known to AerCo. AerCo's obligations to accept Old Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
under "Certain Conditions to the Exchange Offer" below.
AerCo expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance of any Old Notes, by giving oral or written notice of such
extension to the Exchange Agent and notice of such extension to the Holders as
described below. During any such extension, all Old Notes previously tendered
will remain subject to the Exchange Offer and may be accepted for exchange by
AerCo. Any Old Notes not accepted for exchange for any reason will be credited
to an account maintained with the Book-Entry Transfer Facility without expense
to the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer. Notwithstanding the foregoing, pursuant to
the Registration Rights Agreement, AerCo has agreed to keep the Exchange Offer
open for not less than 20 business days after the date notice thereof is mailed
to the holders of the Old Notes (or longer if required by applicable law).
AerCo expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "Certain Conditions to the Exchange Offer." AerCo will
give oral or written notice of any extension, amendment, non-acceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Indenture in connection with the Exchange Offer. AerCo intends to conduct
the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to AerCo of Old Notes by a Holder thereof as set forth below and
the acceptance thereof by AerCo will constitute a binding agreement between the
tendering Holder and AerCo upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal. Except
as set forth below, a Holder (which term, for purposes of the Exchange Offer,
includes any participant in the Book-Entry Transfer Facility system whose name
appears on a security position listing as a holder of such Old Notes) who wishes
to tender Old Notes for exchange pursuant to the Exchange Offer must transmit to
the Exchange Agent on or prior to the Expiration Date either (i) a properly
completed and duly executed Letter of Transmittal or a facsimile thereof,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent at the address set forth below under "Exchange Agent" or (ii) a
computer-generated message (an "AGENT'S MESSAGE"), transmitted by means of the
Book-Entry Transfer Facility's ATOP (as defined below) system and received by
the Exchange Agent and forming part of a Book-Entry Confirmation, in which such
Holder acknowledges and agrees to be bound by the terms of the Letter of
Transmittal. In addition, in order to deliver Old Notes (i) a timely
confirmation of a book-entry transfer (a "BOOK-ENTRY CONFIRMATION") of such Old
Notes into the Exchange Agent's account at The Depository Trust Company (the
"BOOK-ENTRY TRANSFER FACILITY") pursuant to the procedure for book-entry
transfer described below,
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must be received by the Exchange Agent prior to the Expiration Date or (ii) the
Holder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, WE RECOMMEND THAT HOLDERS USE REGISTERED MAIL, WITH RETURN RECEIPT
REQUESTED. IN ALL CASES, HOLDERS SHOULD ALLOW SUFFICIENT TIME TO ASSURE TIMELY
DELIVERY. NO LETTERS OF TRANSMITTAL SHOULD BE SENT TO AERCO.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the United
States (collectively, "ELIGIBLE INSTITUTIONS").
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
AerCo in its sole discretion, which determination shall be final and binding.
AerCo reserves the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Notes which acceptance might, in the judgment of AerCo or its counsel, be
unlawful. AerCo also reserves the absolute right in its sole discretion to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any Holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by AerCo shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with the tenders of Old Notes for
exchange must be cured within such reasonable period of time as AerCo shall
determine. Neither AerCo, the Exchange Agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the Holders of Old Notes, such Letter of Transmittal must be accompanied by
appropriate powers of attorney, in either case signed exactly as the name or
names of the Holders that appear on the security position listing maintained by
DTC.
If the Letter of Transmittal or powers of attorney are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by AerCo, proper
evidence satisfactory to AerCo of its authority to so act must be submitted.
By tendering (including transmission of an Agent's Message), each Holder of
Old Notes will represent to AerCo that, among other things, (i) the New Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is such Holder, (ii) neither the Holder of Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes, (iii) if the Holder is not a broker-dealer, or
is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the Holder nor any such other person is engaged
in or intends to participate in the distribution of such New Notes and (iv)
neither the Holder nor any such other person is an "affiliate" of AerCo, within
the meaning of Rule 405 under the Securities Act. By tendering (including
transmission of an Agent's Message) each Holder of Old Notes that is a
broker-dealer (whether or not it is also an "affiliate") that will receive New
Notes for its own account pursuant to the Exchange Offer will represent that Old
Notes to be exchanged for New Notes were acquired by it as a result of
market-making activities or other trading activities and will acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, it will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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<PAGE> 48
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
AerCo will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, AerCo shall be deemed to have accepted properly tendered Old
Notes for exchange when, as and if AerCo has given oral or written notice
thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Book-Entry Confirmation of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below and either (i) a properly
completed and duly executed Letter of Transmittal or facsimile thereof,
including all other documents required by such Letter of Transmittal or (ii) a
properly transmitted Agent's Message. If any tendered Old Notes are not accepted
for any reason set forth in the terms and conditions of the Exchange Offer, such
unaccepted or non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility as promptly as practicable after the
expiration or termination of the Exchange Offer.
INTEREST ON THE NEW NOTES
Holders of Old Notes that are accepted for exchange will not receive
accrued interest thereon at the time of exchange. However, each New Note will
bear interest from the most recent date to which interest has been paid on the
Old Notes or New Notes, or if no interest has been paid on the Old Notes or New
Notes.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. All deliveries of Old
Notes must be made by book-entry transfer to the account maintained by the
Exchange Agent at the Book-Entry Transfer Facility. Any financial institution
that is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account in accordance with the
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP")
procedures for transfer. Holders of Old Notes who are unable to deliver
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility or all other documents
required by the Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent on or
prior to the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution either a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) or a
properly transmitted Agent's Message and Notice of Guaranteed Delivery,
substantially in the form provided by AerCo (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of such
Holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation and all other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent, and (iii) a Book-Entry Confirmation and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
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<PAGE> 49
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, either (i) a written notice of withdrawal
must be received by the Exchange Agent at one of the addresses set forth below
under "Exchange Agent" or (ii) the appropriate procedures of the Book-Entry
Transfer Facility's ATOP system must be complied with. Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes to
be withdrawn and identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes). Any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Old Notes and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by AerCo, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are not exchanged for any reason will be credited to an account maintained with
Book-Entry Transfer Facility for the Old Notes as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "Procedures for Tendering Old Notes" above at any time on or
prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, AerCo shall not
be required to accept for exchange, or to issue New Notes in exchange for, any
Old Notes and may terminate or amend the Exchange Offer, if at any time before
the acceptance of such Old Notes for exchange or the exchange of the New Notes
for such Old Notes, such acceptance or issuance would violate applicable law or
any interpretation of the staff of the Commission.
The foregoing condition is for the sole benefit of AerCo and may be
asserted by AerCo regardless of the circumstances giving rise to such condition
or may be waived by AerCo in whole or in part at any time and from time to time
in its sole discretion. The failure by AerCo at any time to exercise the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, AerCo will not accept for exchange any Old Notes tendered, and
no New Notes will be issued in exchange for any such Old Notes, if at such time
any stop order shall be threatened or in effect with respect to either the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
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<PAGE> 50
EXCHANGE AGENT
Bankers Trust Company has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be delivered to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Delivery To: Bankers Trust Company, as Exchange Agent
If by Mail, Hand or Overnight Courier:
Bankers Trust Company
Four Albany Street
Mail Stop 5101
New York, New York 10006
Attention: Structured Finance Group
or
If by Facsimile:
(212) 250-6439
Confirm by Telephone:
(212) 250-5601 or (212) 250-6137
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THE ADDRESS
SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN TO A NUMBER SET FORTH
ABOVE WILL NOT BE A VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by the Exchange
Agent, on behalf of AerCo. No additional compensation will be paid to the
Exchange Agent who engages in soliciting tenders. AerCo will not make any
payment to brokers, dealers, or others soliciting acceptances of the Exchange
Offer. AerCo however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by AerCo and are estimated in the aggregate to be $500,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, a transfer tax is
imposed for any reason other than the transfer of Old Notes to AerCo or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the Holder or any other person) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted, the amount of such transfer taxes will be billed
directly to such tendering Holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legends thereon. In general,
the Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. AerCo does not intend
to register the Old Notes under the Securities Act.
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<PAGE> 51
Based upon interpretations contained in letters issued to third parties by
the staff of the Commission, we believe that any holder of Old Notes (other than
a broker-dealer, as set forth below, or any holder who is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who exchanges
its Old Notes for New Notes pursuant to the Exchange Offer may offer such New
Notes for resale, may resell such New Notes, or otherwise transfer such New
Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act IF:
- the holder acquires the New Notes in the ordinary course of its business
AND
- the holder has no arrangement or understanding with any person to
participate in the distribution of the New Notes.
If you wish to accept the Exchange Offer, you must represent to us in the Letter
of Transmittal that the two conditions described above have been met.
If you wish to accept the Exchange Offer, you must also make the following
representations:
- If you are not a broker-dealer, you must represent that you are not
participating in the distribution of the New Notes and that you do not
intend to participate in the distribution.
- If you are a broker-dealer who will not receive New Notes for your own
account, you must represent that neither you nor any person for whom you
receive the New Notes is participating in the distribution and that
neither you nor any such person intends to participate in the
distribution.
- If you are a broker-dealer who will receive New Notes for your own
account, you must represent that you acquired the Old Notes tendered by
you in your market-making or other trading activities. You must also
acknowledge that you will deliver a prospectus if you resell the New
Notes. By making this acknowledgement and delivering a prospectus, you
will not be deemed to admit that you are an "underwriter" within the
meaning of the Securities Act.
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register the New Notes prior to offering or
selling such New Notes. We have agreed to register or qualify the New Notes held
by broker-dealers for offer or sale under the securities or blue sky laws of
such jurisdictions as any such Holder reasonably requests in writing. Unless we
are requested, we do not intend to take any action to register or qualify the
New Notes for resale in any such jurisdictions. In addition, the tender of Old
Notes pursuant to the Exchange Offer will reduce the principal amount of the Old
Notes outstanding, which may have an adverse effect upon, and increase the
volatility of, the market price of the Old Notes due to a reduction in
liquidity.
50
<PAGE> 52
THE PARTIES
AERCO
The Company is a special purpose limited liability company formed on June
4, 1998 under the laws of Jersey for an unlimited duration for certain limited
purposes, including owning the share capital of ALPS 94-1 and the other
Aircraft-Owning Subsidiaries and thereby indirectly acquiring, financing,
re-financing, owning, leasing, re-leasing, maintaining and modifying the
Aircraft (including any Additional Aircraft). The foregoing activities are
initially limited to the Initial Aircraft. In addition, within the limits set
forth in the Indenture, AerCo Group may acquire Additional Aircraft and may also
sell Aircraft and incidents of ownership of the Aircraft in certain tax-related
transactions. AerCo may also enter into certain hedging contracts as described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Resources and Liquidity -- Interest Rate Management",
and establish and provide loans or guarantees to, or in respect of, its
subsidiaries and any entities that may be established in the future in
connection with acquisitions of Additional Aircraft ("FUTURE AERCO ENTITIES").
Future AerCo Entities may be subsidiaries of the Company or may be entities with
no common equity ownership connections to AerCo which have been organized for
the purpose of the Additional Aircraft acquisition and which have guaranteed the
Notes and other obligations of AerCo.
The Company's direct subsidiaries are ALPS 94-1, AerCo Ireland, AerCo
Ireland II and AerCo USA, in each of which it holds 100% of the share capital.
The Company operates the business of AerCo Group principally through its direct
and indirect subsidiaries but in the future may also engage directly in the
acquisition and leasing of Aircraft. The Company's own business therefore
principally consists of, and its own revenues are derived principally from,
making loans to its subsidiaries. The Company and its subsidiaries are also
permitted to lease Aircraft to or from, or sell Aircraft to or buy Aircraft
from, other members of AerCo Group.
The Company has an authorized share capital of 10,000 ordinary shares, $1
par value per share, 20 of which have been issued. Nineteen shares of the issued
Capital Stock of the Company have been issued to and are held by the Nominees
for the benefit of the Charitable Trust. One share of the issued Capital Stock
has been issued to and is held by GPA Group. The 5% shareholding of GPA Group is
intended to assist AerCo and certain of its subsidiaries in obtaining certain
corporate tax benefits for Shannon, Ireland certified companies. See "Risk
Factors -- Loss of Certain Irish Tax Benefits".
The Company has a Board of Directors but has and will have no employees or
executive officers. Accordingly, the Board relies upon the Servicer, the
Administrative Agent, the Cash Manager and the other service providers for all
asset servicing, executive and administrative functions pursuant to the
respective service provider agreements. The Board consists of five members, two
of whom were appointed by the holder of a majority in aggregate principal amount
of the Class E Notes and three of whom are independent directors ("INDEPENDENT
DIRECTORS"). Any resolutions of the Directors of the Company, whether passed at
a meeting of Directors or by way of written resolution, will require the
affirmative vote of a majority of the Independent Directors. Certain significant
transactions or proceedings of the Company may only be approved by a unanimous
vote of all the Directors of the Company. These transactions and proceedings
principally relate to certain insolvency proceedings, amendments to the
Company's Memorandum or Articles of Association, the acquisition of Additional
Aircraft, mergers or, subject to certain exceptions, sale of all or
substantially all of the Company's assets. The Independent Directors will not be
officers, directors or employees of GPA Group, any holder of the Class E Notes
or any affiliate of these persons.
The Company is not involved in or subject to any legal or arbitration
proceedings relating to claims or amounts which are material in the context of
the issue of the Notes nor is the Company aware that any such proceedings are
pending or threatened. GPA Group has represented and warranted in the Stock
Purchase Agreement that there are no liabilities, actual or contingent, of a
Transferring Company that existed at the time of transfer but were not disclosed
in the financial statements of the relevant Transferring Company or otherwise
disclosed to AerCo Group.
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<PAGE> 53
The Company's registered and principal office is located at 22 Grenville
Street, St. Helier, Jersey, JE4 8PX, Channel Islands and its telephone number is
011-44-1534-609000. Until September 9, 1998, the Company's auditors were Arthur
Andersen, Chartered Accountants, Forum House, Grenville Street, St. Helier,
Jersey JE2 4UF, Channel Islands. On September 9, 1998, the Company appointed
KPMG, Chartered Accountants, 1 Stokes Place, St. Stephens Green, Dublin 2,
Ireland, as new independent auditors for the fiscal year ending June 30, 1998
and subsequent periods.
GPA
GPA Group is the holder of all of the Subclass D-1 and Subclass E-1 Notes
of the Company and, through wholly owned subsidiaries, provides administrative,
accounting, liability management, financial consulting and cash management
services to AerCo Group in its capacity as Administrative Agent and Cash
Manager. As the holder of a majority in aggregate principal amount of the
Subclass E-1 Notes, GPA Group is entitled to nominate two Directors of the
Company. The GPA Group nominated Directors are Edward Hansom and Rose Hynes.
Because GPA has access to certain potential benefits arising from the
Aircraft through its ownership of the Subclass D-1 and Subclass E-1 Notes of
AerCo, the Initial Aircraft and the AerCo Notes will be consolidated with GPA's
assets and liabilities on GPA's consolidated balance sheets under both Irish
GAAP and U.S. GAAP.
GPA is a significant lessor of modern commercial aircraft and is a
significant participant in the global commercial aviation industry. GPA leases
aircraft throughout the world almost exclusively by way of operating lease. At
July 16, 1998, GPA employed 30 people and had 85 commercial aircraft in its
portfolio, of which 81 were on lease to 35 lessees in 19 countries. At July 16,
1998, GPA owned or leased-in three aircraft types which represented over 10%
each of its portfolio by appraised value. Airbus A320 aircraft constituted
approximately 18.69%, Boeing 737-300 aircraft constituted approximately 15.50%
and MD-11 aircraft constituted approximately 10.29%. Overall, at July 16, 1998,
narrowbody aircraft (including turboprops) constituted approximately 85.29% of
GPA's portfolio by appraised value and Stage 3 aircraft (including turboprops)
constituted approximately 96.94% of GPA's portfolio by appraised value. At July
16, 1998, 32.25% of GPA's portfolio (by appraised value) was on lease to North
American airlines, 25.54% was on lease to European based airlines, 18.00% was on
lease to Asian airlines and 19.82% was on lease to Latin American airlines. Also
at July 16, 1998, approximately 38.60% of GPA's portfolio was on lease to three
airlines, of which approximately 16.08% was on lease to one U.S. airline,
approximately 12.35% was on lease to one Chinese airline and approximately
10.29% was on lease to one Brazilian airline, in each case by appraised value.
In addition to its remaining owned aircraft, GPA continues to have an indirect
interest in the aircraft owned by Airplanes Limited and Airplanes Trust by
virtue of its deeply subordinated investment in those entities.
On June 5, 1998, GPA Group entered into a nonbinding MOU with GE Capital
and GECAS in relation to a number of matters. On August 21, 1998, GPA Group
entered into definitive agreements with GE Capital and GECAS in relation to the
matters set forth in the MOU. On November 4, 1998, GPA Group's ordinary
shareholders approved the 1998 Restructuring. Following completion of the 1998
Restructuring, GPA will conduct business under a new name, AerFi Group plc.
The principal components of the 1998 Restructuring are:
- Replacement of the Existing Call Right with a new option (the "NEW GE
OPTION"), exercisable at any time until October 29, 2001, to acquire a
passive interest of up to 24.9% in GPA (after exercise) at an option
price of approximately $0.06 per ordinary share (approximately equivalent
to the per share price under the existing Call Right).
- GPA's servicing agreement with GECAS to be amended to provide, among
other things, for its termination on October 29, 2001 in consideration
for a $61.25 million fee to be paid by GPA upon completion of the 1998
Restructuring.
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<PAGE> 54
- GPA to sell nine aircraft to GE Capital for an aggregate purchase price
equal to GPA's net book value (approximately $270 million at September
30, 1998). Eight of these aircraft were owned by GPA and one was owned by
ALPS 94-1 at March 31, 1998.
- Various agreements pursuant to which GPA will assign to GE Capital its
rights under a purchase agreement with The Boeing Company for four new
Boeing 737 aircraft. GE Capital will reimburse GPA for the purchase price
installments previously paid by GPA in the amount of approximately $8.5
million.
- GE Capital to acquire the outstanding Class E Notes issued by Airplanes
Group that are held by GPA Group. GECAS will continue as servicer of
Airplanes Group's 212 aircraft.
- GE Capital to have the option, exercisable at any time until October 29,
2001, to pay GPA an aggregate of $35.9 million in satisfaction of GE
Capital's obligation to make deferred payments to GPA relating to 18
aircraft it previously purchased from GPA. (This amount is equal to GPA's
book value of these assets.)
- GPA to satisfy its obligations as lessee under nine aircraft head leases
from GE Capital for a $36 million cash payment and assignment of its
rights under the relevant subleases. The consummation of this transaction
in respect of the head lease for one of these nine aircraft may not occur
by the time the 1998 Restructuring is consummated, if at all.
- GPA to change its name upon completion of the 1998 Restructuring. GPA, GE
Capital, GECAS and their affiliates will agree not to use the "GPA",
"Guinness Peat Aviation", "GPA Group plc" or "GPA Group" names or logos
or any variant thereof.
On September 30, 1998, GPA Group entered into the Investment Agreement with
TPG AerFi and the Current Shareholders, including all Directors and senior
management of GPA Group. Under the Investment Agreement, TPG AerFi, together
with the Directors and senior management of GPA Group, have made a tender offer
to acquire up to 69.6% of GPA Group's outstanding ordinary shares at a price of
$1.56 per share. TPG AerFi has also agreed to subscribe for a number of new
ordinary shares of GPA Group that is dependent on the results of the tender
offer at the same price. GPA Group expects that, as a result of these
transactions, TPG AerFi will acquire approximately 61.8% of its issued ordinary
shares immediately after the transaction (47.7% on a fully diluted basis). Under
the Investment Agreement, TPG AerFi will have the right to appoint three members
of the board of GPA Group. The Investment Agreement gives these directors the
right to veto significant corporate actions of GPA Group, including acquisitions
and dispositions of assets in excess of certain thresholds.
There can be no assurance that these transactions will be consummated, or
if consummated, that they will not differ from the transaction described above.
Completion of these transactions are subject to contractual, governmental or
regulatory approvals and other customary closing conditions.
As of July 16, 1998, after giving effect on a pro forma basis to the
Transactions, GPA would have 67 aircraft in its portfolio of which 63 were on
lease to 30 lessees in 18 countries. Through its Subclass D-1 and Subclass E-1
Notes, GPA owns the residual interest in the 35 Initial Aircraft. GPA would own
or lease-in five aircraft types which represent over 10% each of its portfolio
by appraised value. Airbus A320 aircraft would constitute approximately 17.07%,
MD11 aircraft would constitute approximately 15.90%, ATR42-300 would constitute
approximately 13.11%, Fokker 100 aircraft would constitute approximately 13.07%
and MD83 aircraft would constitute approximately 10.26%. Overall, on a pro forma
basis, narrowbody aircraft (including turboprops) would constitute approximately
84.10% of GPA's portfolio by appraised value and Stage 3 aircraft (including
turboprops) would constitute approximately 95.28% of GPA's portfolio by
appraised value. Approximately 35.93% of GPA's portfolio (by appraised value)
would be on lease to North American airlines, 28.09% would be on lease to
European airlines, 21.25% would be on lease to Latin American airlines and 6.41%
would be on lease to Asian airlines. Approximately 26.83% of GPA's portfolio
would be on lease to two airlines, of which approximately 15.90% would be on
lease to one Brazilian airline and approximately 10.93% would be on lease to one
U.S. airline, in each case by appraised value.
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<PAGE> 55
GPA would no longer have an indirect interest in the aircraft owned by
Airplanes Group because its economic interest in the Airplanes Group Class E
Notes would be transferred to GE Capital.
The following table indicates the maturities of GPA's indebtedness as of
March 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
---------------------------------------------
1999 2000 2001 2002 2003 THEREAFTER
---- ---- ---- ---- ---- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Secured facilities................................. 37 34 140 19 30 127
Unsecured facilities............................... 71 1 -- 52 -- 3
--- --- --- --- --- ---
Total(1)........................................... 108 35 140 71 30 130
=== === === === === ===
</TABLE>
- ---------------
(1) As of March 31, 1998, GPA had cash on hand of $286.4 million ($159.8 million
of which were restricted cash balances) and as of the same date, but giving
effect on a pro forma basis to the Transactions, and the restructuring of
Novel Limited, a subsidiary of GPA Group, GPA would have had cash on hand
of $411.6 million ($133.8 million of which would have been restricted cash
balances).
BABCOCK & BROWN
Babcock & Brown provides various services to AerCo Group as Servicer under
the Servicing Agreement.
Babcock & Brown is an indirect subsidiary of Babcock & Brown Holdings Inc.,
a California corporation, which is the parent of a group of corporations
operating throughout the world under the Babcock & Brown name. The Babcock &
Brown Group comprises a global financial advisory company specializing in
arranging and managing asset-based financial transactions, with particular
expertise in the international aviation industry.
The Babcock & Brown Group's primary activities include: (i) arranging and
advising airlines, aircraft owners, lenders and investors on aircraft operating
leasing transactions, providing related management and marketing services and
making selected and generally short-term investments in, and otherwise trading
in, aircraft and aircraft-related assets; (ii) arranging and advising on single
jurisdiction and cross-border leasing and project finance transactions; (iii)
arranging and advising on asset-based debt finance; (iv) developing and
implementing special financial products to meet specific needs of clients; and
(v) offering general advisory services to airlines and other users of high value
capital equipment and to investors in such assets.
The Babcock & Brown Group is one of the largest independent arrangers of
finance and operating leases for aircraft. Since its formation in 1977, the
Babcock & Brown Group has provided financial advisory or management services in
approximately 775 transactions to more than 140 clients in the international
aviation industry. The Babcock & Brown Group also advises and works with a wide
range of lenders and investors in aircraft financing and lease transactions.
Recently the Babcock & Brown Group has also established an aircraft trading
and/or investment operation to invest for its own account, generally on a
short-term basis, in aircraft on operating lease.
Babcock & Brown is headquartered in Dublin, Ireland and at March 31, 1998
had seven employees. At March 31, 1998, the Babcock & Brown Group, which has its
headquarters in San Francisco, had a total of 275 employees world-wide in 14
office locations in Brisbane, Dublin, Greenwich (Connecticut), Hong Kong,
Johannesburg, London, Madrid, Melbourne, Milan, New York, Paris, San Francisco,
Seattle and Sydney.
BUSINESS
Management and Marketing Services
The Babcock & Brown Group manages a portfolio of aircraft on operating
lease on behalf of its investor clients, most of which are not principally in
the business of aircraft ownership and are seeking a return from future lease
rentals, future residual value realization and/or tax benefits. Babcock & Brown
is servicer to a portfolio of 13 aircraft ("ALPS 96-1") at March 31, 1998. The
Babcock & Brown Group offers a comprehensive range of management services
including arrangement of the acquisition and delivery of
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<PAGE> 56
aircraft, collection of rentals, security deposits and maintenance reserves,
monitoring insurance and arranging for additional insurance coverage as
appropriate, arranging for aircraft valuations, registration and de-
registration, technical and contract compliance supervision, re-leasing of
aircraft at the end of the lease term, acceptance of aircraft at the end of the
lease term, re-delivery under a new lease and sale of the aircraft to a
subsequent buyer. In addition, the Babcock & Brown Group offers lease
enforcement and repossession services in the event of a lessee's failure to meet
the contractual terms of a lease.
The Babcock & Brown Group has been providing management services to its
investor clients in respect of aircraft on operating lease since 1990, and it
has developed a team of experienced professionals and support systems to handle
the broad range of tasks involved in the management of high value assets. At
March 31, 1998, the Babcock & Brown Group managed the following 63 aircraft on
behalf of its investor and other clients:
<TABLE>
<CAPTION>
AIRCRAFT TYPE NO.
------------- ---
<S> <C>
Airbus Industrie
A300-B4-100/200........................................... 5
A320-200.................................................. 1
Boeing
B737-300/400/500.......................................... 29
B747-200.................................................. 2
B747-400.................................................. 1
B757-200.................................................. 16
B767-300.................................................. 6
Fokker
Fokker 100................................................ 1
McDonnell Douglas
MD83...................................................... 2
--
Total....................................................... 63
==
Body Type
Widebody.................................................... 14
Narrowbody.................................................. 49
--
Total....................................................... 63
==
Stage Compliance
State 2..................................................... --
Stage 3..................................................... 63
--
Total....................................................... 63
==
</TABLE>
Operating Lease Arrangement. The Babcock & Brown Group is a leading
arranger of aircraft operating lease transactions on behalf of third parties.
These transactions include acquiring and managing aircraft on operating lease
for identified investors, primarily in Japan, which purchase the aircraft with
operating leases in place as financial assets for investment purposes. The
Babcock & Brown Group also represents owners of aircraft, including airlines and
lessors in the sale of aircraft from their portfolios. In the case of airlines,
these transactions often include a simultaneous lease-back of the aircraft. The
investors in these transactions are located throughout the world, but primarily
in Japan and North America.
55
<PAGE> 57
Since 1990, the Babcock & Brown Group has completed aircraft operating
lease transactions with more than 40 airlines and operating lessees, including
transactions involving 130 aircraft.
For the period from December 1994 though March 1998, the Babcock & Brown
Group arranged the re-lease of the following 37 aircraft owned by its clients:
<TABLE>
<CAPTION>
AIRCRAFT
AIRCRAFT TYPE RE-LEASED
------------- ---------
<S> <C>
Airbus Industrie
A300-B4-100/200........................................... 5
A320-200.................................................. 1
Boeing
B737-300.................................................. 13
B737-400.................................................. 4
B747-200.................................................. 3
B757-200.................................................. 4
B767-300.................................................. 4
McDonnell Douglas
DC10-30................................................... 1
MD83...................................................... 2
--
37
==
</TABLE>
Aircraft Trading and Investment
The Babcock & Brown Group has recently established an aircraft trading
and/or investment operation to invest, generally on a short term basis, in
aircraft on operating lease. This operation has taken positions in aircraft on
operating lease with a view to on-selling the aircraft to long term investors at
the most opportune time. Generally, persons within the Babcock & Brown Group
have only put a limited amount of capital, if any, at risk in such transactions
as the investments, underwritings and fundings are generally for the account of
NBB and/or third party lenders or investors, which may be guaranteed or
otherwise supported by NBB.
Since 1994, the Babcock & Brown Group has been involved in the acquisition
of approximately 20 aircraft on this basis, of which 13 have been sold within
holding periods that have not exceeded six months.
On March 31, 1998, Babcock & Brown Inc. and The Nomura Securities Co., Ltd
("NOMURA") restructured their relationship, including eliminating both Babcock &
Brown Inc.'s 20% shareholding in NBB and Nomura's 20% shareholding in Babcock &
Brown Inc. The restructuring contemplates that members of the Babcock & Brown
Group and NBB will continue their mutually beneficial relationship in the
Japanese operating lease business, including aircraft trading and investment.
The exact nature of this continuing relationship is currently under discussion
between Babcock & Brown Inc., Nomura and NBB.
Single Jurisdiction and Cross-Border Leasing and Project Finance Services
The Babcock & Brown Group also engages in the structuring, implementation
and completion of complex tax-oriented transactions such as U.S. and
cross-border leveraged and single investor leases, project financings and other
forms of tax-arbitraged equity and debt funding for aircraft and other
high-value capital assets. The Babcock & Brown Group is a leading advisor in the
area of domestic and cross-border tax-based leasing, particularly for aircraft.
The Babcock & Brown Group also arranges and advises on leases of assets such as
rail cars and satellites and on financing for projects such as power generation,
natural resources and manufacturing. Typical transactions range in size from $25
million to over $1 billion. In addition to the aircraft management services
described above, the Babcock & Brown Group also manages non-aircraft assets,
such as computers, locomotives, other rail equipment, satellites, films, oil and
gas properties and real estate.
56
<PAGE> 58
Asset-Based Debt Finance
Another aspect of the Babcock & Brown Group's business is the arrangement
of debt financing in various markets, with a primary focus on privately placed,
secured asset-based financings involving aerospace and other lenders located
throughout the world. Many of the debt placements are part of leveraged leases,
in which the Babcock & Brown Group acts on behalf of its clients as both the
debt and equity arranger, coordinating debt teams, equity marketers, financial
analysts and in-house counsel to complete transactions. Other transactions
involve privately placed secured and unsecured debt for the financing or
refinancing of assets or to provide clients with access to debt financing to
support their operations. From time to time, the Babcock & Brown Group also
structures transactions that involve the issuance of public debt, which is
arranged by other investment banking firms.
Special Products and Advisory Services
The Babcock & Brown Group also advises its clients regarding complex tax
and accounting issues, which frequently involve the tax laws and accounting
rules of several different jurisdictions. In addition, the Babcock & Brown Group
offers general advisory services to airlines, aircraft owners and other users of
capital equipment as well as to investors in aircraft and other capital
equipment. See "Risk Factors -- Risks Relating to AerCo and Certain Third
Parties".
57
<PAGE> 59
THE INITIAL AIRCRAFT, RELATED LEASES AND COLLATERAL
THE REFINANCING OF ALPS 94-1 AND ACQUISITION OF THE TRANSFERRING COMPANIES
Substantially all of the assets of AerCo consist of loans to, and 100% of
the issued and outstanding capital stock of, ALPS 94-1 and the Transferring
Companies. On July 15, 1998, AerCo purchased all of the issued and outstanding
capital stock (i) of ALPS 94-1 from the trustees of the ALPS 94-1 Trust for a
nominal amount and (ii) of the Transferring Companies from GPA Group for the
Purchase Price (as defined below).
On July 15, 1998, AerCo lent to ALPS 94-1 a portion of the net cash
proceeds from the Offering and the issuance of the Subclass D-1 and Subclass E-1
Notes to GPA Group for the purpose of immediately (i) redeeming the Class A-C
Notes issued by ALPS 94-1 and repaying the ALPS 94-1 Class D and Class E Note
and (ii) paying fees and other expenses payable by ALPS 94-1 in connection with
the refinancing of ALPS 94-1 and the Offering. Completion of the foregoing
transactions resulted in the repayment of all of ALPS 94-1's existing financial
indebtedness.
Pursuant to an agreement among ALPS 94-1, GECAS, the former servicer of
ALPS 94-1, and GPA Group, GECAS agreed to the termination of the existing ALPS
94-1 servicing agreement on July 15, 1998 in consideration of payment of a
termination fee. Pursuant to this termination agreement, ALPS 94-1 agreed, upon
termination of the ALPS 94-1 servicing agreement, (i) to waive all claims it may
have against GECAS, its affiliates and their respective representatives
thereunder and (ii) to indemnify GECAS, its affiliates and their respective
representatives for any losses they may have incurred in connection with the
termination of the ALPS 94-1 servicing agreement, the Offering and the issuance
of the AerCo Notes and the refinancing of ALPS 94-1.
AerCo paid to GPA Group the purchase price for the Transferring Companies
(the "PURCHASE PRICE") on July 15, 1998. The Purchase Price was equal to the
following amount calculated as of July 15, 1998:
(i) the aggregate Initial Appraised Value of the Transferring Aircraft
($213.3 million)
LESS THE SUM OF:
(ii) the amount of cash security deposits held in respect of the
Transferring Aircraft at July 15, 1998 ($2.9 million); and
(iii) the amount of indebtedness of any Transferring Companies to GPA Group
at July 15, 1998 ($210.1 million).
On this basis, the Purchase Price for the Transferring Companies was equal
to $0.3 million.
On July 15, 1998, AerCo lent to each Transferring Company a portion of the
net proceeds of the Offering for the purpose of immediately repaying the amount
of indebtedness of such Transferring Company to GPA Group. All letters of
credit, guarantees or similar arrangements securing obligations of any Lessee of
the Transferring Aircraft were, transferred to, renewed, amended or reissued in
the name of, a Transferring Company. As these arrangements were transferred to,
renewed, amended or reissued in the name of a Transferring Company, that portion
of the retained amount representing the amount which was withheld in respect of
the relevant arrangements was released to GPA Group.
Certain customary representations and warranties were given by GPA Group in
the Stock Purchase Agreement including, among other things, representations
relating to solvency, no undisclosed contingent liabilities and insurance.
APPRAISERS' REPORTS
As of March 1, 1998, the Initial Aircraft had an Initial Appraised Value of
$951.973 million. The Initial Appraised Value is equal to the average of the
opinions of the Appraisers as to the Base Value of each Initial Aircraft as of
March 1, 1998 without taking into account the value of the Initial Leases,
maintenance reserves or security deposits.
58
<PAGE> 60
The Appraisers have provided Appraisals of the value of each of the Initial
Aircraft at normal utilization rates in an open, unrestricted and stable market
as of March 1, 1998, adjusted to account for the reported maintenance standard
of the Initial Aircraft. The Appraisals were not based on physical inspection of
the Initial Aircraft. The Appraisals explain the methodology used to determine
the values for the Initial Aircraft. See "Risk Factors -- Aircraft Risks --
Risks of Decline in Appraised Values". Based on the Appraisals, the aggregate
Base Values calculated by each of the three Appraisers for the Initial Aircraft
are $981.27 million in the case of BK Associates, Inc., $984.38 million in the
case of Aircraft Information Services, Inc. and $890.27 million in the case of
Airclaims Limited. The Initial Appraised Values for the Initial Aircraft by type
and class are set out below. The Initial Appraised Value should not be relied
upon as a measure of the realizable value of any Initial Aircraft. See "Risk
Factors -- Aircraft Risks -- Cyclicality of Supply of and Demand for Aircraft"
and "-- Risks of Decline in Appraised Values".
PORTFOLIO INFORMATION
THE INITIAL AIRCRAFT
All of the Initial Aircraft hold or are capable of holding a noise
certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the
Chicago Convention (the "CHICAGO CONVENTION") or have been shown to comply with
the Stage 3 noise levels set out in Section 36.5 of Appendix C of Part 36 of the
United States Federal Aviation Regulations ("STAGE 3 AIRCRAFT").
The following table sets forth the Initial Aircraft by type of aircraft
both by reference to the number of Initial Aircraft at September 30, 1998 and to
the percentage of Initial Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF ENGINE AIRCRAFT BY INITIAL
MANUFACTURER TYPE OF AIRCRAFT AIRCRAFT BODY TYPE STAGE APPRAISED VALUE
- ------------ ---------------- --------- ---------- ------ --------------------
<S> <C> <C> <C> <C> <C>
Boeing (63.80%)..................... B737-400 7 Narrowbody 3 19.33%
B757-200 3 Narrowbody 3 13.36
B767-300ER 2 Widebody 3 13.19
B737-300 5 Narrowbody 3 12.41
B747-200B 1 Widebody 3 3.28
B737-500 1 Narrowbody 3 2.22
Airbus (17.63%)..................... A320-200 5 Narrowbody 3 16.24
A300-B4-200 1 Widebody 3 1.40
McDonnell Douglas Corporation
(10.19%) ......................... MD83 3 Narrowbody 3 6.83
DC8-71F 2 Narrowbody 3 3.36
Fokker N.V. (8.38%)................. F100 5 Narrowbody 3 8.38
-- ------
35 100.00%
== ======
</TABLE>
59
<PAGE> 61
The following table sets forth the Initial Aircraft by Initial Lessee at
September 30, 1998 both by reference to the number of Initial Aircraft and to
the percentage of the Initial Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF AIRCRAFT BY INITIAL
LESSEE(1) AIRCRAFT APPRAISED VALUE
- --------- --------- --------------------
<S> <C> <C>
Spanair S.A. ("SPANAIR").................................... 3 11.05%
Airtours International Airways Limited ("AIRTOURS")......... 2 6.60
Linea Aerea Nacional Chile S.A. ("LAN CHILE")............... 1 6.56
Asiana Airlines, Inc. ("ASIANA")............................ 2 5.76
Turk Hava Yollari A.O. ("THY").............................. 2 5.73
Transportes Aereos Regionais S.A. ("TAM")................... 3 5.17
Philippine Airlines, Inc. ("PAL")........................... 2 4.61
Air 2000 Limited ("AIR 2000")............................... 1 4.53
China Southwest Airlines ("CHINA SOUTHWEST")................ 1 4.45
Aerovias Nacionales de Colombia S.A. Avianca ("AVIANCA").... 1 4.38
Monarch Airlines Limited ("MONARCH")........................ 1 3.45
Canadian Airlines International Limited ("CANADIAN")........ 1 3.37
Tower Air, Inc. ("TOWER")................................... 1 3.28
Portugalia-Companhia Portuguesa de Transportes Aereos, S.A.
("PORTUGALIA")............................................ 2 3.21
Compagnie Nationale Air France ("AIR FRANCE")............... 1 2.81
Aer Lingus Limited ("AER LINGUS")........................... 1 2.70
China Aviation Supplies Corporation and Civil Aviation
Administration of China -- Yunnan Administration
("YUNNAN")................................................ 1 2.70
Pegasus Hava Tasimaciligi A.S. ("PEGASUS").................. 1 2.59
Gunes Ekspres Havacilik A.S. ("SUN EXPRESS")................ 1 2.56
British Midland Airways Limited ("BRITISH MIDLAND")......... 1 2.54
Malev RT ("MALEV").......................................... 1 2.54
Far Eastern Transport Corporation ("FEAT").................. 1 2.41
Air Pacific Limited ("AIR PACIFIC")......................... 1 2.22
BAX Global, Inc. ("BAX GLOBAL")............................. 1 1.68
Aircraft International Leasing Limited...................... 1 1.68
Indian Airlines Limited ("INDIAN").......................... 1 1.40
-- ------
35 100.00%
== ======
</TABLE>
- ---------------
(1) Total number of Initial Lessees = 26
60
<PAGE> 62
The following table sets forth the Initial Aircraft by country at September
30, 1998 according to the number of Initial Aircraft and to the percentage of
the Initial Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF AIRCRAFT BY INITIAL
COUNTRY(1) AIRCRAFT APPRAISED VALUE
- ---------- --------- --------------------
<S> <C> <C>
United Kingdom.............................................. 5 17.12%
Spain....................................................... 3 11.05
Turkey...................................................... 4 10.88
China....................................................... 2 7.15
Chile....................................................... 2 8.24
South Korea................................................. 2 5.76
Brazil...................................................... 3 5.17
United States............................................... 2 4.97
Philippines................................................. 2 4.61
Colombia.................................................... 1 4.38
Canada...................................................... 1 3.37
Portugal.................................................... 2 3.21
France...................................................... 1 2.81
Ireland..................................................... 1 2.70
Hungary..................................................... 1 2.54
Taiwan...................................................... 1 2.41
Fiji........................................................ 1 2.22
India....................................................... 1 1.40
-- ------
35 100.00%
== ======
</TABLE>
- ---------------
(1) Total number of countries = 18
The following table sets forth the Initial Aircraft by region at September
30, 1998 according to the number of Initial Aircraft and to the percentage of
the Initial Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF AIRCRAFT BY INITIAL
REGION AIRCRAFT APPRAISED VALUE
- ------ --------- --------------------
<S> <C> <C>
Developed Markets
Europe.................................................... 12 36.90%
North America............................................. 3 8.34
Emerging
Asia...................................................... 8 21.33
Latin America............................................. 6 17.79
Europe and the Middle East................................ 5 13.42
Others...................................................... 1 2.22
--- ------
35 100.00%
=== ======
</TABLE>
61
<PAGE> 63
The following table sets forth the Initial Aircraft by year of aircraft
manufacture or conversion to freighter at September 30, 1998 calculated by
reference to the number of Initial Aircraft and to the percentage of the Initial
Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF AIRCRAFT BY INITIAL
YEAR OF MANUFACTURE AIRCRAFT APPRAISED VALUE
- ------------------- --------- -------------------
<S> <C> <C>
1981........................................................ 1 3.28%
1983........................................................ 1 1.40
1988........................................................ 1 2.54
1989........................................................ 5 10.81
1990........................................................ 3 7.82
1991........................................................ 10 30.28
1992........................................................ 11 32.51
1993........................................................ 3 11.35
-- ------
35 100.00%
== ======
</TABLE>
The following table sets forth the exposure of the Initial Aircraft by seat
category at September 30, 1998 calculated by reference to the number of Initial
Aircraft and to the percentage of the Initial Appraised Value.
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF AIRCRAFT BY INITIAL
SEAT CATEGORY AIRCRAFT TYPE AIRCRAFT APPRAISED VALUE
- ------------- ------------- --------- -------------------
<S> <C> <C> <C>
91-120 B737-500, F-100........................... 6 10.60%
121-170 A320-200, B737-300, B737-400, MD83........ 20 54.80
171-240 B757-200.................................. 3 13.36
241-350 A300-B4-200, B767-300ER................... 3 14.59
351 and above B747-200B................................. 1 3.28
Freighter DC8-71F................................... 2 3.36
-- ------
35 100.00%
== ======
</TABLE>
62
<PAGE> 64
AERCO PORTFOLIO ANALYSIS
<TABLE>
<CAPTION>
DATE OF
AIRCRAFT ENGINE SERIAL MANUFACTURE/
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION
- ------ ------- ------ -------- ------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Asia..................... China China Southwest B757-200 RB211-535E4 26153 Aug-92
(Emerging) China Yunnan B737-300 CFM56-3C1 26068 Jun-92
India Indian Airlines A300-B4-200 CF6-50C2 240 May-83
Philippines PAL B737-300 CFM56-3B1 24465 Aug-89
Philippines PAL B737-300 CFM56-3B1 24677 Mar-90
South Korea Asiana Airlines B737-400 CFM56-3C1 25764 Jul-92
South Korea Asiana Airlines B737-400 CFM56-3C1 25765 Jul-92
Taiwan FEAT MD83 JT8D-219 49952 Dec-91
Europe................... France Air Inter A320-200 CFM56-5A1 85 Feb-90
(Developed) Ireland Aer Lingus B737-400 CFM56-3C1 24685 May-90
Portugal Portugalia F100 TAY650-15 11258 Dec-89
Portugal Portugalia F100 TAY650-15 11342 Aug-91
Spain Spanair B767-300ER PW4060 24999 Feb-91
Spain Spanair MD83 JT8D-219 49627 Apr-89
Spain Spanair MD83 JT8D-219 49790 Oct-89
United Kingdom Air 2000 B757-200 RB211-535E4 26158 Feb-93
United Kingdom Airtours A320-200 CFM56-5A3 299 Apr-92
United Kingdom Airtours A320-200 V2500-A1 362 Nov-92
United Kingdom British Midland B737-400 CFM56-3C1 23868 Oct-88
United Kingdom Monarch A320-200 CFM56-5A3 391 Feb-93
Europe................... Hungary Malev B737-300 CFM56-3C1 24909 Apr-91
(Emerging) Turkey Pegasus B737-400 CFM56-3C1 23979 Jan-89
Turkey Sun Express B737-300 CFM56-3C1 24908 Mar-91
Turkey THY B737-400 CFM56-3C1 24904 Feb-91
Turkey THY B737-400 CFM56-3C1 26066 Jun-92
Latin America............ Brazil TAM F100 TAY650-15 11341 Aug-91
(Emerging) Brazil TAM F100 TAY650-15 11350 Apr-92
Brazil TAM F100 TAY650-15 11351 Sep-91
Chile Lan Chile B767-300ER PW4060 24947 Mar-91
Chile Aircraft International DC8-71F CFM56-2C1 46040 Mar-91
Leasing Limited(1)
Columbia Avianca B757-200 RB211-535E4 26152 Aug-92
North America............ Canada Canadian A320-200 CFM56-5A1 403 Dec-93
(Developed) United States BAX Global DC8-71F CFM56-2C1 46064 Mar-92
United States Tower Air B747-200B JT9D-7Q 22496 Oct-81
Other.................... Fiji Air Pacific B737-500 CFM56-3C1 26067 Jun-92
<CAPTION>
INITIAL
APPRAISED
VALUE AT
MARCH 1
REGION 1998
- ------ -------------
(U.S.$'000'S)
<S> <C>
Asia..................... 42,373
(Emerging) 25,683
13,317
21,953
21,943
27,353
27,500
22,920
Europe................... 26,777
(Developed) 25,710
14,207
16,343
63,130
21,283
20,820
43,097
31,290
31,527
24,214
32,883
Europe................... 24,157
(Emerging) 24,667
24,367
26,430
28,143
Latin America............ 16,163
(Emerging) 16,710
16,313
62,470
15,997
41,680
North America............ 32,083
(Developed) 16,020
31,270
Other.................... 21,180
--------
951,973
========
</TABLE>
- ---------------
(1) Aircraft International Leasing Limited is an indirect 100% subsidiary of Lan
Chile.
ACQUISITION OF ADDITIONAL AIRCRAFT
AerCo Group may contract to acquire additional commercial passenger or
freight aircraft from various sellers, which may include GPA. Cash flows derived
from the Additional Aircraft, if any, and the related Additional Leases will be
available to satisfy the Company's payment obligations, including payments of
interest on, principal of, and premium, if any, on the Notes and any Additional
Notes. See "Risk Factors -- Aircraft Risks -- Additional Aircraft Risks". Any
acquisition of Additional Aircraft and related issuance of Additional Notes will
be subject to certain conditions under the Indenture. See "Description of the
Notes -- Payment of Principal and Interest -- Indenture Covenants -- Limitation
on Indebtedness" and "-- Limitations on Aircraft Acquisitions".
63
<PAGE> 65
INITIAL LEASES
GENERAL
All Initial Leases are managed by the Servicer pursuant to the Servicing
Agreement. References in this Prospectus to "LESSOR" will mean the relevant
subsidiary of the Company which leases the Aircraft to the operator.
The following description relates only to the Initial Leases. Any
Additional Leases acquired in connection with the acquisition of Additional
Aircraft and any Future Leases entered into in connection with the re-lease of
any Aircraft may differ from the description of the Initial Leases set forth
below. However, any Additional Leases or Future Leases will be required to
comply with the Operating Covenants. See "Description of the Notes -- Payment of
Principal and Interest -- Operating Covenants".
The Initial Leases are all operating leases under which the Company
generally will retain the benefit, and bear the risk, of the residual value of
the Initial Aircraft upon expiry or early termination of the Initial Lease
(although in the case of certain Initial Aircraft the Company has granted an
option to purchase the Aircraft to the Lessee or an affiliate and/or to extend
or shorten the term of the related Lease. See "-- Lessees' Options" below).
Under the Initial Leases, the Lessees have agreed to lease the Initial Aircraft
for a fixed term (but in some cases the Lessee has the right to terminate the
Lease early and/or to extend the Lease term. See "-- Lessees' Options" below).
Although the Initial Lease documentation is fairly standardized in many
respects, significant variations do exist as a result of Lessee negotiation.
LEASE PAYMENTS AND SECURITY
Each Initial Lease requires the Lessee to pay periodic rentals during the
Lease term. Certain of the Initial Leases require the Lessee to pay periodic
amounts by way of maintenance reserves or to provide maintenance letters of
credit or guarantees. See "-- Maintenance and Maintenance Reserves" below.
The Initial Lessees are required to make payments to the Lessor without
set-off or counterclaim, and each Initial Lease includes an obligation of the
Lessee to gross-up payments under the Lease where payments are subject to
certain withholding and other taxes, although, in certain cases, such amount
will be limited to the extent of the amount that would have been payable, if
any, if the Lease had never been transferred from GPA to the Company. The
Initial Leases also contain indemnification of the Lessor for certain taxation
liabilities (including, in some Leases, value added tax and stamp duties, but
generally excluding income tax or its equivalent imposed on the Lessor) and, in
all but one case, taxation of indemnity payments. The Lessees also are obliged
to pay default interest on any overdue amounts. In some cases, the Lessee may
exercise certain remedies if the lessor breaches its covenant of quiet
enjoyment.
Under the Initial Leases, the Lessees are liable through various
operational indemnities for operating expenses accrued or payable during the
term of the respective Lease, which would normally include maintenance,
operating, overhaul, airport and navigation charges, certain taxes, licenses,
consents and approvals, Aircraft registration and hull all risks and public
liability insurance premiums. The Initial Lessees are obliged to remove liens on
the Aircraft other than certain liens permitted under the Initial Leases.
Under all of the Initial Leases the Lessee has provided security for its
obligations in the nature of security deposits. In the case of 17 of such
Initial Leases (52.33% of the Initial Leases by Initial Appraised Value), the
Lessee has provided cash security deposits. In the case of ten of the Initial
Leases (24.22% of the Initial Leases by Initial Appraisal Value), the Lessee has
provided letters of credit. In the case of the other eight Initial Leases
(23.46% of the Initial Leases by Initial Appraised Value), the Lessee has
provided a combination of cash deposits and letters of credit.
Under ten of the Initial Leases, the Lessee has procured the issuance to
the Lessor of general guarantees by third parties in respect of the Lessee's
payment obligations (and in some cases performance obligations) under the
applicable Lease. In the case of seven of the Initial Leases, these guarantees
have been issued by a shareholder or affiliated company of the Lessee. In the
case of the Leases to China Southwest and Yunnan, a
64
<PAGE> 66
guarantee in respect of each Lessee's payment obligations has been issued by the
Bank of China (subject in each case to a stipulated maximum amount).
In the case of one Initial Lease, letters of comfort have been issued to
the Lessor by two of the Lessee's shareholders; these are in the nature of
statements of general commercial policy of each shareholder, not of guarantees.
RENTALS
Rentals under 33 of the Initial Leases (92.85% of the Initial Aircraft by
Initial Appraised Value) are payable monthly in advance, and rentals under the
remaining two Initial Leases (7.15% of the Initial Aircraft by Initial Appraised
Value) are payable quarterly in advance.
Rental payments on the Initial Leases are calculated either on a fixed or
floating rate basis. The rental payment of a lease which is calculated on a
floating rate basis generally has a minimum fixed amount (the rental floor) that
is payable even if LIBOR is 0% per annum plus an amount which varies with LIBOR
or varies itself. The rental floor varies from Lease to Lease.
OPERATION OF THE AIRCRAFT
The Initial Leases require the Lessees to operate the Aircraft in
compliance with all laws and regulations applicable to the Aircraft. The
Aircraft generally must remain in the possession of the Lessees, and any
subleases of the Aircraft must be approved by the Lessor. Under most of the
Initial Leases, the Lessees may enter into charter or "wet lease" arrangements
in respect of the Aircraft (i.e., a lease with crew and services provided by the
Lessee), provided the Lessee does not part with possession or operational
control of the Aircraft. Under certain Initial Leases, the Lessee is permitted
to enter into subleases to specified operators without the Lessor's consent,
provided certain conditions are met. Two of the Initial Lessees, BAX Global and
Aer Lingus currently sublease the Initial Aircraft on lease to them to Air
Transport International and Transbrasil, respectively.
Most of the Initial Leases permit the Lessees to subject the engines, and
other equipment or components in certain cases, to removal or replacement and,
in certain cases, to pooling arrangements (temporary borrowing of equipment), in
some cases with permitted entities (which may include certain manufactures,
suppliers, other airlines or aircraft operators) without the Lessor's consent
but subject to conditions and criteria set forth in the relevant Lease. Under
all of the Initial Leases, the Lessees may deliver possession of the Aircraft,
engines and other equipment or components to the manufacturer thereof for
testing or similar purposes, or to a third party for service, maintenance,
repair or other work required or permitted under the Lease. The Lessor's ability
to repossess the Aircraft or engines, equipment or components from any such
sublessee, transferee, manufacturer, or other person may be restricted by liens
or similar rights of detention and by applicable bankruptcy and insolvency laws.
MAINTENANCE AND MAINTENANCE RESERVES
The Initial Leases contain detailed provisions specifying maintenance
standards and the required condition of the Aircraft upon redelivery. Under
approximately half of the Initial Leases, Lessees are required to provide
monthly maintenance reserves. Under the balance of the Initial Leases, depending
upon the specific maintenance condition of the Aircraft or specified items
(airframe, engines, certain components, auxiliary power unit or landing gear) at
redelivery, the Lessee may be required to make certain adjustment payments to
the Lessor and, under certain of the Initial Leases, the Lessor may be required
to make certain adjustment payments to the Lessee. During the term of each
Initial Lease, the Lessee is required to ensure that the Aircraft is maintained
in accordance with an agreed maintenance program designed to ensure that the
Aircraft meets applicable airworthiness and other regulatory requirements in the
jurisdiction in which the Aircraft is registered, as well as in the Lessee's
jurisdiction, if different. Under the Initial Leases, the agreed maintenance
program is generally performed by the Lessee. In cases where the Lessee has paid
maintenance reserves such payments are used to reimburse the Lessee for
significant maintenance charges, including major airframe and engine overhauls.
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Under the balance of the Initial Leases there is no provision for the
payment of maintenance reserves. In these cases the Lessor must rely on the
credit of the Lessee and the ability of the Lessee to return the Aircraft in the
condition required by the Lease upon termination or, if available, any credit
support to make any required payments based on the Aircraft's return condition
upon termination of the related Lease and to perform scheduled maintenance
throughout the Lease term.
The Initial Lessees are required under the Initial Leases to comply with
ADs of the applicable aviation authorities specified in the Leases and with
manufacturer's service bulletins and the Lessees primarily bear the cost of
compliance. However, under some of the Initial Leases, the Lessor may be
required by the Lease to contribute to the cost of certain ADs or manufacturer's
service bulletins or to the cost above a specified threshold.
LESSEES' OPTIONS
Purchase Options with respect to six of the Initial Aircraft representing
23.10% of the Initial Aircraft by Initial Appraised Value, have been granted to
Lessees pursuant to either the applicable Lease or a separate purchase option
agreement.
Five of the Purchase Options (20.15% of the Initial Aircraft by Initial
Appraised Value) are currently exercisable. The duration of some Purchase
Options depend on whether the Lessee exercises a separate option to extend the
Lease. Assuming that all Lease extension options are exercised, the latest date
on which a Purchase Option may be exercised is September 30, 2007 for a purchase
on March 31, 2009. There are no Purchase Options which are exercisable at prices
below the assumed Note Target Prices.
Six of the Initial Leases (17.26% of the Initial Aircraft by Initial
Appraised Value) include options for the Lessee to extend the term of the Lease
and one of the Initial Leases (3.37% of the Initial Aircraft by Initial
Appraised Value) includes an option for the Lessor to extend the term. The rent
payable during the extension period under these Leases varies from Lease to
Lease. Four of the Initial Leases (7.93% of the Initial Aircraft by Initial
Appraised Value) contain provisions under which the relevant Lessee may
terminate its Lease prior to its scheduled expiration date, subject, in certain
instances, to specified conditions.
INDEMNIFICATION AND INSURANCE OF THE AIRCRAFT
GENERAL
The Initial Lessees are required under the Initial Leases to bear
responsibility (through an operational indemnity) and carry insurance for any
liabilities arising out of the operation of the Aircraft, including any
liabilities for death or injury to persons and damage to property that
ordinarily would attach to the operator of the Aircraft, subject to customary
exclusions. In addition, the Lessees are required to carry other types of
insurance that are customary in the air transportation industry, including all
risks aircraft hull and hull war risks insurance (in each case at a value
stipulated in the relevant Lease, subject to adjustment in certain
circumstances) and aircraft spares insurance (on a replacement cost basis), in
each case subject to customary deductibles. The Servicer is required to monitor
the compliance of the Lessees with the insurance provisions of the Initial
Leases. In addition, AerCo will also have its own contingent liability coverage.
This will operate both to cover a liability that is in excess of the coverage
provided by a Lessee's policy and where a Lessee's policy lapses for any reason
(including an early termination of a Lease and repossession of an Aircraft).
AerCo's contingent third party liability insurance will cover all of the
Aircraft and its contingent hull and hull war risks insurance covers certain of
the Aircraft. The amount of such contingent liability policies may or may not be
the same as required under the relevant Lease. The amount of third party
contingent liability insurance is subject to certain limitations imposed by the
air transportation insurance industry.
In the event that any of the existing insurance policies are canceled or
terminated and in the case of the re-lease of an Initial Aircraft, the Company,
or the Servicer with the Company's approval, may from time to time engage
insurance experts, to advise and recommend the appropriate amount of insurance
coverage the Company should procure.
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LIABILITY INSURANCE
Third party liability insurance is required under the Initial Leases for a
combined single limit in minimum amounts ranging between $350 million and $850
million for each Initial Aircraft. In general, liability coverage on each
Initial Aircraft includes third party legal liability, property damage legal
liability, passenger legal liability, baggage legal liability, cargo legal
liability, mail and aviation general third party (including products) legal
liability.
In some jurisdictions liabilities for risks that are insured against by the
Lessees also may attach to AerCo Group as owner of the Aircraft irrespective of
whether it is in any way responsible for the loss for which liability is
asserted. In addition, claimants may assert claims against AerCo Group on the
basis of alleged responsibility for a loss, even if such claim is not ultimately
sustained. Under the Initial Leases, the Lessees are currently obligated to
indemnify the Lessor against claims, including the costs of defending against
such claims, by third parties against them for such liabilities while the
Aircraft are owned by AerCo Group and under lease to the Lessees.
The indemnified losses include both operating costs relating to the actual
operation of the Initial Aircraft as well as losses to persons and property
resulting from the operation of the Initial Aircraft. The latter types of losses
are generally covered by the Lessee's liability insurances.
AIRCRAFT PROPERTY INSURANCE
In addition to liability insurance, the Initial Lessees are obligated under
the Initial Leases to carry other types of insurance that are customary in the
air transportation industry, including all risks aircraft hull and hull war
risks insurance (in each case at a value stipulated in the relevant Lease,
subject to adjustment in certain circumstances) and aircraft spares insurance
(on a replacement cost basis), in each case subject to customary deductibles. In
addition to such stipulated lease value coverage obtained by the Lessees, AerCo
Group will purchase declining "total loss only" coverage with respect to certain
Initial Aircraft. As of September 30, 1998, in no case was the sum of the
stipulated loss value and the additional coverage with respect to the Initial
Aircraft in place for all risks aircraft hull and hull war risks insurances less
than 105% of the Initial Appraised Value of the applicable Initial Aircraft, and
on average the sum of such coverages in place for each Initial Aircraft was
approximately 125% of the Initial Appraised Value of the applicable Initial
Aircraft. In many cases, the Lessor is permitted to increase the insured value
above the stipulated lease value consistent with industry practice with the
Lessee being responsible for any increased premium that results. Permitted
deductibles range from $250,000 to $1,000,000; however, the deductible generally
applies only in the case of a partial loss. In the case of a total loss of an
Initial Aircraft, no deductible would be applied against the insurance proceeds
received.
The Initial Leases include provisions defining an event of loss or a
casualty occurrence such that where a total loss of the airframe occurs, with or
without loss of the engines installed on the airframe, the agreed value is
payable by the Lessee. This payment is generally funded with insurance proceeds.
However, the air transportation insurance industry practice is to treat only a
loss of greater than 75% of the value of the Aircraft, including the engines, as
a total loss. Where insurance proceeds do cover a total loss, most Leases
require the Lessor to pay to the Lessee the balance of the insurance proceeds
received under the hull all risks or war risks policy after deduction of all
amounts payable by the Lessee to the Lessor under the Lease.
All insurance certificates contain a breach of warranty endorsement so that
the additional insureds continue to be protected even if the Lessee violates one
or more of the terms, conditions or warranties of the insurance policies,
provided that such additional insured has not caused, contributed to or
knowingly condoned such breach.
The insurance advisor has confirmed to AerCo, among other things, that the
insurance requirements currently detailed in the insurance certificates meet
customary practices.
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POLITICAL RISK REPOSSESSION INSURANCE
With respect to certain of the Initial Leases, the Lessor may arrange
separate political risk repossession insurance for its own benefit, covering (a)
confiscation, nationalization and requisition of title of the relevant aircraft
by the government of the country of registry and denegation and deprivation of
legal title and rights, and (b) the failure of the authorities in that country
to allow de-registration and export of the aircraft, subject to the conditions
of the policies. Only 9.10% of the relevant Initial Leases by Initial Appraised
Value require the Lessee to reimburse the Lessor for any political risk
repossession insurance premiums.
THE LESSEES
As of September 30, 1998, there were 26 Initial Lessees in 18 countries
throughout the world.
PAYMENT HISTORY
As a general matter, weakly capitalized airlines are more likely than well
capitalized airlines to seek operating leases. As a result, many of the Initial
Lessees are in a relatively weak financial position and several of them have
faced and continue to face severe economic difficulties, generally as a result
of adverse economic conditions in their principal markets.
As of September 30, 1998, amounts outstanding for a period greater than 30
days in respect of Rental Payments, Maintenance Reserves and other miscellaneous
amounts due under the Leases (net of amounts in respect of agreed deferrals or
other restructurings, default interest and certain cash in transit) amounted to
$3.90 million in respect of 8 Lessees who had a combined total of 11 Aircraft on
lease as of such date. In addition to these amounts, one Lessee, Canadian
Airlines, was being allowed formal deferrals of rent and miscellaneous payments
totaling $0.90 million at that date under the terms of a restructuring agreement
entered into with ALPS 94-1. At September 30, 1998, $0.43 million of rent and
maintenance payments and $0.30 million in respect of security deposits was
outstanding with respect to another North American Lessee (representing 3.28% of
the Portfolio by Initial Appraised Value).
PAL, the Lessee of two B737-300 Aircraft representing 4.61% of the
portfolio by Initial Appraised Value, has recently suffered severe financial
difficulties. On June 19, 1998, PAL filed a petition for Approval of a
Rehabilitation Plan with the Philippine SEC and subsequently the Philippine SEC
appointed an Interim Receiver. PAL was instructed by the Philippine SEC to
submit a Rehabilitation Plan within thirty days. Following a number of
applications for extension of this time limit, PAL currently has until November
20, 1998 to file a Rehabilitation Plan with the Philippine SEC.
At September 30, 1998, $2.02 million (of which $1.48 million was in arrears
for more than 30 days) was outstanding from PAL. The Servicer is in negotiations
with PAL regarding repayment of its arrearages. There can be no assurance,
however, that PAL will ultimately repay its arrearages or be able to pay future
lease rentals. AerCo Group may encounter delays or difficulties in recovering
possession of the Aircraft (which are currently operated within the Philippines)
or terminating such Leases. If the Aircraft are recovered, the technical costs
required to ensure the Aircraft are in suitable condition for re-leasing may be
significant. See "-- Inability to Terminate Leases or Repossess Aircraft".
At September 30, 1998, an Asian Lessee (representing 4.45% of the Portfolio
by Initial Appraised Value) was in arrears in respect of rent in an amount of
$1.20 million. The Servicer is in contact with the Lessee which has indicated
that the payments have been delayed due to the necessity to obtain certain
approvals from the Lessee's national authorities.
At September 30, 1998, another Asian Lessee (representing 1.4% of the
Portfolio by Initial Appraised Value) was in arrears in respect of rent in an
amount of $0.36 million. The Servicer is in discussions with the Lessee about
its arrearages.
ALPS 94-1 has responded, and AerCo Group expects to respond, to the needs
of Lessees in financial difficulty including, in certain instances,
restructuring the applicable Leases or agreeing lease deferrals. Such
restructurings will typically involve the rescheduling of rental payments for a
specified period. In addition,
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certain restructurings may involve the voluntary termination of a Lease prior to
its expiration, the replacement of Aircraft with less expensive aircraft and the
arrangement of sub-leases from the Lessee to another aircraft operator. In
certain cases, it may be necessary to repossess Aircraft from defaulting Lessees
and re-lease such Aircraft to other Lessees. Repossession and re-leasing of
Aircraft may be difficult, time-consuming and expensive and may result in such
Aircraft being off-lease for a substantial period. See "Risk Factors -- Lease
Risks -- Inability to Re-Lease Aircraft on Favorable Terms", "Risk Factors --
Risk of Lessee Default", and "Risk Factors -- Inability to Terminate Leases or
Repossess Aircraft". The premature termination of Leases may, in certain
circumstances, lead AerCo to incur swap breakage costs under its agreements with
Swap Providers ("SWAP AGREEMENTS") which could be substantial. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Interest Rate Management".
Since 1995, ALPS 94-1 has entered into deferral and other restructuring
transactions with two of the Initial Lessees and one former lessee involving a
total of three Initial Aircraft. These restructurings are described below.
The Airbus A320-200 Aircraft currently on lease to Airtours was, until
November 1995, leased to a U.K. charter operator. During 1994 and 1995, this
lessee incurred substantial losses. In July 1995, at which time approximately
$0.70 million was due under the Lease, ALPS 94-1 agreed with the lessee and its
parent company to the termination of the lease in November 1995 and the payment
by the lessee of a termination fee of $500,000, payable from the security
deposit held by ALPS 94-1. In December 1995, the parties entered into a
restructuring agreement, which provided for the payment of a L200,000 fee
(payable in monthly installments through October 1997) in settlement of all
outstanding claims of ALPS 94-1 under the first restructuring agreement.
Although both the lessee and its parent company became subject to bankruptcy
proceedings in August 1996, all such installments have been paid under a bank
letter of credit.
Upon termination of this lease, the A320-200 Aircraft was immediately
released to Airtours in November 1995 as part of a larger aircraft swap
transaction, pursuant to which Airtours terminated its lease of the MD83
aircraft owned by ALPS 94-1 and entered into a seven-year lease with respect to
the A320-200 Aircraft currently on lease to Airtours. ALPS 94-1 shortly
thereafter re-leased the MD83 Aircraft to FEAT for a term of three years.
Although the transfer of the two Aircraft was achieved without either Aircraft
being off-lease for any significant period, ALPS 94-1 incurred maintenance and
other expenses of approximately $0.20 million and $0.50 million in connection
with the redelivery of the A320-200 Aircraft and the MD83 Aircraft,
respectively. Lost cash flow attributable to the restructuring described above
(including the subsequent transfer of Aircraft described above) during the year
ended June 30, 1996 was $0.60 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
In December 1996, a second Lessee, Canadian, Lessee of an A320-200 Aircraft
(approximately 3.37% of the Initial Aircraft by Initial Appraised Value),
approached its creditors, including ALPS 94-1, with proposals to reschedule its
obligations as part of a general plan designed to address its financial
difficulties. After extensive negotiations, ALPS 94-1 and Canadian entered into
an agreement in May 1997 providing for the deferral of operating lease rentals
for the three months from December 1996 to February 1997. The deferred payments
are scheduled to be repaid with interest prior to the scheduled expiration of
the Lease in January 1999. In addition, Canadian agreed to the cancellation of
its option under the Lease to extend the Lease term. The restructuring agreement
resulted in a loss of cashflow to ALPS 94-1 of approximately $0.90 million
during the year ended June 30, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
In early 1996, a third Lessee, a Latin American airline which operates a
Boeing B757-200 Aircraft (approximately 4.38% of the Initial Aircraft by Initial
Appraised Value), experienced significant periodic cash shortages as a result of
a seasonal drop in revenues. In April 1996, ALPS 94-1 agreed to the deferral of
approximately $0.90 million in rental and maintenance payments for January and
February 1996 to August 1996. The amounts deferred, together with default
interest and a deferral fee, were subsequently paid. In addition, in December
1997, this Initial Lessee prepaid 12 months' rental payments under the relevant
Lease. As of March 31, 1998, however, ALPS 94-1 had $0.05 million in non-rental
amounts outstanding as a receivable from this Initial Lessee, all of which was
outstanding for a period of less than 30 days.
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In addition, certain of the Initial Lessees have experienced periodic
difficulties in meeting their maintenance obligations under the related Leases.
Such difficulties have arisen from, among other things, the failure of the
applicable Lessee to have in place a sufficiently well established maintenance
program, adverse climate and other environmental conditions in the locations
where such related Aircraft are operated or financial and labor difficulties
experienced by the relevant Lessee. A continuous failure by a Lessee to meet its
maintenance obligations under the relevant Lease: (a) could result in a
grounding of the Aircraft; (b) in the event of a re-lease of such Aircraft would
likely cause AerCo Group to incur costs, which may be substantial, in restoring
such Aircraft to an acceptable maintenance condition; and (c) would be likely to
adversely affect the value of the Aircraft.
There can be no assurance that any payment defaults described above will be
cured or that any additional defaults will not arise which can be cured. In
addition, a certain amount of Lessees are likely to be in arrears or in default
from time to time.
DOWNTIME
Since August 1994, none of the Initial Aircraft has been off-lease for any
significant period other than the A300B4-200 Aircraft currently on lease to
Indian Airlines, which was off-lease for approximately five months between
December 1997 and April 1998. At September 30, 1998, none of the Initial
Aircraft were off-lease. The past three years, however, has been a period of
improving conditions in the commercial aviation industry generally and in the
aircraft leasing market in particular. There can be no assurance that the
experience of ALPS 94-1 and GPA will be indicative of the ability of AerCo Group
and the Servicer to keep the Initial Aircraft and any Additional Aircraft
on-lease in the future. AerCo Group and the Servicer may be unable to re-lease
Aircraft upon the expiration of Leases as a result of a deterioration in
industry conditions, decreased demand for specific types of Aircraft or other
factors. See "Risk Factors -- Lease Risks -- Inability to Re-Lease Aircraft on
Favorable Terms".
DESCRIPTION OF THE INITIAL LESSEES
The table below sets forth certain available information with respect to
the country of domicile, government, airline or principal shareholders, fleet
size and composition and the first year of operation of each Initial Lessee. See
"-- Portfolio Information" above for additional tables setting forth the
exposure of the Portfolio (as a percentage of Initial Appraised Value) to each
Initial Lessee and the countries and geographic regions in which the Initial
Lessees are domiciled.
<TABLE>
<CAPTION>
BEGAN GOVERNMENT/COMMERCIAL
LESSEE DOMICILE OPERATION AIRLINE/PRINCIPAL SHAREHOLDERS FLEET(1)
- ------ -------- --------- ------------------------------ --------
<S> <C> <C> <C> <C>
Aer Lingus.............. Republic of Ireland 1936 Government of Ireland (100%) 6 B737-400
8 B737-500
5 A330-300
1 L-1011-100
Airtours................ United Kingdom 1990 Airtours Plc (100%) 10 A320-200
4 B757-200
4 B767-300ER
Air 2000................ United Kingdom 1986 First Choice Holidays Plc (100%) 4A320-200
9 B757-200
</TABLE>
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<TABLE>
<CAPTION>
BEGAN GOVERNMENT/COMMERCIAL
LESSEE DOMICILE OPERATION AIRLINE/PRINCIPAL SHAREHOLDERS FLEET(1)
- ------ -------- --------- ------------------------------ --------
<S> <C> <C> <C> <C>
Air France.............. France 1933 Government of France (95%) 5 F100
7 B737-300
16 B737-500
17 B737-200A
4 B747-100
2 B747-200B
10 B747-200BC
10 B747-200F
2 B747-200SF
2 B747-300C
7 B747-400
6 B747-400C
5 B767-300ER
2 A300-B4-200
6 A310-200
4 A310-300
9 A319-100
13 A320-100
43 A320-200
6 A321-100
4 A321-200
3 A340-200
11 A340-300
6 Concorde
9 F.27-5000
Air Pacific............. Fiji 1951 Government of Fiji (72%) 1 B737-300
Qantas (17.5%) 1 B737-500
Air New Zealand (2%) 1 B747-200B
1 B767-300ER
Asiana.................. Republic of Korea 1988 Kumho Group (62%) 19 B737-400
Korean Development Bank (12.6%) 3 B737-500
Korean Long Team Credit Bank (6.4%) 12 B747-400
Swiss Bank Corp (19%) 8 B767-300
8 B767-300ER
1 A321-100
Avianca................. Colombia 1919 Private 3 B727 200
4 B757 200
3 B767 200ER
1 B767 300ER
10 F50
11 MD83
British Midland......... United Kingdom 1938 BBW Partnership (60%) 4 F100
SAS (40%) 9 Saab340
3 F70
8 B737-300
5 B737-400
13 B737-500
1 Jetstream 41
BAX Global.............. United States 1972 Bax Global Northern Air Freight 3 B727-200A
1997 (100%) 11 DC8-60
1979 11 DC8-70
Canadian................ Canada 1987 AMR (33%) 12 A320-200
41 B737-200
4 B747-400
9 B767-300ER
4 DC10-30
5 DC10-30ER
</TABLE>
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<TABLE>
<CAPTION>
BEGAN GOVERNMENT/COMMERCIAL
LESSEE DOMICILE OPERATION AIRLINE/PRINCIPAL SHAREHOLDERS FLEET(1)
- ------ -------- --------- ------------------------------ --------
<S> <C> <C> <C> <C>
China Southwest......... People's Republic 1987 People's Republic of China (100%) 1 B707-300
of China 16 B737-300
11 B757-200
3 AN-24
5 TU-154
4 Y-12
FEAT.................... Taiwan 1957 China Development (controlled by the 2 B737 200A
KMT, Taiwan's ruling party) (14%) 3 B757-200
China Airlines (10%) 7 MD82
3 MD83
Indian Airlines......... India 1953 Government of India (100%) 1 Fairchild 228-200
7 B737-200A
1 B737-200AC
8 A300-B2-100
2 A300-B4-200
30 A320-200
Lan Chile............... Chile 1929 Grupo Guato (38.5%) 18 B737-200A
Grupo Pifiera (33.1%) 11 B767-300ER
Grupo Humas (19%) 1 B757-200QC
Grupo Ebler (8.4%)
Malev................... Hungary 1946 Government of Hungary (63.9%) 6 B737-200A
Alitalia (30%) 2 B737-400
2 B767-200ER
5 F70
4 B737-300
3 Tu-134
5 Tu-154
Monarch................. United Kingdom 1967 Cosmos Guide Holding International 4 A300-600ER
NV (100%) 5 A320-200
6 B757-200
1 DC10-30
1 A321-200
1 L-1011-1
Pegasus................. Turkey 1990 Yapi Kredit Bank (49%) 3 B737-400
Alper Elchin (21%)
Silkar and Net Holdings (30%)
PAL..................... Philippines 1941 Lucio Tan (34%) 11 A300-B4-200
Government (33%) 11 B737 300
10 F50
1 MD11ER
8 A330-300
4 A340-200
5 A340-300
4 A320-200
5 A340-300
3 B747-200B
4 B747-400
Portugalia.............. Portugal 1987 Groupo Espirito Saneto (61%) 6 F100
5 RJ145
1 RJ70
</TABLE>
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<TABLE>
<CAPTION>
BEGAN GOVERNMENT/COMMERCIAL
LESSEE DOMICILE OPERATION AIRLINE/PRINCIPAL SHAREHOLDERS FLEET(1)
- ------ -------- --------- ------------------------------ --------
<S> <C> <C> <C> <C>
Spanair................. Spain 1987 SAS (49%) 2 B767-300ER
15 MD-83
1 MD-82
2 MD-87
1 MD-81
2 B757-200
Sun Express............. Turkey 1990 THY (60%) 3 B737-300
Condor (Lufthansa subsidiary) (40%) 2 B737-400
TAM..................... Brazil 1976 VASP (3.35%) 29 F100
Rolim Amao (66.6%) 9 F50
6 F27
6 Citation
Tower Air............... United States 1982 Tower Travel (75%) 5 B747-100
1 B747-100F
9 B747-200B
1 B747-200SF
THY..................... Turkey 1933 Republic of Turkey (98.7%) 7 A310-200
7 A310-300
5 A340-300
3 B727-200A
28 B737-400
2 B737-500
4 RJ70
9 RJ100
Yunnan.................. People's Republic 1992 China Southwest (50%) 14 B737-300
of China City of Kunming (Yunnan Province) 3 B767-300ER
(50%)
</TABLE>
- ---------------
(1) Source: Airclaims Limited CASE Database, February 15, 1998.
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THE COMMERCIAL AVIATION INDUSTRY
Commercial aviation is an important segment of the travel and tourism
industry.
The level of worldwide demand for air travel has been cyclical, and is
influenced by a number of factors, including global and regional political
stability, general economic, business and credit conditions, the impact of the
price and availability of jet fuel on airline costs and technological
developments in the field of transport and communications such as high-speed
rail travel and video-conferencing which provide partial substitutes for some
air travel.
Demand for air travel as measured by the number of fare paying passengers
carried multiplied by the distance flown in miles (revenue passenger miles, or
"RPMS") has increased since 1970 in every year but one, 1991, in which there was
a decline of 2.8% principally due to a worldwide economic slowdown exacerbated
by the Gulf War. This decline in demand together with a sharp increase in
surplus industry capacity led to widespread financial losses in the airline
industry. The average annual increase in RPMs from 1970 to 1997, taking into
account the decline in 1991, was approximately 7%. Historical growth in RPMs has
shown a correlation with growth in world GDP and the decrease in the cost of air
travel on an inflation-adjusted basis.
Demand has varied in different regions of the world. In the period since
1990 the highest rates of annual increase in RPMs have been on certain routes in
the Asia-Pacific region, although these growth rates are expected to suffer as a
result of the economic crises that have recently affected several Asian
economies. The lowest rates of annual increase in RPMs have been on domestic
routes within Europe and the United States.
Worldwide traffic, as measured by RPMs, grew by approximately 7.5% in 1996
and 6.4% in 1997. The following table sets forth worldwide aviation traffic, as
measured by RPMs, and the annual growth rate in such traffic for the years
indicated.
WORLD TRAFFIC GROWTH
(EXCLUDING DOMESTIC CIS RPMS)
<TABLE>
<CAPTION>
ANNUAL GROWTH IN
WORLD TRAFFIC WORLD TRAFFIC
YEAR (IN RPMS) (IN RPMS)
- ---- ------------- ----------------
(BILLIONS) (%)
<S> <C> <C>
1985........................................................ 868.5 --
1990........................................................ 1,216.4 7.0
1995........................................................ 1,569.8 5.2
1996........................................................ 1,687.8 7.5
1997........................................................ 1,796.6 6.4
</TABLE>
There can be no assurance that the worldwide demand for air travel will
continue to increase or that such worldwide demand will not decline.
DEMAND FOR AIRCRAFT
Over time, an increase in RPMs will create a need for new aircraft capacity
to service the incremental demand for air travel over and above the existing
capacity provided by airlines. Growth in RPMs has been the principal long-term
factor affecting demand for aircraft. Another factor contributing to the demand
for aircraft is the need to replace aircraft that are retired at the end of
their useful economic lives or are written off for other reasons, including
casualties.
In addition to those factors which affect the demand for air travel, the
overall level of demand for commercial aircraft depends on a number of factors,
including changes in aircraft productivity; the supply of new and used or
replacement aircraft, which is affected by manufacturer production levels and
may be affected by bankruptcies of significant owners or operators of aircraft;
the ability of air transport infrastructure to accommodate commercial air
traffic levels; the cost and availability of jet fuel; and governmental
regulations and restrictions affecting the costs and benefits of owning and
operating aircraft.
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The types of aircraft, jet or turboprop, required by an operator are
dictated principally by its existing and anticipated structure of routes and
traffic volume. An operator's specific choice of aircraft will also depend on a
number of additional factors, including the size and composition of its current
fleet, its ability to operate and maintain particular aircraft types based on
the training of its personnel and the capacity of its ground facilities, seating
capacity of the aircraft and operating costs. Approximately 71% of commercial
jet aircraft manufactured outside the CIS since 1990 are narrowbody aircraft
with the balance being widebody aircraft. Increased airport congestion and
limitations on air traffic control systems may lead to a relative increase in
the number of widebody aircraft in the worldwide commercial jet fleet. As of
February 15, 1998, of the 9,095 narrowbody aircraft in operation, approximately
21% were more than 25 years old while only approximately 7.40% of the 3,154
widebody aircraft in service on that date were more than 25 years old. It is
difficult to predict whether any such increase in the number of widebody
aircraft will have a material effect on the relative demand for either type of
aircraft, as the demand for replacements for older narrowbody aircraft may equal
or exceed the demand for widebody aircraft. Within the widebody sector, the
availability of newer long-haul aircraft is likely to result in a continued weak
market for earlier models such as the A300-B4-200, A310, B747-100, B747-200 and
DC-10. The newer models have lower operating costs and allow airlines to develop
new long-haul routes more efficiently as well as to increase service frequency
on established routes.
NEW AIRCRAFT SUPPLY
There are currently two major manufacturers of commercial jet aircraft
outside of the CIS (Boeing and Airbus Industrie G.I.E.) and three smaller
manufacturers (British Aerospace plc, Bombardier and Embraer) which produce
regional aircraft. The manufacturers of commercial jet aircraft in the CIS are
currently not a material factor in supplying the requirements of operators
outside the CIS and the former Eastern Bloc countries. There are three principal
manufacturers which, together with their affiliates, produce substantially all
commercial jet engines: General Electric Company, through the GE Aircraft
Engines Division; United Technologies International, Inc., through Pratt &
Whitney; and Rolls Royce. There are relatively more manufacturers of turboprop
aircraft and engines than jet aircraft and engines.
There has been a long-term trend toward consolidation of the commercial
aircraft manufacturing industry, evidenced by the merger between Boeing and
McDonnell Douglas, the creation of the Airbus Industrie consortium by four
European manufacturers (Aerospatiale, British Aerospace, Daimler-Benz and CASA)
and the exit of former participants such as Lockheed, Fokker and Convair. The
long lead time, high capital cost and technological sophistication required to
bring a new aircraft model to the market create significant barriers to entry
into the industry, particularly for narrowbody and widebody jet aircraft.
Although most new aircraft are ordered under long-term, multi-aircraft
contracts, the volume of aircraft production has varied significantly over the
years, reflecting the changing state of the commercial aviation industry and the
economy in general. Manufacturers generally adjust production levels in response
to their customers' desires and financial capacity to take delivery of ordered
aircraft which in turn may be affected by the level of air traffic and the
availability of competitive used aircraft. Boeing and Airbus have both announced
and partially implemented increased production levels from the cyclical low
reached in 1995, with the result that new jet aircraft production levels are
likely to double by 1999 to over 900 aircraft. This level of production is above
the long-term requirement implied by industry forecasts, including those
published by Boeing and Airbus. The increase in production has been accompanied
by very aggressive pricing strategies in an effort by these companies to
maximize their market share. A continuation of current new aircraft production
and pricing trends is likely to have an adverse impact on AerCo's ability to
generate cash flows consistent with the Assumptions.
All of the major manufacturers are implementing programs to shorten lead
times and reduce the cost of manufacturing commercial aircraft, including the
reorganization of design and production systems and business arrangements with
suppliers which have resulted in, in some instances, among other things, lower
escalation of future prices and shifts in aircraft ordering patterns such that
purchasers are able to acquire aircraft at shorter lead times than previously
required. Some manufacturers are also discussing the use of lower-cost
production locations. Depending on the extent to which cost savings are achieved
and passed on to
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aircraft purchasers these factors could have an adverse impact on the ability of
AerCo Group to re-lease or sell Aircraft and on the rental rates of Future
Leases of the Aircraft.
USED AIRCRAFT SUPPLY
The supply of used aircraft depends on the level of utilization of the
existing worldwide fleet and the net change in this fleet based on
manufacturers' production levels and aircraft retirements. Cyclical factors that
affect air travel demand also may affect the supply of used aircraft. According
to the Airclaims Limited CASE database, as of February 15, 1998 there were
approximately 606 commercial jet aircraft in storage of which approximately 57%
(345 aircraft) were Stage 2 aircraft and approximately 43% (261 aircraft) Stage
3 aircraft. The median ages of such aircraft in storage were approximately 28
and 19 years, respectively. According to third party industry sources, there was
a total of 375 commercial jet aircraft available for sale or lease at such date,
of which 173 were Stage 2 aircraft and 202 were Stage 3 aircraft. Approximately
33% of such Stage 3 aircraft were narrowbodies and 67% widebodies. There are a
number of aircraft in storage that are not available for sale or lease;
conversely, a number of aircraft available for sale or lease are in service
rather than in storage. In general older aircraft are significantly more likely
to be stored than younger aircraft.
The weak growth of air travel in the 1990-1994 period combined with high
levels of new deliveries from manufacturers in the early 1990s resulted in low
levels of profitability or significant losses for many airlines and leasing
companies, a significant increase in the supply of used aircraft and decrease in
their value, especially for older Stage 2 aircraft and older Stage 3 widebody
aircraft. There can be no assurance that such oversupply will diminish or that
any future downturn in the commercial aviation industry or the worldwide demand
for aircraft will not result in increased availability of used aircraft for
lease or sale in the future, particularly at the times Aircraft are being
marketed for lease by AerCo Group.
OPERATING LEASING
Until the mid-1970s, almost all commercial aircraft were either owned by
their airline operators or leased under finance leases from financial
institutions, except for short-term leases of surplus aircraft from one airline
to another. Beginning in the mid-1970s, in contrast, leasing companies were
willing to purchase aircraft and undertake the risk of finding a buyer or lessee
for such aircraft.
Leasing companies acquire aircraft for lease through purchases of used
aircraft, often through sale-leaseback arrangements with the operators of such
aircraft. Also, in the mid-1980s a number of leasing companies started to
acquire new aircraft directly from manufacturers, with or without lease
commitments for such aircraft. Leasing companies and other financial
institutions have become significant purchasers of new aircraft and their jet
aircraft orders and options constituted approximately 18% of outstanding jet
orders as of February 15, 1998.
The number of airlines taking aircraft on operating leases has increased
from 82 out of a worldwide total of 313 in 1980 (approximately 26% of total
airlines) to 374 out of a worldwide total of 673 in 1997 (approximately 56% of
total airlines).
Many operating lessees are airlines that cannot independently finance the
purchase of aircraft, that desire greater flexibility in fleet planning, or that
choose to take advantage of demand from leasing companies to acquire assets
through equipment sale-leaseback transactions.
ROLE OF GOVERNMENT
National governments play a major role in the regulation of air
transportation through the establishment of standards of aircraft certification,
airworthiness and operation, the regulation of airspace and the provision of
services, including navigational aids, air traffic control and search and
rescue. There is a general worldwide uniformity of standards because all nations
with any significant civil aviation industry are members of the International
Civil Aviation Organization (a United Nations agency) and apply the technical
standards developed by this agency as the basis of national aviation
regulations. In many countries, the national government regulates both domestic
routes and the pricing of air travel, although since the late 1980s there
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has been a trend in certain jurisdictions, such as the European Union,
Australia, Mexico and Brazil, toward limited deregulation and the progressive
opening up of routes to competition, which could lead to developments similar to
those which have occurred in the United States since the enactment of the
Airline Deregulation Act of 1978. In particular, the European Union introduced a
package of liberalization measures in 1993 affecting the licensing of air
carriers, access to air routes within the European Union and fares and rates for
air transportation services.
National governments have also influenced the financial condition of the
commercial aviation industry in other ways. These include the ownership or
support of national and local airlines, often with direct subsidies. However,
there have been recent initiatives within the European Union intended to make
more stringent the conditions subject to which state aid may be given to
airlines, and there is currently a worldwide trend toward the complete or
partial privatization of many government-owned airlines. Most governments limit
the extent to which foreign interests may own domestic airlines (although this
is no longer the case within the European Union with respect to the nationals of
other member states). Certain national governments also have provided financial
support of local commercial passenger jet manufacturing industries. Indirect
financial support is also provided to aircraft and engine manufacturers through
the issuance of credits and guarantees from national export credit agencies.
There can be no assurance, however, that the recent trends toward
deregulation of routes and pricing of air travel and toward complete or partial
privatization of government-owned airlines will continue or will occur in the
manner announced by the relevant governments. Although such trends may result
initially in an increase in the number of airlines worldwide, they also may
result ultimately in a greater concentration of larger airlines due to the
failure of smaller, more thinly capitalized airlines. In any event, deregulation
and privatization may at times adversely affect the future market for aircraft,
including the Aircraft.
TECHNICAL REGULATION
In addition to general requirements regarding maintenance of aircraft,
aviation authorities from time to time issue ADs requiring the operators of
aircraft to take particular maintenance actions or make particular modifications
with respect to a number of aircraft of one or more designated types. ADs
normally specify a period of time in which to carry out the required action or
modification and generally enough time is allowed to permit the implementation
of the AD in connection with scheduled maintenance of the aircraft or engines.
The Initial Leases typically require the Lessees to bear the cost of compliance
with ADs issued by applicable aviation authorities and, in most cases, relevant
manufacturers' recommendations. In some cases, AerCo Group may be required to
contribute a portion of such costs over a specified threshold. However, to the
extent that a Lessee fails to perform ADs required on an Aircraft, AerCo Group
would bear the cost of compliance necessary for the Aircraft to maintain its
Certificate of Airworthiness. In such circumstances, funds in the Collection
Account and Lessee Funded Account will be available to AerCo Group to mitigate
the costs of compliance, although such use would reduce the availability of such
amounts to cover the cost of scheduled maintenance. There can be no assurance
that such funds will be available at the time needed or that any funds available
will be sufficient for such purposes.
In addition to the foregoing requirements relating to airworthiness, other
governmental regulations may apply to the Aircraft, including requirements
relating to noise and emissions levels. Such regulations may be imposed not only
by the jurisdictions in which the Aircraft are registered, possibly in
connection with airworthiness requirements, but also in jurisdictions where the
Aircraft operate. Chapters 2 and 3 of Chicago Convention establish two
progressively restrictive noise level standard that correspond to the
requirements for Stage 2 and Stage 3 aircraft. A number of jurisdictions have
adopted, or are in the process of adopting, noise regulations which ultimately
will require all aircraft to comply with the most restrictive of these
standards. Such regulations restrict the future operation of aircraft that are
not Stage 3 aircraft and ultimately will prohibit the operation of such aircraft
in the relevant jurisdictions early in the next century (1999, in the case of
the United States). Since AerCo Group has the ability to acquire Stage 2
aircraft, these regulations may affect AerCo adversely. In addition, local
municipalities may have more stringent noise regulations than those applicable
to Stage 3 aircraft.
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Volume 2 of Annex 16 of the Chicago Convention also contains standards and
recommendations regarding limitations on vented fuel and smoke and gaseous
emissions for aircraft. While a number of countries have adopted regulations
implementing these recommendations, such regulations generally have been
prospective in nature, requiring only that newly manufactured engines meet
particular standards after a particular date. To the extent that any such
regulations require modifications to the Engines owned by AerCo Group, they
would receive the same treatment under the Leases as do ADs.
There can be no assurance, however, that new noise or emissions reduction
requirements will not be adopted in the future that would adversely affect the
value of some or all Stage 3 aircraft. Some organizations and jurisdictions have
already begun to discuss the tightening of noise and emissions certification
requirements for newly manufactured aircraft. There can be no assurance that any
such regulations, if adopted, would not adversely affect the value of the
Aircraft.
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MANAGEMENT OF AERCO GROUP
Except to the limited extent described herein, particularly upon an Event
of Default, neither the Trustee nor any of the Noteholders has any right to
participate in the management or affairs of AerCo. In particular, such parties
cannot supervise the functions relating to the Leases and the re-lease of the
Aircraft, which functions have generally been delegated to the Servicer under
the Servicing Agreement. See "Risk Factors -- Risks Relating to AerCo and
Certain Third Parties -- Delegation of Responsibilities", "Description of the
Notes -- Payment of Principal and Interest -- Indenture Covenants" and "--
Events of Default and Remedies".
DIRECTORS
The Board of Directors of the Company (the "BOARD") will generally, as
provided below, be composed of no more than five members. The holder or holders
of a majority in aggregate principal amount of the Class E Notes issued by the
Company have the right to appoint two Directors of the Company while the Class E
Notes are outstanding. The remaining Directors must be Independent Directors.
The initial Independent Directors of the Company are Mr. Frederick W. Bradley,
Chairman of the Company, Mr. Kenneth Peters and Mr. G. Adrian Robinson. The
succeeding Independent Directors will be appointed by a majority of the then
standing Directors. If no Independent Directors are serving on the Board at any
time, three new Independent Directors will be appointed in accordance with the
Company's Articles of Association. Mr. Edward Hansom and Ms. Rose Hynes were
appointed directors of the Company by GPA Group as holder of the majority of the
Subclass E-1 Notes. Any resolution of the Directors of the Company, whether
passed at a meeting of Directors or by way of written resolution, will require
the affirmative vote of a majority of the Independent Directors. Certain
significant transactions or proceedings of the Company may only be approved by a
unanimous vote of all Directors. These transactions and proceedings principally
relate to certain insolvency proceedings, amendments to the Company's Memorandum
or Articles of Association, acquisition of Additional Aircraft, mergers or the
sale of all or substantially all of the Company's assets.
The Directors, their ages and principal activities are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICES HELD WITH THE REGISTRANT
- ---- --- --------------------------------
<S> <C> <C>
Frederick W. Bradley, Jr.................. 71 Director and Chairman
Kenneth N. Peters......................... 63 Director
G. Adrian Robinson........................ 49 Director
Edward Hansom............................. 40 Director
Rose Hynes................................ 40 Director
</TABLE>
Frederick W. Bradley, Jr. -- From 1969 until 1992, Mr. Bradley was a Senior
Vice President of Citibank N.A., in charge of the bank's global airline and
aerospace business, having joined Citibank in 1958. Mr. Bradley has served as a
director and Chairman of ALPS 94-1 since 1994. Mr. Bradley also serves as a
director and Chairman of Aircraft Lease Portfolio Securitisation 92-1 Limited.
Mr. Bradley is also a director of America West Airlines, Inc., First Citicorp
Life Insurance Co., and the Institute of Air Transport, Paris, France and is
president of the International Air Transport Association's (IATA) International
Airline Training Fund of the United States.
Kenneth N. Peters -- Mr. Peters was Assistant Treasurer of The Boeing
Company from 1985 to 1995 and was Vice President, Customer Financing at The
Boeing Company from 1995 until his retirement from The Boeing Company in 1997.
From 1960 to 1985, Mr. Peters held various positions with The Boeing Company
including the positions of Manager and Director of Customer Financing within the
Corporate Treasurer's Organization.
G. Adrian Robinson -- Mr. Robinson has been an Aerospace Consultant since
1992. From 1990 to 1992 Mr. Robinson was a Deputy General Manager of The Nippon
Credit Bank. Until 1989, he was a Managing Director, Special Finance Group of
Chemical Bank, which he joined in 1986. Mr. Robinson also serves as a director
of ALPS 94-1 and its subsidiaries and Aircraft Lease Portfolio Securitisation
92-1 Limited and its
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subsidiaries. Mr. Robinson also provides consulting services from time to time
to Air 2000, one of the Initial Lessees.
Edward Hansom -- Mr. Hansom is Chief Financial Officer of GPA Group. He
joined GPA Group in 1988 from the treasury division of Schroders. Prior to
taking up his current position in May 1997, Mr. Hansom was General Manager,
Treasury of GPA Group. Mr. Hansom is also a director of Airplanes Limited and a
controlling trustee of Airplanes Trust.
Rose Hynes -- Ms. Hynes is General Counsel of GPA Group. She joined GPA
Group in 1988, having previously been a partner in an Irish law firm. Prior to
taking up her current position with GPA Group in May 1997, she was Vice
President, Corporate Finance of GPA Group. Ms. Hynes also serves as a director
of Aer Lingus, one of the Initial Lessees, and certain of its subsidiaries.
The Board of Directors of the Company are non-executive Directors. Further,
as is common with many other special purpose companies, the Company does not
have and will not have any employees or executive officers. Accordingly, the
Board of Directors relies upon the Servicer, the Administrative Agent, the Cash
Manager and the other service providers for all asset servicing, executive and
administrative functions pursuant to the respective service provider agreements.
See "Risk Factors -- Risks Relating to AerCo and Certain Third Parties". Certain
individuals other than the Directors listed above serve as directors of various
subsidiaries of AerCo.
All Directors are compensated for travel and other expenses incurred by
them in the performance of their duties. The Company pays each Independent
Director an aggregate fee of $75,000 per annum for their services in such
capacity. The Directors appointed by the holder of a majority in aggregate
principal amount of the Class E Notes do not and will not receive remuneration
from the Company for their services.
Mr. Bradley, Mr. Peters and Mr. Robinson also act as directors of certain
AerCo Group subsidiaries. Mr. Bradley, Mr. Peters and Mr. Robinson each receive
$1,000 in respect of each day, or portion thereof, which they are required to
devote to the activities of those subsidiaries and AerCo (other than in respect
of its board meetings).
The Company knows of no arrangement, the exercise of which could result in
a change in control of the Company.
BENEFICIAL OWNERSHIP OF THE COMPANY
<TABLE>
<CAPTION>
NUMBER OF PERCENT
TITLE OF CLASS NAME AND ADDRESS SHARES OF CLASS
- -------------- ---------------- --------- --------
<S> <C> <C> <C>
Common Stock Mourant & Co. Trustees Limited,................... 19 Shares 95%
as trustee of AerCo Holding Trust
22 Grenville Street
St. Helier
Jersey, Channel Islands
GPA Group plc..................................... 1 Share 5%
GPA House
Shannon,
Ireland
</TABLE>
Pursuant to the Shareholders Undertaking entered into on July 15, 1998 by
Mourant & Co. Trustees Limited as trustee of the Charitable Trust (the
"CHARITABLE TRUST TRUSTEE"), the Nominees, GPA Group, AerCo and the Trustee (the
"SHAREHOLDERS UNDERTAKING"), the Charitable Trust Trustee and GPA Group agreed
that, as long as the AerCo Notes are outstanding, they will not, without the
prior written approval of the Trustee and all the Directors, transfer any part
of the Capital Stock held by them or any interest therein unless the transferee
(a) in the case of the Capital Stock held by the Nominees for the Charitable
Trust Trustee, is a trustee of a trust formed for charitable purposes
substantially identical to those for which the
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Charitable Trust is established and (b) enters into an agreement substantially
identical to the Shareholders Undertaking in favor of the Trustee. In
consideration for the undertakings given by the Charitable Trust Trustee in the
Shareholders Undertaking, the Charitable Trust Trustee is entitled to receive
from AerCo an undertaking fee equal to $1,500 per annum. Pursuant to the
instrument of trust establishing the Charitable Trust, a certificate given by
the Directors to the Charitable Trust Trustee that its voting of the Capital
Stock in a specified manner is in the best commercial interests of the Company
shall, for the purposes of the exercise of the Charitable Trust Trustee's
discretion, be conclusive that any such action is in the best commercial
interests of the Company.
THE SERVICER
The Servicer and its affiliates have not assumed and are not responsible
for, or guarantors of, and shall not assume or be responsible for, or guarantors
of, any liabilities of the Company or any of its affiliates, including, without
limitation, any payments due with respect to the Notes.
The Servicer provides services pursuant to the terms of the Servicing
Agreement on behalf of AerCo Group (except in certain circumstances described
below where a substitute servicer may perform such services). The Servicing
Agreement (a) sets forth the various duties of the Servicer with respect to the
management and administration of the Initial Aircraft and the Leases, (b) sets
forth certain aircraft marketing activities to be performed by the Servicer and
(c) sets forth certain Initial Aircraft management-related obligations of the
Servicer in connection with offers and sales by AerCo of Refinancing Notes or
Additional Notes.
The Servicer provides the services in accordance with the express terms of
the Servicing Agreement, which, among other things, provides that the Servicer
will act in accordance with applicable law and with directions given by AerCo,
from time to time in accordance with the Servicing Agreement. In addition, under
the Servicing Agreement, the Servicer has agreed to perform its services in
accordance with the Babcock & Brown Services Standard and the Babcock & Brown
Conflicts Standard.
The duties and obligations of the Servicer are limited to those expressly
set forth in the Servicing does not have any fiduciary or other implied duties
or obligations to AerCo or any other person, including any Noteholder.
In addition to managing, servicing and marketing the Initial Aircraft,
Babcock & Brown also manages, services and markets aircraft assets owned by
third parties and persons within the Babcock & Brown Group. In the course of
conducting such activities, Babcock & Brown will from time to time have
conflicts of interest in performing its obligations on behalf of AerCo Group.
With respect to the negotiation of a transaction giving rise to a conflict of
interest, the Servicer may withdraw from representing AerCo, which shall be
required to appoint an independent representative to represent AerCo as to such
negotiation, and the Servicer shall be entitled to act on behalf of itself or
any of its affiliates with respect to such negotiation. See "Risk Factors --
Risks Relating to AerCo and Certain Third Parties -- Conflicts of Interest of
Babcock & Brown".
Pursuant to the Servicing Agreement, the Servicer will not be liable or
accountable to any person, other than AerCo or its subsidiaries to the limited
extent described below, under any circumstances, for any Losses directly or
indirectly arising out of, in connection with or related to (i) the sale, lease
or purchase of an Initial Aircraft on less favorable terms than might have been
achieved at any time, provided such transactions were entered into on the basis
of a commercial decision or recommendation of the Servicer in accordance with
the Babcock & Brown Services Standard, (ii) the Servicer's obligation to apply
the Babcock & Brown Conflicts Standard in respect of its performance of the
services, except, in either of case (i) or (ii), where such Losses are finally
adjudicated to have been caused directly by the negligence, recklessness, wilful
misconduct or fraud of the Servicer, (iii) the ownership, operation,
maintenance, acquisition, leasing, financing, refinancing or sale of any Initial
Aircraft, or any action, or failure to act on the part of any person at any time
prior, to the effective date of the Servicing Agreement, (iv) any action AerCo
or, as contemplated by the Servicing Agreement, the Cash Manager or the
Administrative Agent instructs the Servicer to take, limit or terminate despite
the Servicer's recommendation to the contrary, (v) the refusal by AerCo Group to
take any action recommended by the Servicer, (vi) circumstances where any person
within AerCo Group has already received
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an amount sufficient to cover such Losses, or (vii) as a result of the gross
negligence, recklessness, fraud or wilful misconduct of any person within AerCo
Group. AerCo Group shall indemnify the Servicer, its affiliates and
representatives on an after-tax basis for any Losses that may be imposed on,
incurred by or asserted against the Servicer or its affiliates or
representatives directly or indirectly arising out of, in connection with or
related to (i) the Servicer's performance under the Servicing Agreement, errors
in judgment or omissions by the Servicer or any action taken, limited or
terminated in accordance with AerCo's instructions or, as contemplated by the
Servicing Agreement, the Cash Manager's or the Administrative Agent's
instructions, except where such Losses are finally adjudicated to have been
caused directly by the Servicer's negligence, recklessness, fraud or wilful
misconduct in respect of its obligation to apply the Babcock & Brown Services
Standard or the Babcock & Brown Conflicts Standard in respect of its performance
of the services under the Servicing Agreement or any other Loss for which the
Servicer has agreed to indemnify AerCo and its affiliates pursuant to the
Servicing Agreement, or (ii) any of the circumstances under which the Servicer
would not be liable to AerCo as described above.
The Servicer shall indemnify AerCo Group on an after-tax basis for Losses
arising as a result of the performance of the Services where such Losses are
finally adjudicated to have (i) been caused directly by the negligence,
recklessness, fraud or willful misconduct of the Servicer or any of its
affiliates or delegates in respect of its obligations to apply the Standard of
Care or the Conflicts Standard in connection with the performance of the
services; or (ii) directly resulted from a breach by the Servicer of the express
terms and conditions of the Servicing Agreement; provided that the Servicer's
obligation to indemnify AerCo shall exclude circumstances where any person
within AerCo Group has already received an amount sufficient to cover such
Losses and shall be limited to a maximum amount of $21 million in the aggregate
with respect to any and all Losses except for Losses arising from fraud on the
part of the Servicer, for which the Servicer will have unlimited liability.
See "Risk Factors -- Risks Relating to AerCo and Certain Third Parties --
Limitation of Liability on the Part of the Servicer".
Notwithstanding anything to the contrary stated above, the Servicer is not
obligated to take or refrain from taking any action that it believes is
reasonably likely to violate any applicable law with respect to the Babcock &
Brown Group.
AIRCRAFT SERVICES
Pursuant to the Servicing Agreement, the Servicer has, among other things,
undertaken:
- to employ or otherwise engage such staff (including in-house legal
staff) and maintain such supporting resources as the Servicer shall deem
necessary, both in number and quality, to enable it to perform the
Services;
- to grant AerCo Group and its agents, including the Administrative Agent,
access to certain information, programs, records and personnel of the
Servicer under specified circumstances to enable AerCo Group to monitor
the Servicer's compliance with the Servicing Agreement and otherwise for
the purposes of AerCo Group's business; and
- not to commingle with its own funds any funds of any person within AerCo
Group.
The main categories of services being provided by the Servicer pursuant to
the Servicing Agreement in respect of the Initial Aircraft (the "SERVICES") are:
- Lease marketing services, including, subject to the terms of the
Indenture and the Servicing Agreement, remarketing, Lease drafting,
negotiation and execution (including, without limitation, negotiating
final Lease terms);
- Initial Aircraft asset management services, including Lease rent
collection and cash services, Aircraft maintenance, insurance, contract
compliance of, and enforcement against, Lessees, and accepting delivery
and redelivery of Aircraft;
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- Initial Aircraft sales services as, when and to the extent directed by
AerCo;
- monitoring of maintenance and provision of records and information with
respect to the Initial Aircraft;
- arranging for valuations and monitoring and advising AerCo of regulatory
developments;
- using reasonably, necessary or appropriate efforts to keep AerCo in
compliance with certain covenants under the Indenture directly relating
to the status, insurance, maintenance or operation of the Initial
Aircraft;
- providing to AerCo certain data and information relating to the Initial
Aircraft and the commercial aviation industry;
- assistance in connection with the public or private offerings and sale
of Refinancing Notes or Additional Notes including assisting in public
disclosure relating to the Servicer and its affiliates contained in any
disclosure document, certain Initial Aircraft-related participation in
marketing activities solely in the Servicer's capacity as Servicer of
the Aircraft, and providing AerCo, underwriters, rating agencies and/or
other advisors with the reasonable opportunity to conduct due diligence
with respect to the Servicer and its provision of the Services as they
relate to the Initial Aircraft;
- assistance with Permitted Tax-Related Dispositions or other permissible
tax-based financings;
- legal and other professional services with respect to the lease, sale or
financing of the Initial Aircraft, any amendment or modification of any
Lease with respect to the Initial Aircraft, the enforcement of the
rights of any person within AerCo Group under any Lease with respect to
the Initial Aircraft, any disputes that arise with respect to the
Initial Aircraft or for any other purpose that the Servicer reasonably
determines is necessary in connection with the performance of the
Services;
- periodic reporting of certain operational, financial and other
information relating to the Initial Aircraft and the related Leases; and
- providing assistance to the Cash Manager with respect to cash services
for the Initial Aircraft.
OPERATING GUIDELINES
Under the Servicing Agreement, the Servicer is entitled to exercise such
authority as is necessary to give it a practicable and working autonomy in
performing the Services, while at the same time AerCo, through the
Administrative Agent, will establish monitoring and control procedures which are
expected to enable it properly to manage the business and assets of AerCo Group.
Pursuant to the terms of the Servicing Agreement, the Servicer is required
to comply with the Babcock & Brown Services Standard and the Babcock & Brown
Conflicts Standard in the performance of the Services. All transactions to be
entered into by the Servicer on behalf of AerCo Group (other than with other
persons within AerCo Group) are required to be at arm's length and on fair
market value terms unless otherwise agreed or directed by AerCo. Certain
transactions or matters with respect to the Initial Aircraft require the
specific written approval of AerCo, including:
- except as already required by the terms of any Initial Lease, sales of
(or agreements to sell) Initial Aircraft or any engine forming part of
the Initial Aircraft;
- the entering into of any new Leases with respect to the Initial Aircraft
(including amendments, renewals or extensions of an Existing Lease) if
the Lease does not comply with the covenants set forth under
"Description of the Notes -- Payment of Principal and Interest --
Operating Covenants";
- terminating any Lease or Leases to any single Lessee or related Lessees
with respect to Initial Aircraft then having an aggregate depreciated
net book value in excess of $100 million;
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- unless provided for in the applicable budget, entering into any contract
for the modification or maintenance of Initial Aircraft where (A) the
costs to be incurred by AerCo Group exceed the greater of (i) the
estimated aggregate cost of a heavy maintenance "D" check for the
airframe and the equivalent for engines of the type in question and (ii)
available Maintenance Reserves or other collateral under the related
Lease or (B) such modification or maintenance is outside the ordinary
course of AerCo Group's business;
- entering into any capital commitment or confirming any order or
commitment to acquire or acquiring aircraft or engines on behalf of
AerCo Group;
- issuing any guarantee on behalf of, or otherwise pledging the credit of,
any person within AerCo Group other than guarantees by a member of AerCo
Group of the Lease obligations of another member of AerCo Group and
other than guarantees with respect to trade payables in the ordinary
course of AerCo Group's business;
- entering into any agreements for services costing in excess of $50,000
to be provided in respect of Initial Aircraft by third parties at AerCo
Group's cost, except in each case to the extent that the same is an
expense provided for in the then applicable budget; and
- entering into or amending or granting a waiver, on behalf of any person
within AerCo Group, with respect to any transaction with the Servicer or
any of its affiliates including without limitation for the acquisition,
sale or lease of any Initial Aircraft from or to, or the obtaining or
provision of services by, such entity.
BUDGETS
AerCo will adopt an annual and a three-year budget each year with respect
to all Initial Aircraft owned by it. Under the Servicing Agreement, the Servicer
has undertaken to use reasonable commercial efforts to achieve the annual budget
for each year.
MANAGEMENT FEES
The Company is obligated to pay a fee (the "RETAINER FEE") to the Servicer,
pursuant to the Servicing Agreement, in a per annum amount equal to
approximately 0.10% of the Initial Appraised Value of each Initial Aircraft
payable monthly in arrears in 12 equal installments subject to pro-rata
reduction for any month in which AerCo does not own all the Initial Aircraft;
provided that, solely for purposes of calculating the Retainer Fee, the Initial
Appraised Value shall not be reduced below $250 million until all of the
Aircraft shall have been sold. A rent-related fee is also payable monthly, equal
to 1% of the aggregate rent actually paid for any month (or portion of a month)
in which AerCo Group owns the related Initial Aircraft. In addition, the
Servicer will receive three incentive fees: (i) a results-based incentive fee,
based on a formula to be agreed upon by the Servicer and AerCo, or if no such
agreement is reached, equal to 12.50% of any excess of actual revenues available
to repay holders of AerCo's publicly and privately issued debt securities for
any year over 95% of the target amount contained in the applicable annual
budget, (ii) a base sales fee of 1.25% multiplied by the target sales price for
the sale of any Aircraft net of transaction expenses (such target sales price to
be an amount equal to 90% of the Initial Appraised Value of the relevant Initial
Aircraft), and (iii) a sales-based incentive fee with respect to each sale of an
Initial Aircraft, equal to 10% of the excess of the net proceeds of such sale
over the target sales price for such Aircraft agreed by AerCo and the Servicer.
The Servicer also will be reimbursed for certain expenses incurred in connection
with the Servicer's performance of the Services. These expenses include, among
other expenses, Initial Aircraft non-ordinary course maintenance costs and
insurance, non-ordinary course outside professional advisory fees (including
legal fees) and other out of pocket expenses, all of which in the aggregate may
constitute a significant additional component of AerCo's total overhead costs.
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<PAGE> 86
TERM AND TERMINATION
The Servicing Agreement is for an initial term of ten years expiring on
July 15, 2008. AerCo has the right to extend the term of the Servicing Agreement
to July 15, 2023 years upon at least six months written notice to the Servicer
and subject to an increase in the rental fee percentage.
Each party will also have the right to terminate the Servicing Agreement
under certain circumstances. The Servicer has the right to terminate the
Servicing Agreement if, among other things:
- the Company fails to pay when due (i) any servicing fees if not paid
within five business days of written notice of such failure, or (ii) any
other amount payable by any person within AerCo Group to the Servicer if
not paid within ten business days of notice of such failure;
- any person within AerCo Group fails to perform or observe or violates in
any material respect any material term, covenant, condition or agreement
to be performed or observed by it under the Servicing Agreement;
- an involuntary proceeding is commenced or an involuntary petition is
filed in respect of AerCo or any subsidiary of AerCo or in respect of a
substantial part of the property or assets of any person within AerCo
Group under applicable bankruptcy, insolvency, receivership or similar
law, and such proceeding shall continue undismissed for 100 days or an
order or decree approving any of the foregoing shall be entered or any
such person shall go into liquidation, suffer a receiver or mortgagee to
take possession of all or substantially all of its assets or have an
examiner appointed over it, or a petition or proceeding is presented for
any of the foregoing and not discharged within 100 days; or a voluntary
proceeding is commenced in respect of AerCo or any subsidiary of AerCo
under bankruptcy, insolvency, receivership or similar law or any such
person consents to the institution of, or fails to contest the filing
of, any petition described above, or files an answer admitting the
material allegations of any such petition, or makes a general assignment
for the benefit of its creditors;
- the Servicer or any of its affiliates becomes obligated to pay (or
indemnify) for taxes as a result of its provision of the Services under
the Servicing Agreement (other than taxes on net income derived by the
Servicer under the Servicing Agreement) which taxes it is unable to
avoid using reasonable commercial efforts, and AerCo fails to indemnify
the Servicer or its affiliate for such taxes; and
- the Servicer reasonably determines that directions given by AerCo or any
of its subsidiaries are, or if carried out would be, unlawful under
applicable law.
AerCo, by a majority vote of the Directors, has the right to terminate the
Servicing Agreement:
- upon the Servicer materially breaching any of its obligations under the
Servicing Agreement and failing to cure such breach after written notice
from AerCo;
- upon the Servicer ceasing or giving notice that it will cease to be
actively involved in the aircraft advisory and management business;
- when all of the public or private debt securities of AerCo are repaid,
refinanced or defeased in full;
- upon the occurrence of a change of control of the Servicer;
- upon commencement of an involuntary proceeding or the filing of an
involuntary petition in respect of the Servicer or in respect of a
substantial part of the property or assets of the Servicer under
bankruptcy, insolvency, receivership or similar law, if such proceeding
continues undismissed for 120 days or an order or decree approving any
of the foregoing shall be entered or the Servicer shall go into
liquidation, suffer a receiver or mortgagee to take possession of all or
substantially all of its assets or have an examiner appointed over it,
or a petition or proceeding for any of the foregoing being presented and
not discharged within 120 days; or commencement of a voluntary
proceeding in respect of the Servicer under bankruptcy, insolvency,
receivership or similar law upon consent by any such person to the
institution of, or failure by such person to contest the filing of, any
petition described
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<PAGE> 87
above, or filing of an answer admitting the material allegations of any
such petition, or the making of a general assignment for the benefit of
its creditors; and
- upon six months' written notice, or upon shorter written notice,
provided that the Servicer is paid a retainer fee, a rental fee (based
on rent budgeted to be received during the period) and an incentive fee
(based on the achievement of an approved budget target) for a six-month
period after written notice of termination is received, and payment of
the termination fee set out below.
The termination fee shall be the following percentage of Initial Appraised
Value as of the date of termination:
<TABLE>
<S> <C> <C>
On or after March 31, 1998 but prior to March 31, 2001...... 0.20%
On or after March 31, 2001 but prior to March 31, 2003...... 0.15%
On or after March 31, 2003 but prior to March 31, 2005...... 0.10%
Thereafter.................................................. Nil
</TABLE>
In addition, if, at any time, either (i) the Servicer or any of its
affiliates is retained to service a fleet of commercial jet aircraft on or
available for lease having an aggregate appraised value exceeding the lesser of
(a) $3.50 billion in appraised value or (b) 50% or more (by appraised value) of
all commercial jet aircraft then serviced by the Servicer and its affiliates or
(ii) the Servicer or any of its affiliates acquires or makes an equity
investment in any aircraft portfolio, securitization vehicle or other entity
that owns or leases commercial jet aircraft on or available for lease where such
investment represents more than 20% of the total equity of such entity and the
appraised value of the portfolio exceeds the lesser of (a) $2.50 billion in
appraised value and (b) the amount which represents 35% of all commercial jet
aircraft (by appraised value) then serviced by the Servicer and its affiliates,
AerCo may terminate the Servicer upon six months' written notice, or upon
shorter written notice provided that the Servicer is paid a retainer fee, a
rental fee (based on rent budgeted to be received during the period) and an
incentive fee (based on the achievement of the approved budget target) for a
six-month period after written notice of termination is received, and the
payment of 50% of the termination fee set out above.
AerCo, by a majority vote of Directors, shall be entitled to terminate the
Servicing Agreement in respect of any Initial Aircraft to which one or more of
the following conditions apply:
- in the case of marketing for re-lease of an Initial Aircraft, such
Aircraft has been off-lease and is reasonably available for re-lease for
more than 180 days after expiry of the agreed lease marketing period; or
- the Servicer fails, within a reasonable period of time (not to exceed
180 days), to submit to AerCo a bona fide third party offer to purchase
an Initial Aircraft after written direction from AerCo to arrange such a
sale; or
- the Servicer recommends a course of action in respect of an Initial
Aircraft or Lease to AerCo which AerCo does not approve and, after
negotiation in good faith, the Servicer refuses to amend, withdraw or
replace such recommendation with one that is consistent with the
performance of the Services.
ASSIGNMENT OF SERVICING AGREEMENT
The Servicing Agreement and the rights and obligations of the Servicer, on
the one hand, and AerCo, on the other hand, are not assignable by any of such
parties other than with the prior consent of the other parties.
PRIORITY OF PAYMENT OF SERVICING FEES AND REIMBURSABLE EXPENDITURES
The fees and expenses of the Servicer rank senior in priority of payment to
all payments of interest, principal and premium, if any, on the Notes.
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<PAGE> 88
ADDITIONAL SERVICERS
The Company has the option to appoint Babcock & Brown to service Additional
Aircraft on the terms of the Servicing Agreement. The Company may, however,
appoint another Servicer to service Additional Aircraft. Under the Indenture,
the appointment of an additional Servicer would require Rating Agency
confirmation. See "Description of the Notes -- Payment of Principal and Interest
- -- Operating Covenants".
CORPORATE MANAGEMENT
With regard to the corporate affairs of AerCo, management services are
provided by three entities: the Administrative Agent, the Cash Manager and the
Company Secretary.
ADMINISTRATIVE AGENT
GPA Administrative Services acts as the Administrative Agent of AerCo
Group.
The Administrative Agent is responsible for providing administrative and
accounting services to the Directors. The Administrative Agent's duties include:
- monitoring the performance of AerCo Group's service providers (including
the Servicer's compliance with the Servicing Agreement) and reporting on
such performance to the Board on a quarterly basis;
- acting as liaison with the Rating Agencies with respect to the rating
impact of certain decisions taken by AerCo Group;
- the establishment and maintenance on behalf of AerCo Group of accounting
ledgers and the provision on a quarterly and annual basis of draft
accounts on a combined basis for AerCo Group as well as, on a quarterly
and annual basis, on an individual company basis for certain companies.
However, AerCo Group retains responsibility for the ledgers and accounts
including all discretionary decisions and judgments relating to the
preparation and maintenance thereof, and AerCo Group retains
responsibility for, its financial statements;
- preparing annual and three year budgets, discussing such budgets with
the Servicer and presenting them to AerCo for approval;
- authorizing payment of certain bills and expenses;
- to the extent required by AerCo Group or the parties thereto,
coordinating any amendments to the transaction agreements, other than
the Leases, subject to the terms of such agreements and approval by
AerCo;
- procuring, supervising and coordinating outside legal counsel,
accounting, tax and other professional advisors to assist AerCo Group;
- preparing and coordinating reports to investors (including preparing
press releases and managing investor relations) and to the Commission
with the assistance of outside counsel and auditors, if appropriate;
- preparing and filing (or arranging for the preparation and filing of)
all required tax returns with the assistance of AerCo Group's tax
advisors;
- maintaining, or monitoring the maintenance of, the books, records and
related filings of AerCo Group other than those maintained by the
Company Secretary;
- preparing and distributing an agenda and any required papers for
meetings of the governing bodies of the entities within AerCo Group and
preparing minutes of those meetings;
- assisting AerCo in developing and implementing its interest rate
management policy and developing financial models, cash flow projections
and forecasts, to the extent required by AerCo, and in making aircraft
lease, sale and capital investment decisions;
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<PAGE> 89
- advising AerCo as to the appropriate levels of the Liquidity Reserve
Amount; and
- assistance in connection with the public or private offerings of
Refinancing Notes.
The Administrative Agent also may be asked by the Board to provide other
administrative services, including (a) undertaking an effort to avoid any
adverse change in tax status of any person within the AerCo Group and (b) such
other actions as may be appropriate to facilitate AerCo Group's business
operations and assist the Board in carrying out its duties. In any such event,
the Administrative Agent neither will be obligated to perform, nor will it
perform, any of the services described in the preceding sentence to the extent
that such services could reasonably be expected to result in the business of
AerCo or any of its subsidiaries ceasing to be separate and readily identifiable
from, and independent of, the Administrative Agent, GPA Group or any of their
respective affiliates. AerCo is obligated to pay a fee (the "ADMINISTRATIVE
FEE") to the Administrative Agent each month equal to 2% of the rental payments
made by the Lessees under the Leases for such month subject to an annual minimum
of $200,000. The Administrative Agent is also entitled to an additional fee (the
"ADDITIONAL FEE") for services provided in connection with the public or private
offering of securities by AerCo in an amount of 0.025% of the net proceeds of
any such offering. The Administrative Fee will, from time to time, be adjusted
for inflation. The Administrative Agent is also entitled to be reimbursed for
certain expenses incurred in connection with the performance of its services
under the Administrative Agency Agreement. The Administrative Agent may resign
on 60 days' written notice in certain circumstances. AerCo may remove the
Administrative Agent on 120 days' written notice in certain circumstances. No
such resignation or termination will be effective unless AerCo has engaged
another person or entity to perform the services that were being provided by the
Administrative Agent, except that after 90 days the Administrative Agent may
petition any court of competent jurisdiction to appoint a successor
administrative agent.
CASH MANAGER
GPA Cash Manager II acts as the Cash Manager. The Cash Manager provides
cash management and related services to AerCo Group. In the ordinary course of
AerCo Group's business, the Cash Manager informs the Servicer and the
Administrative Agent of the aggregate deposits in the Accounts as required and
provide such other information as shall be required in connection with the
Accounts. In accordance with the Indenture, and subject to certain limitations
and at the direction of AerCo, the Cash Manager is authorized to invest the
funds held by AerCo Group in the Accounts other than the Tax Defeasance Account
in certain prescribed investments (the "PERMITTED ACCOUNT INVESTMENTS") on
permitted terms. At all times, the Accounts other than the Tax Defeasance
Account will be maintained in the name of the Security Trustee, except that
certain Rental Accounts which, for certain legal or other regulatory reasons,
cannot be established in the name of the Security Trustee, will be maintained in
the names of such parties as are specified in the relevant Leases and maintained
with another bank that has a rating of AA or equivalent or higher or any other
responsible or reputable bank.
In addition, the Cash Manager receives certain data provided by the
Servicer with respect to the Aircraft and Leases of AerCo and calculates certain
monthly payments and makes all other calculations as required under the Cash
Management Agreement. The Cash Manager also provides the Trustee with such
information as is required by the Trustee to provide its reports to the
Noteholders.
The Cash Manager will devote the same amount of time and attention to and
is required to exercise the same level of skill, care and diligence in the
performance of its services as a prudent businessperson would in administering
such services on its own behalf. The Cash Manager receives a fee of $250,000 per
annum (as adjusted for inflation) from AerCo in respect of its services to AerCo
Group. The Cash Manager will not be liable to AerCo Group for any losses or
taxes payable by AerCo Group unless such losses or taxes arise in connection
with the Cash Manager's own gross negligence (or simple negligence in the
handling of funds), willful misconduct, deceit or fraud or that of its officers,
agents or employees. In addition, the Cash Manager will be entitled to
indemnification by the members of AerCo Group for, and will be held harmless
against, any loss, liability or tax incurred by the Cash Manager, its officers,
directors, agents and employees as a result of
88
<PAGE> 90
the performance of services under the Cash Management Agreement (other than
through its own deceit, fraud, willful default or negligence or that of its
officers, directors, agents and employees).
The Cash Manager may resign on 60 days' written notice and the Security
Trustee (on behalf of and at the written direction of the secured parties) or
AerCo Group may remove the Cash Manager upon 120 days' written notice in certain
circumstances. No such resignation or termination will be effective unless AerCo
has engaged another person or entity to perform the services that were being
provided by the Cash Manager, except that after 90 days the Cash Manager may
petition any court of competent jurisdiction to appoint a successor cash
manager.
COMPANY SECRETARY
The Company Secretary (with respect to any company, the entity which
provides its secretarial services, the "COMPANY SECRETARY") maintains company
books and records, including minute books and stock transfer records. It makes
available telephone, telecopy, telex and post office box facilities and will
maintain a registered office in the relevant jurisdictions.
Mourant & Co. Secretaries Limited acts as Company Secretary for the
Company, ALPS 94-1 and any other subsidiary of the Company incorporated in
Jersey.
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<PAGE> 91
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below (the "ALPS 94-1
SELECTED CONSOLIDATED FINANCIAL DATA") have been extracted or derived from the
ALPS 94-1 Consolidated Financial Statements included elsewhere in this
Prospectus. See "Summary Consolidated Financial Data". Accordingly, such
selected consolidated financial data include data relating to the 27 Original
ALPS 94-1 Aircraft but do not include financial data relating to the
Transferring Aircraft (other than the A300-B4-200 aircraft purchased by GPA from
ALPS 94-1 which was sold to AerCo Group as one of the Transferring Aircraft).
Moreover, the ALPS 94-1 Selected Consolidated Financial Data include data
relating to the Boeing 767-300ER aircraft that was purchased by GPA from ALPS
94-1 prior to the closing of the Offering and is not among the Initial Aircraft.
AerCo believes that the ALPS 94-1 Selected Consolidated Financial Data set forth
below are an appropriate presentation because: (i) AerCo was incorporated
principally for the purpose of effecting the refinancing and assuming ownership
of ALPS 94-1, (ii) the Initial Aircraft will include 26 of the 27 Original ALPS
94-1 Aircraft and the ongoing aircraft leasing activities of AerCo Group will be
substantially similar to those conducted by ALPS 94-1 and (iii) the Initial
Aircraft of ALPS 94-1 and its consolidated subsidiaries (including the
A300-B4-200 aircraft referred to above) represent approximately 79% by Initial
Appraised Value of the Initial Aircraft of AerCo Group. Such data exclude
financial data relating to the Nine Transferring Aircraft, and therefore such
data are not indicative of, and will not be comparable with, the consolidated
financial results of AerCo Group.
Financial statements for the Nine Transferring Aircraft for the year ended
June 30, 1997 and for the nine months ended March 31, 1998 are included
elsewhere in this Prospectus. Such financial statements for the year ended June
30, 1997 have been audited by Arthur Andersen, independent chartered
accountants. See "Experts". Such financial statements for the nine months ended
March 31, 1998 have not been audited. The financial statements for the Nine
Transferring Aircraft are presented on the basis that the Nine Transferring
Aircraft have been operated separately from GPA for all periods presented.
Investors should note, however, that the companies owning the Nine Transferring
Aircraft did not conduct any independent business operations in the periods
presented.
Also included elsewhere in this Prospectus is certain unaudited pro forma
combined financial information for AerCo Group for the year ended June 30, 1997
and the nine months ended March 31, 1998. Such pro forma combined financial
information give effect, among other things, to the issuance by AerCo of the
AerCo Notes, the refinancing of ALPS 94-1, the sale of the Boeing 767-300ER and
certain other transactions described herein. Such pro forma financial
information has not been audited. See "Unaudited Pro Forma Combined Financial
Information".
ALPS 94-1
The ALPS 94-1 Selected Consolidated Financial Data set out below have been
extracted or derived from the ALPS 94-1 Consolidated Financial Statements. ALPS
94-1 did not conduct any business operations prior to its acquisition of the
Original ALPS 94-1 Aircraft from GPA in 1994. Accordingly, the financial data
for the fiscal year ended June 30, 1995 only includes trading data for the
approximately ten-month period from August 24, 1994 to June 30, 1995. These
financial statements have been prepared in accordance with U.K. GAAP which
differ in certain significant respects from U.S. GAAP. For a discussion of the
principal differences and a reconciliation from U.K. GAAP to U.S. GAAP of
shareholders' equity and net income or loss at and for the fiscal years ended
June 30, 1995, 1996 and 1997 and at March 31, 1998 and for the nine months ended
March 31, 1997 and 1998, see Notes 20, 21, 22 and 23 to the ALPS 94-1 Audited
Consolidated Financial Statements and Notes 1, 2 and 3 to the ALPS 94-1 Interim
Consolidated Financial Statements.
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<PAGE> 92
ALPS 94-1 CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
----------------------------- -----------------
1995(2) 1996 1997 1997 1998
-------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Revenues
Aircraft leasing....................... 86,803 102,022 102,121 76,263 76,098
Expenses
Depreciation........................... (18,158) (17,978) (38,062) (28,569) (28,569)
Additional depreciation................ -- -- (34,385) (34,385) --
Provision for permanent diminution in
aircraft value...................... -- (12,000) -- -- (8,720)
Net interest expense................... (64,206) (73,576) (71,037) (53,816) (52,340)
Other expenses......................... (3,702) (5,581) (5,053) (4,123) (4,278)
Operating profit/(loss).................. 737 (7,113) (46,416) (44,630) (17,809)
Reduction in indebtedness................ -- 6,647 46,273 44,630 17,824
Profit/(Loss) before taxes............... 737 (466) (143) -- 15
Taxes.................................... (69) (200) 143 -- (15)
Dividends................................ (2) -- -- -- --
Net income/(loss)........................ 666 (666) -- -- --
U.S. GAAP(3)
Depreciation............................. (16,442) (32,338) (32,339) (24,254) (24,254)
Provision for permanent diminution in
aircraft value......................... -- (12,000) -- -- (520)
Reduction in indebtedness................ -- -- 5,258 5,258
Net loss................................. (14,850) (22,028) (907) (672) (5,309)
</TABLE>
ALPS 94-1 CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30(1) MARCH 31(1)
-------------------------------- -----------
1995(2) 1996 1997 1998
--------- --------- -------- -----------
($ THOUSANDS)
<S> <C> <C> <C> <C>
U.K. GAAP
Aircraft, net of accumulated depreciation and
provision for permanent diminution in
aircraft value............................. 957,021 927,043 854,596 818,440
Total assets................................. 1,038,691 1,019,671 949,033 911,522
Indebtedness............................... (976,494) (946,729) (871,495) (830,321)
Provision for maintenance.................. (29,405) (39,544) (46,247) (46,516)
Total liabilities............................ (1,038,025) (1,019,671) (949,033) (911,522)
Shareholders' equity......................... 666 -- -- --
U.S. GAAP(3)
Aircraft, net of accumulated depreciation and
provision for permanent diminution in
aircraft value............................. 811,149 766,811 734,472 710,831
Indebtedness................................. (976,494) (953,376) (919,157) (895,807)
Shareholders' equity......................... (162,438) (184,466) (185,373) (190,682)
</TABLE>
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<PAGE> 93
ALPS 94-1 CONSOLIDATED STATEMENT OF CASH FLOWS AND OTHER DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
----------------------------- -----------------
1995(2) 1996 1997 1997 1998
-------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Cash paid in respect of interest......... (51,147) (64,002) (59,872) (45,952) (42,975)
Net cash provided by operating activities
(after payment of interest)............ 66,526 45,532 45,119 29,371 36,109
Net cash used in investing activities.... (953,859) -- -- -- (1,133)
Net cash provided by (used in) financing
activities............................. 967,496 (36,025) (43,494) (31,909) (35,690)
Net movements in cash.................... 80,163 (25,803) (2,886) (6,808) 1,026
</TABLE>
ALPS 94-1 SELECTED RATIOS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30(1) MARCH 31(1)
----------------------------- -----------------
1995(2) 1996 1997 1997 1998
-------- -------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.K. GAAP
Ratio of Combined Earnings to Combined
Fixed Charges(4)....................... 1.011 0.994(5) 0.998(5) 1.000 1.000
U.S. GAAP
Ratio of Combined Earnings to Combined
Fixed Charges(4)(5).................... 0.770 0.703 0.985 0.988 0.900
</TABLE>
- ---------------
(1) The financial statements of ALPS 94-1 are stated in U.S. dollars which is
the principal operating currency of ALPS 94-1 and the aviation industry.
(2) ALPS 94-1 did not conduct any business operations prior to its acquisition
of aircraft from GPA in August 1994. Accordingly, the financial data for the
year ended June 30, 1995 only includes trading data for the approximately
10-month period from August 24, 1994 to June 30, 1995.
(3) For a discussion of the differences between ALPS 94-1's results of
operations and financial position under U.S. GAAP compared with U.K. GAAP,
see Notes 20, 21, 22 and 23 to the ALPS 94-1 Audited Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- Year Ended June 30,
1996 Compared With Year Ended June 30, 1995 -- Differences between U.K. GAAP
and U.S. GAAP".
(4) Earnings include pretax income from continuing operations plus fixed
charges. Fixed charges are the total of (i) interest, whether expensed or
capitalized, (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized and (iii) such
portion of rental expense as can be demonstrated to be representative of the
interest factor in the particular case.
(5) Ratio of less than one indicates that earnings are inadequate to cover fixed
charges. The amount by which fixed charges exceeded earnings (i) for the
years ended June 30, 1996 and 1997 under U.K. GAAP was $0.47 million and
$0.14 million, respectively, and (ii) for the years ended June 30, 1995,
1996 and 1997 and the nine months ended March 31, 1997 and 1998 under U.S.
GAAP was $14.78 million, $21.83 million, $1.05 million, $0.67 million and
$5.29 million, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Management's Discussion and Analysis of Financial Condition and Results
of Operations set forth below (except the discussion under "-- Financial
Resources and Liquidity") is based on the ALPS 94-1 Selected Consolidated
Financial Data and therefore is limited to a discussion of historical financial
data with respect to the Original ALPS 94-1 Aircraft and the related leases.
Investors should note, however, that because the following discussion does not
cover historical data with respect to the Nine Transferring Aircraft, it will
not necessarily be indicative of an analysis of the consolidated financial
results of AerCo.
Since ALPS 94-1 contracted to acquire the Original ALPS 94-1 Aircraft from
GPA in August 1994, the market for aircraft on operating lease has experienced
generally favorable conditions. Consequently, leasing revenues and operating
cash flows have not been materially adversely affected by lessee defaults, bad
debt provisions or significant amounts of downtime. Operating cash flows in the
period 1995-97 did suffer, however, as a result of certain lessee rental
deferral and restructuring arrangements. See "The Initial Aircraft, Related
Leases and Collateral -- The Lessees". In addition, over the same period and
despite the generally favorable industry conditions, certain of the lessees have
been in arrears on their rental payments. Notwithstanding any continuation of
favorable industry conditions, like ALPS 94-1, AerCo Group will likely need to
address the problems of Lessees in financial difficulty with lease
reschedulings, rent deferrals and other restructuring arrangements. Further, as
and when the market for aircraft on operating lease deteriorates cyclically,
lease rentals and operating cash flows can be expected to suffer as a result of
increased lessee defaults, payment deferrals, lease restructurings and aircraft
repossessions and downtime. In such circumstances, AerCo's ability to pay
interest on, and repay principal of, the Notes may be materially adversely
affected.
The following discussion is based on the ALPS 94-1 Consolidated Financial
Statements which were prepared under U.K. GAAP. U.K. GAAP differs significantly
in certain respects from U.S. GAAP. See Notes 20, 21, 22 and 23 to the ALPS 94-1
Audited Consolidated Financial Statements and "-- Differences between U.K. GAAP
and U.S. GAAP" below.
RESULTS OF OPERATIONS -- NINE MONTHS ENDED MARCH 31, 1998 COMPARED WITH NINE
MONTHS ENDED MARCH 31, 1997.
REVENUES
Revenue for the nine months ended March 31, 1998 was $76.1 million compared
with revenue for the nine months ended March 31, 1997 of $76.3 million. Rentals
from European and Asia Pacific carriers represented 44.60% and 26.58%,
respectively, of ALPS 94-1's leasing revenues in the nine months ended March 31,
1998, with two lessees accounting for more than 10% of ALPS 94-1's leasing
revenues (Lan Chile: 14.89% and Spanair: 12.12%) compared with one lessee in the
nine months ended March 31, 1997, (Spanair: 11.97%).
At March 31, 1998, ALPS 94-1 had one Aircraft (an A300-B4-200) off-lease.
This Aircraft's lease with Philippine Airlines ended in December 1997 at which
time the aircraft was returned to ALPS 94-1. On April 28, 1998, ALPS 94-1 sold
this Aircraft to GPA and the Aircraft was subsequently leased and delivered to
Indian Airlines. This Aircraft will be acquired by AerCo as one of the
Transferring Aircraft.
Rental rates on the seven new leases written by ALPS 94-1 since August 1994
have reflected the general trend in the commercial aviation market for operating
lease rentals, which increased slightly during 1995 and 1996 and have remained
relatively stable in 1997 and 1998. In 1996, 1997 and 1998, ALPS 94-1 entered
into new leases with respect to two Aircraft (an MD83 and an A320-200), three
aircraft (one B767-300ER, one B737-400 and one F100), and one Aircraft (an
A320-200) respectively. In 1996, the new lease terms written were 36 months and
84 months, respectively, and the lease rates with respect to these Aircraft
were, overall, 2% higher than the previous lease rates. The new lease terms for
leases written in 1997 were for 84, 29 and 59 months, respectively, and the
lease rates with respect to these Aircraft were, overall, in line with the
previous lease rates. The new lease term written in 1998 was for 6 months.
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DEPRECIATION
The depreciation charge in the nine months ended March 31, 1998 amounted to
approximately $28.6 million compared to approximately $63 million for the same
period in 1997. Beginning on July 1, 1996, ALPS 94-1 has depreciated each
aircraft on a straight-line basis over 25 years from the date of manufacture to
a residual value of 15% of ALPS 94-1's historic cost. As a result of the
adoption by ALPS 94-1 of this new depreciation method, an additional
depreciation charge of $34.40 million was recorded in 1997 in order to bring the
opening net book values of ALPS 94-1's aircraft at the beginning of the 1997
fiscal year into line with the amount of depreciation ALPS 94-1 would have
recorded had it applied such new depreciation method from the time it acquired
each aircraft. Prior to July 1, 1996, ALPS 94-1 depreciated the carrying value
of each aircraft at 2% per annum increasing to 7% per annum beginning 15 years
after the date of manufacture of the aircraft to a nil residual value. See
"Statement of Accounting Policies" in the ALPS 94-1 Consolidated Financial
Statements.
PROVISION FOR PERMANENT DIMINUTION IN AIRCRAFT VALUE
In respect of the nine months ended March 31, 1998, directors of ALPS 94-1
determined to make a provision of $8.70 million in respect of a permanent
diminution in the book value of ALPS 94-1's three F100 Aircraft. The directors
arrived at such determination based on the bankruptcy of Fokker N.V. and the
discontinuation of its aircraft manufacturing operations, resulting in
significant reductions of values and lease rates for Fokker aircraft. This
provision was approved by the directors of ALPS 94-1 during May 1998 in respect
of the nine months ended March 31, 1998. It is expected that such reductions
will continue. The net book value of these Aircraft, net of the $8.70 million
provision, at March 31, 1998 was $49.20 million.
NET INTEREST EXPENSE
Net interest expense amounted to $52.30 million in the nine month period
ended March 31, 1998 compared to $53.80 million in the same period ended March
31, 1997. The decrease in net interest expense was primarily due to lower
average debt in the nine months ended March 31, 1998, including, in particular,
a significant reduction in the principal balances of the ALPS 94-1 Subclass A-1
Notes and Class D Note. This reduction was partially offset by a marginally
higher interest rate accrued during the nine months to March 31, 1998, in
addition to step-up interest being charged on the ALPS 94-1 Subclass A-2 Notes
and additional interest being accrued on the ALPS 94-1 Class E Note. The average
indebtedness outstanding during the nine months ended March 31, 1998 and 1997
was $907.40 million and $939.90 million, respectively.
Under the terms of the ALPS 94-1 Class E Note, interest accrues at a rate
of 10% per annum but only a portion of such interest ($3.10 million) has been
payable in cash in each of the periods under review. However, approximately $11
million and $12.80 million in respect of accrued and unpaid interest of the ALPS
94-1 Class E Note was capitalized during the periods ended March 31, 1998 and
1997, respectively. Cash paid in respect of interest amounted to $43 million in
the nine months ended March 31, 1998 and $46 million in the nine months ended
March 31, 1997, compared with net interest expense, which amounted to $52.30
million (net of interest income of $3.40 million) in the nine months ended March
31, 1998 and $53.8 million (net of interest income of $2.30 million) in the nine
months ended March 31, 1997, principally reflected Class E Note interest accrued
but not paid. In addition, since November 1997, under the terms of the ALPS 94-1
Subclass A-2 Notes, step-up interest accrued at the rate of 2% per annum in
addition to the fixed coupon of 7.15% per annum on the Subclass A-2 Notes. This
step-up interest amount has not been paid since December 1997.
Net interest expense is stated after deducting interest income earned
during the relevant period. In the nine months ended March 31, 1998, ALPS 94-1
earned interest income of $3.40 million compared with $2.30 million in the nine
months ended March 31, 1997.
In each of the periods under review, ALPS 94-1 has not been party to any
interest rate derivative agreements.
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Following completion of the Offering, the Notes will bear interest at
floating rates while the Subclass D-1 and Subclass E-1 Notes to be held by GPA
will bear a fixed rate of interest. It is currently expected that the aggregate
principal amount of the Subclass A-1, Subclass A-2, Subclass B-1 and Subclass
C-1 Notes will represent approximately 81% of AerCo's total indebtedness.
Accordingly, AerCo's exposure to movements in LIBOR will be relatively greater
than for ALPS 94-1 and AerCo will adopt a hedging strategy to manage its
exposure to movements in LIBOR rates. See "-- Financial Resources and Liquidity
- -- Interest Rate Management".
Following the Offering, a large proportion of AerCo's indebtedness will be
represented by the Notes and the Subclass D-1 Notes which will be issued on
terms and conditions prevailing in the market. To the extent that the weighted
average interest cost on AerCo's indebtedness is higher or lower than the cost
of the ALPS 94-1 indebtedness being refinanced, AerCo's net interest expense and
cash paid in respect of interest will be higher or lower, respectively, than
that experienced by ALPS 94-1 historically.
OTHER EXPENSES
Other expenses consist of GECAS' servicer fees, insurance premiums
(political risk and directors' liability insurance), administrative agent fees,
other service provider costs and miscellaneous expenditure items. Other expenses
amounted to approximately $4.30 million in the nine months ended March 31, 1998
compared with $4.10 million in the nine months ended March 31, 1997.
In each of the nine months ended March 31, 1998 and 1997, servicer fees
payable to GECAS were approximately $2.20 million. Substantially all of these
amounts represent asset based fees calculated as an annual percentage of agreed
values of aircraft under management. Following completion of the Offering,
Babcock & Brown will act as Servicer with respect to the Initial Aircraft on the
terms described in "Management of AerCo Group -- The Servicer".
OPERATING LOSS
In the nine months ended March 31, 1998, ALPS 94-1 recorded an operating
loss of approximately $17.80 million compared with a loss of $44.60 million in
the same period in 1997. The higher loss in 1997 was primarily attributable to
the additional depreciation charge described above.
REDUCTION IN INDEBTEDNESS
The ALPS 94-1 Class E Note has a premium interest rate attached to capture
any potential profits made by ALPS 94-1. Any losses of ALPS 94-1 are effectively
borne by the ALPS 94-1 Class E Noteholder. Accordingly an amount equivalent to
such losses, including the permanent diminution in value of aircraft, has been
released from the carrying value of the debt and credited to the statement of
operations. The decrease in the reduction in indebtedness required in the nine
months ended March 31, 1997 of $44.60 million compared with $17.80 million in
the nine months ended March 31, 1998 is primarily due to the additional
depreciation charge required in the period ended March 31, 1997.
TAXES
ALPS 94-1 had a tax charge of approximately $0.02 million in the nine
months ended March 31, 1998, compared with no charge in the nine months ended
March 31, 1997.
NET LOSS/NET PROFIT
As a result of the above factors, ALPS 94-1 had no net loss or profit in
either of the nine month periods ended March 31, 1998 and 1997.
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RESULTS OF OPERATIONS -- YEAR ENDED JUNE 30, 1997 COMPARED WITH YEAR ENDED JUNE
30, 1996
REVENUES
Revenues for each of 1997 and 1996 were approximately $102 million. As with
1996, rentals from European and Asia Pacific carriers continued to represent
more than three-quarters of ALPS 94-1's leasing revenues in 1997. In 1997, two
lessees accounted for more than 10% of ALPS 94-1's leasing revenues (Spanair:
12%; and Lan Chile: 11%). In 1996, one lessee accounted for more than 10% of
leasing revenues (Spanair: 12%).
Since it acquired the ALPS 94-1 Aircraft beginning in August 1994, ALPS
94-1's operations have been conducted in relatively favorable industry
conditions that have resulted in no requirements for bad debt provisions and
only minimal levels of downtime with no material adverse impact on leasing
revenues. There have been, however, certain significant deferral and other
restructuring transactions which, although having no material adverse impact on
revenues, adversely affected operating cash flows. These restructurings are
described below. The combined effect of these restructurings was to reduce cash
collections by $0.20 million and increase cash collections by $1.50 million in
the year ended June 30, 1997 and 1996, respectively. See "The Initial Aircraft,
Related Leases and Collateral -- The Lessees -- Payment History".
In December 1995, ALPS 94-1 agreed with one former lessee, a U.K. charter
operator, and its parent company to the early termination of the lease of an
A320-200 aircraft. Upon termination of the lease, the A320-200 was immediately
re-leased to Airtours as part of a swap transaction pursuant to which Airtours
terminated its lease of an MD83 aircraft, which was immediately re-leased to
FEAT. In the year ended June 30, 1996, these transactions resulted in a loss of
cash flows to ALPS 94-1 of $0.60 million. Partially offsetting this loss, ALPS
94-1 received cash amounts of $0.20 million from the former lessee in the year
ended June 30, 1997.
In early 1996, ALPS 94-1 agreed with one Latin American Initial Lessee to
the deferral of two months' rental and one month's maintenance payments in the
amount of $0.90 million. These amounts together with late payment interest and a
deferral fee were received in August 1996.
In December 1996, ALPS 94-1 agreed to restructuring of the Lease to
Canadian Airlines which resulted in a loss of cash flow to ALPS 94-1 of $0.90
million. These deferred amounts are now scheduled to be paid prior to the
scheduled expiration of the Lease to Canadian Airlines on January 23, 1999.
DEPRECIATION
Depreciation expense in 1997 totaled approximately $72.40 million compared
with approximately $18 million in 1996 and 1995. The increase in depreciation
expense reflects the increased depreciation rate for 1997 as a result of the
adoption by ALPS 94-1 of a new depreciation method. See "Results of Operations--
Nine Months Ended March 31, 1998 Compared With Nine Months Ended March 31, 1997"
above.
PROVISION FOR PERMANENT DIMINUTION IN AIRCRAFT VALUE
In 1996, the $12 million provision for permanent diminution in aircraft
values related to a particular aircraft type (A300-B4-200). No provision against
aircraft values was required in 1997. The appraised value of this A300-B4-200
Aircraft at June 30, 1997 was $13.70 million compared to the net book value at
that date of $9.30 million.
NET INTEREST EXPENSE
Net interest expense amounted to approximately $71 million in 1997 compared
with $73.60 million in 1996. Net interest expense reflects interest payable on
ALPS 94-1's Class A-E Notes net of amounts earned on permitted investments of
ALPS 94-1's cash balances. The decrease in net interest payable in 1997 largely
reflects a decrease in average indebtedness outstanding. Approximately 50% of
ALPS 94-1's Class A-D Notes by principal amount outstanding at June 30, 1997
bears interest at a floating rate determined by reference to
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one month LIBOR. The weighted average interest cost on ALPS 94-1's indebtedness
in 1997 was 7.40% compared with 7.50% in 1996. Average indebtedness outstanding
in 1997 was approximately $936.30 million compared with approximately $965.80
million in 1996 reflecting a combination of principal amortization on ALPS
94-1's Class A-D Notes, a $5.30 million reduction in the principal amount of the
Class E Note in accordance with its terms and a compounding of $36.40 million
and $21.90 million of accrued but unpaid interest on the Class E Note in 1997
and 1996, respectively.
Under the terms of the ALPS 94-1 Class E Note, interest accrues at the rate
of 10% per annum but only a portion of such interest ($3.10 million) has been
payable in cash in each of the years under review. Interest accrued, but not
paid in cash, is added to the principal amount of the ALPS 94-1 Class E Note.
Accordingly, approximately $14.50 million and $12.90 million in respect of
accrued and unpaid interest on the ALPS 94-1 Class E Note was capitalized during
1997 and 1996, respectively. The reduction in cash paid in respect of interest,
which amounted to $59.90 million in 1997 and $64 million in 1996, relative to
net interest expense, which amounted to $71 million in 1997 and $73.60 million
in 1996, principally reflected ALPS 94-1 Class E Note interest accrued but not
paid.
In each of the periods under review, ALPS 94-1 has not been party to any
interest rate derivative agreements.
OTHER EXPENSES
Other expenses consist of GECAS's servicer fees, insurance premiums
(political risk and directors' liability insurance), administrative agent fees,
other service provider costs and miscellaneous expenditure items. Other expenses
amounted to approximately $5.10 million in 1997 compared with $5.60 million in
1996. For a breakdown of other expenses by type, see Note 11 to the ALPS 94-1
Audited Consolidated Financial Statements. The decrease in 1997 was largely
attributable to the negotiation of a lower political risk insurance premium in
1997 and the one-time payment in 1996 to Airtours in connection with the
termination of its Lease of an MD83 Aircraft and the immediate re-lease of the
A320-200 formerly on lease to a U.K. operator. See "The Initial Aircraft,
Related Leases and Collateral -- The Lessees -- Payment History".
In each of 1997 and 1996, servicer fees payable to GECAS were approximately
$2.90 million. Substantially all of these amounts represent asset based fees
calculated as an annual percentage of agreed values of aircraft under
management.
OPERATING LOSS
In 1997 and 1996, ALPS 94-1 recorded an operating loss as a result of the
above factors. The operating loss of approximately $7.10 million in 1996
increased to approximately $46.40 million in 1997, largely as a result of the
increased depreciation charges described above.
REDUCTION IN INDEBTEDNESS
As described above, any operating losses of ALPS 94-1 are effectively borne
by the holder of the ALPS 94-1 Class E Note. The increase in the reduction in
indebtedness required in the year ended June 30, 1997 of $46.30 million compared
with $6.60 million in the year ended June 30, 1996, is primarily due to the
increased depreciation charge required in 1997.
TAXES
ALPS 94-1's tax credit of $0.14 million in 1997, compared to a charge of
approximately $0.20 million in 1996, reflected the approval by the Irish
authorities of the application of a lower tax rate for ALPS 94-1's Irish
subsidiary in respect of prior periods.
NET PROFIT/(NET LOSS)
As a result of the above factors, ALPS 94-1's net loss decreased from
approximately $0.70 million in 1996 to nil in 1997.
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RESULTS OF OPERATIONS -- YEAR ENDED JUNE 30, 1996 COMPARED WITH YEAR ENDED JUNE
30, 1995
REVENUES
The increase in revenues from rentals of the Aircraft from $86.80 million
in 1995 to $102 million in 1996 is principally due to the fact that ALPS 94-1
leased the Aircraft for a full 12 month period in fiscal year 1996 compared with
a period of 10 months and 7 days in fiscal year 1995 during which aircraft were
gradually acquired from GPA, and income therefrom recognized for U.K. GAAP
purposes, beginning on August 24, 1994.
DEPRECIATION
Depreciation expense decreased from $18.20 million in 1995 to $18 million
in 1996 due to the elimination of purchase options over two of the Aircraft
during 1996. Depreciation expense had been charged to depreciate such Aircraft
to the purchase option price on a straight line basis from the date of initial
acquisition by ALPS 94-1 in August, 1994 until the purchase option exercise
date. Such Aircraft are now depreciated in accordance with ALPS 94-1's general
depreciation method. The change in the basis of charging depreciation resulted
in a lower depreciation rate for 1996 in respect of such Aircraft and an
adjustment to depreciation expense in respect of depreciation previously charged
on such Aircraft in the period prior to the elimination of the purchase options.
However, the impact of such change in depreciation rate was offset by the fact
that ALPS 94-1 was in operation during only ten months of fiscal year 1995.
PROVISIONS FOR PERMANENT DIMINUTION IN AIRCRAFT VALUE
The directors of ALPS 94-1 determined to make a provision of $12 million
during fiscal year 1996 in respect of a permanent diminution in the book value
of ALPS 94-1's A300-B4-200 Aircraft. The directors arrived at such determination
based upon the prevailing unfavorable market conditions for this aircraft type
which conditions are believed to be likely to continue for the foreseeable
future and which also caused independent appraisers to reduce their appraisal
values of such A300-B4-200 Aircraft. After charging this provision for permanent
diminution in value, the A300-B4-200 Aircraft had a net book value of $13
million as at June 30, 1996. As of that date the average appraised base value of
this A300-B4-200 Aircraft was $15.90 million compared with the Initial Appraised
Value at March 1, 1998 of $13.30 million.
NET INTEREST EXPENSE
Net interest expense increased from $64.20 million in 1995 to $73.60
million in 1996. The increase is attributable to the net impact of the following
two factors: (1) ALPS 94-1's indebtedness was outstanding for 12 months in 1996
compared with the period from August 24, 1994 to June 30, 1995 in fiscal year
1995, and (2) the average outstanding indebtedness was reduced from fiscal year
1995 to fiscal year 1996 as a result of the repayment of principal over the
terms of both 1995 and 1996 which had the effect of reducing interest expense.
Average indebtedness outstanding was reduced from $990.80 million in 1995 to
$965.80 million in 1996. The weighted average interest cost on ALPS 94-1's
indebtedness in both 1996 and 1995 was 7.50%. Cash paid in respect of interest
increased to $64 million in 1996 from $51.10 million in 1995 , largely
reflecting the fact that ALPS 94-1's indebtedness was outstanding for the full
fiscal year 1996 compared to approximately ten months in 1995 as well as accrued
and unpaid interest on the ALPS 94-1 Class E Note.
OTHER EXPENSES
Other expenses incurred increased from $3.70 million in 1995 to $5.60
million in 1996, reflecting higher fees and other expenses as result of the
longer trading period in 1996 compared to 1995 and, especially in the case of
servicing fees, the increase in the asset value of ALPS 94-1's aircraft assets
as the acquisition of the Initial Aircraft from GPA was completed. Servicing
fees, which increased to $2.90 million in 1996 from $1.50 million in 1995, and
political risk insurance premiums, which increased to $1.20 million in 1996 from
$0.50 million in 1995, accounted for most of the increase, which was partially
offset by a decrease in legal and professional fees, cash manager's fees and
audit and tax fees from the amounts incurred in connection with the
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formation of ALPS 94-1 in 1994. See Note 11 to the ALPS 94-1 Audited
Consolidated Financial Statements for a breakdown of Other Expenses by type.
OPERATING LOSS
As a result of the above factors, ALPS 94-1 recorded a small operating
profit of $0.70 million in 1995 compared with an operating loss of $7.10 million
in 1996.
REDUCTION IN INDEBTEDNESS
As described above, any operating losses of ALPS 94-1 are effectively borne
by the holder of the ALPS 94-1 Class E Note. Accordingly, the outstanding
principal of the ALPS 94-1 Class E Note was reduced by $6.60 million for the
year ended June 30, 1996.
TAXES
ALPS 94-1's charge for taxes in 1996 of $0.20 million reflects the amount
of tax payable on the taxable profits of ALPS 94-1's Irish and Belgian leasing
subsidiaries compared with less than $0.10 million in 1995. The principal reason
for the increased tax charge in fiscal year 1996 as compared to 1995 is that the
taxable profits of the subsidiaries were lower in 1995 due to the costs of
establishing such subsidiaries and the costs of entering into lease transactions
in 1995.
NET PROFIT/(NET LOSS)
As a result of the above factors, ALPS 94-1 reported a net profit for 1995
of $0.70 million and a net loss for 1996 of $0.70 million.
DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP
The principal differences between U.S. GAAP and U.K. GAAP that have
affected the results of operations and financial position of ALPS 94-1, relate
to the accounting treatment of aircraft cost, depreciation accounting and
accounting for Class E Note liabilities.
Aircraft are stated at purchase cost under U.K. GAAP. Under U.S. GAAP
aircraft are stated at GPA's amortized cost at the date of delivery to, and
acquisition by, ALPS 94-1. The difference between the purchase cost and GPA's
amortized cost is treated as a distribution to GPA. The impact is to reduce the
net book value of aircraft and shareholders' equity under U.S. GAAP compared
with U.K. GAAP.
For the years ended June 30, 1995 and 1996, ALPS 94-1 has provided for
depreciation of its aircraft under U.K. GAAP at rates calculated to write off
the cost of the assets to ALPS 94-1 over 25 years from the date of closing of
the ALPS 94-1 initial debt offering. The rate of depreciation in the first 15
years of an aircraft's life was 2% per annum and thereafter was 7% per annum.
Under U.S. GAAP during the years 1995 and 1996, the aircraft were depreciated on
a straight line basis so as to write off the cost of the assets over a period of
25 years from the date of delivery to ALPS 94-1. Given the Initial Aircraft are
all significantly less than 15 years old, depreciation charges under U.S. GAAP
were significantly higher for fiscal year 1996 than under U.K. GAAP, thereby
decreasing net income and shareholders' equity reported under U.S. GAAP.
As discussed above, however, under "Results of Operations -- Nine Months
Ended March 31, 1998 Compared With Nine Months Ended March 31, 1997 --
Depreciation", ALPS 94-1 has adopted, with effect from and including the fiscal
year ending June 30, 1997, a revised depreciation rate under U.K. GAAP (which
will also be adopted by AerCo for periods after the Closing Date) that is
intended to write off the cost of the aircraft over 25 years from the date of
manufacture on a straight line basis to a residual value of 15% of historic
cost. In addition, the depreciation method under U.S. GAAP has changed in 1997
and aircraft are now also depreciated on a straight line basis at a rate
designed to write off the cost of the assets to a residual value of 15% over a
period of 25 years from the date of manufacture.
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In 1996 and 1997, ALPS 94-1 has recorded a reduction in the principal
balance of the ALPS 94-1 Class E Note to reflect operating losses (including any
provision for permanent diminution in aircraft value) for those years since such
losses are effectively borne by the holder of the ALPS 94-1 Class E Note. These
reductions in indebtedness increase shareholders' equity and net income (but not
operating income) under U.K. GAAP compared with U.S. GAAP. U.S. GAAP does not
allow any such reduction in indebtedness except to the extent the obligation is
legally extinguished or reduced. Under the terms of the ALPS 94-1 Class E Note,
recognition of a permanent diminution in the value of the ALPS 94-1 Aircraft
results in an equivalent reduction in the principal balance of the ALPS 94-1
Class E Note. Accordingly, under U.S. GAAP, such reductions in indebtedness are
recognized only to the extent of any permanent diminution in the value of the
Aircraft.
For a discussion of these and other differences between U.K. GAAP and U.S.
GAAP, including certain income recognition and depreciation differences relating
to ALPS 94-1's initial acquisition of the Aircraft from GPA, see Notes 20, 21,
22 and 23 to the ALPS 94-1 Audited Consolidated Financial Statements.
FINANCIAL RESOURCES AND LIQUIDITY
LIQUIDITY
ALPS 94-1's ultimate primary source of liquidity has been, and AerCo's
primary source of liquidity is and will be, rental payments made by lessees
under the lease agreements. The principal uses of cash rental payments are and
will continue to be, expenses related to the Aircraft and the servicing thereof,
corporate expenses and the payment of interest on and principal of indebtedness.
Such indebtedness consists of the Notes and the Subclass D-1 and Subclass E-1
Notes which are held by GPA.
The cash balances (including short term investments in commercial paper) at
March 31, 1998 amounted to $90.60 million compared to $87.10 million at March
31, 1997. Under the terms of its existing indebtedness, ALPS 94-1 is required to
maintain cash balances in an amount equal to (i) the amount of lessee security
deposits ($13.60 million at March 31, 1998; $18.90 million at March 31, 1997),
(ii) balance sheet provisions for maintenance ($46.50 million at March 31, 1998;
$39.70 million at March 31, 1997) and (iii) a contingency reserve amount ($18
million at March 31, 1998 and 1997). The terms of ALPS 94-1's indebtedness
restricted the use of such cash so that it was generally not available to
service debt.
Following the purchase of its share capital by AerCo, ALPS 94-1 maintains
no significant cash balances of its own and AerCo Group maintains cash balances
in an amount equal to the Liquidity Reserve Amount, which was initially $40
million plus Security Deposits of $16.15 million. The Liquidity Reserve Amount
has been determined largely based on an analysis of historical experience,
assumptions regarding AerCo Group's future experience and the frequency and cost
of certain contingencies in respect of the Initial Aircraft, and is intended to
provide liquidity for meeting the cost of maintenance obligations and
non-maintenance, aircraft-related contingencies such as removing regulatory
liens, complying with ADs, repossessing and re-leasing aircraft. In analyzing
the future impact of these costs, assumptions have been made regarding their
frequency and amount based upon historical experience. There can be no
assurance, however, that historical experience will prove to be relevant or that
actual cash received by AerCo Group will not be significantly less than that
assumed. Any significant variation may materially adversely affect AerCo's
ability to make payments of interest and principal on the Notes. See
"Description of the Notes -- The Accounts".
OPERATING ACTIVITIES
Net cash provided by ALPS 94-1's operating activities in the nine months
ended March 31, 1998 amounted to $36.10 million compared with $29.40 million in
the nine months ended March 31, 1997. The increase in cash from operations
generated in the nine month period to March 31, 1998 is primarily attributable
to the prepayment of one year's rentals in the amount of $5 million by one Latin
American lessee. In addition there was a decrease of approximately $3 million in
the amount of cash paid in respect of interest in the nine months ended March
31, 1998 to $43 million compared with $46 million in the nine months to March
31, 1997.
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Net cash provided by ALPS 94-1's operating activities in 1997 of $45.10
million was comparable with $45.50 million provided in 1996. There was however a
reduction in cash paid in respect of interest of $4.10 million in 1997 to $59.90
million compared with $64 million in 1996. This reduction was offset by a
decrease in net cash inflows from maintenance payments and disbursements. In
1996, ALPS 94-1 received maintenance payments of $10 million more than it
disbursed to lessees, compared with only $6.70 million in 1997. In addition,
cashflows in 1997 were $0.4 million lower than in 1996 as a result of an outflow
of security deposits.
Also included within cash flow from operations in the nine months ended
March 31, 1998 and 1997 is cash generated by permitted investments of ALPS
94-1's cash balances. These cash balances have been significantly reduced since
July 15, 1998 which has resulted in a corresponding reduction in cash flow
generated to AerCo. In the nine months ended March 31, 1998 and 1997, cash flow
from permitted investments amounted to approximately $3.40 million and $3.30
million, respectively.
INVESTING AND FINANCING ACTIVITIES
Cash flows used in financing activities in the nine months ended March 31,
1998 reflect the repayment of $35.70 million of principal on the ALPS 94-1
Subclass A-1 and A-2 and Class D Notes by ALPS 94-1 compared with $31.90 million
of principal repaid on the ALPS 94-1 Subclass A-1 and A-2 and Class D Notes by
ALPS 94-1 in the nine months ended March 31, 1997. ALPS 94-1 used approximately
$43.50 million of cash in 1997 and $36 million in 1996 for the same purpose.
ALPS 94-1 has recorded no cash flows used in investing activities since its
purchase of aircraft in 1995, other than $1.10 million in respect of maintenance
work carried out on the A300-B4-200 Aircraft during the nine months ended March
31, 1998.
INDEBTEDNESS
Upon the closing of the Offering, all of ALPS 94-1's existing financial
indebtedness was repaid. Following the Offering, AerCo's indebtedness consists
of the Notes, the Subclass D-1 and Subclass E-1 Notes. In order to repay the
Outstanding Principal Balance of the Subclass A-1 Notes on or before their
Expected Final Payment Date, AerCo will have to refinance such Notes through the
sale of Refinancing Notes at such time. There can be no assurance that AerCo
will be able to sell Refinancing Notes in the amount and at the time required.
YEAR 2000
As discussed above under "Risk Factors -- Aircraft Risks -- Year 2000
Risk", AerCo Group has begun a process of assessing the potential impact of the
Year 2000 issue on its operations. AerCo is currently not able to make any
estimate of the amount, if any, it may be required to spend to remediate Year
2000 problems. Such expenditures could, however, have a material adverse impact
on the ability of AerCo to make payments on the Notes.
INTEREST RATE MANAGEMENT
The leasing revenues of AerCo will be generated primarily from Rental
Payments which are either fixed or floating. In some cases, Leases carry fixed
and floating rental payments for different rental periods. In the case of
floating rate Leases, an element of the rental varies in line with changes in
LIBOR, generally six-month LIBOR. See "The Initial Aircraft, Related Leases and
Collateral -- The Leases". As of September 30, 1998, Leases with respect to
approximately 61.20% of the Initial Aircraft by Initial Appraised Value provided
for fixed rate rental payments and approximately 38.80% provided for floating
rate payments.
In general, an interest rate exposure in respect of the Notes arises to the
extent that AerCo's floating interest obligations in respect of the Notes do not
correlate to the mix of fixed and floating rate Lease rental payments for
different rental periods. This interest rate exposure can be managed through the
use of interest rate swaps and other derivative instruments. The Subclass A-1,
Subclass A-2, Subclass B-1 and Subclass C-1 Notes will bear floating rates of
interest. The mix of fixed and floating rental payments contains a higher
101
<PAGE> 103
percentage of fixed rate payments than the percentage of fixed rate interest
payments on the AerCo Notes the effect of which is compounded by the fact that
the reset periods on floating rental payments are generally longer than the
monthly reset periods on the floating rate Notes. AerCo Group enters into
interest rate swaps (the "SWAPS") in order to correlate the contracted fixed and
floating rental payments to the fixed and floating interest payment on the
Notes. Under the Swaps, AerCo Group pays fixed amounts and receives floating
amounts on a monthly basis. The Swaps amortize on the basis of the expected
paydown schedule of the Class A and B Notes, the expiry dates of the Leases
under which Lessees are contracted to make fixed rate rental payments and the
LIBOR reset dates under the floating rate Leases. At least every three months,
and in practice more frequently, the Administrative Agent seeks to enter into
additional swaps or sell at market value or unwind part or all of the Swaps and
any future swaps in order to rebalance the fixed and floating mix of interest
obligations and the fixed and floating mix of rental payments. At September 30,
1998, AerCo Group had unamortized Swaps with an aggregate notional principal
balance of $755 million.
Additional interest rate exposure will arise to the extent that Lessees
owing fixed rate Rental Payments default and interest rates have declined
between the contract date of the Lease and the date of default. This exposure
can be managed through the purchase of options on interest rate swaps
("SWAPTIONS"). However, because of the credit quality of the Lessees and the
current interest rate environment, AerCo does not currently intend to acquire
any such Swaptions. If the credit quality of the Lessees changes materially, or
if the interest rate environment warrants it, AerCo may decide to purchase such
Swaptions, or enter into other derivative transactions such as credit
derivatives as a means of managing such risk.
Through the use of interest rate swaps, and other interest rate hedging
products, it is AerCo's policy not to be adversely exposed to material movements
in interest rates. There can be no assurance, however, that AerCo's interest
rate risk management strategies will be effective in this regard. Any change to
AerCo's policy with regard to its dealing in interest rate hedging products will
be subject to periodic review by the Rating Agencies.
The Directors of AerCo are responsible for reviewing and approving the
overall interest rate management policies and transaction authority limits.
Specific hedging contracts are approved by officers of the Administrative Agent
acting within the overall policies and limits. Counterparty risk is monitored on
an ongoing basis. Counterparties are subject to the prior approval of the
Directors of AerCo. AerCo's counterparties will consist primarily of the
affiliates of major U.S. and European financial institutions (which may include
special purpose derivative vehicles) whose credit ratings are consistent with
maintaining the ratings of the most senior class of AerCo Notes then
outstanding.
102
<PAGE> 104
UNAUDITED PRO-FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro-forma combined financial information set forth below (the
"UNAUDITED PRO-FORMA COMBINED FINANCIAL INFORMATION") reflects pro-forma
adjustments made to the ALPS 94-1 Consolidated Financial Statements and the
financial statements for the Nine Transferring Aircraft (on a combined basis)
for the year ended June 30, 1997 and the nine months ended March 31, 1998
included elsewhere in this Prospectus that are intended to give effect to (i)
the issuance of the AerCo Notes, (ii) the refinancing of the existing financial
indebtedness of ALPS 94-1, (iii) the sale by ALPS 94-1 of the Boeing 767-300ER
aircraft to GPA and (iv) the other transactions described in "Summary --
Transaction Overview" and "The Initial Aircraft, Related Leases and the
Collateral -- The Refinancing of ALPS 94-1 and Acquisition of the Transferring
Companies" (collectively, the "TRANSACTION"). As described below, such
adjustments relate to, among other things, historical indebtedness, net interest
expense, selling, general and administrative expenses and tax amounts. The
Unaudited Pro-Forma Combined Financial Information is presented on the basis
that the Initial Aircraft have been operated separately from ALPS 94-1 and GPA
for all periods presented.
The Unaudited Pro-Forma Combined Financial Information has been prepared in
accordance with U.K. GAAP as set forth in the ALPS 94-1 Audited Consolidated
Financial Statements and the audited financial statements for the Nine
Transferring Aircraft for the year ended June 30, 1997. U.K. GAAP differ in
certain respects from U.S. GAAP. A reconciliation from U.K. GAAP to U.S. GAAP of
net assets/(liabilities) and net loss for the year ended June 30, 1997 and the
nine months ended March 31, 1998 is presented below.
The Unaudited Pro-Forma Combined Financial Information does not purport to
demonstrate what the Company's results of operations or net assets would have
actually been had the Transaction been completed on July 1, 1996 or March 31,
1998, respectively or to predict results of operations or net assets for any
future period or at any future date.
The unaudited pro-forma combined statements of operations for the year
ended June 30, 1997 and the nine months ended March 31, 1998 set forth below
gives pro-forma effect to the Transaction as if the Transaction had occurred on
July 1, 1996.
UNAUDITED PRO-FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30,
1997 (IN MILLIONS)
<TABLE>
<CAPTION>
AUDITED HISTORICAL RESULTS
--------------------------
NINE
TRANSFERRING
ALPS 94-1 AIRCRAFT SUB-TOTAL IMPACT OF NOTE 1 COMBINED
30-JUN-97 30-JUN-97 30-JUN-97 TRANSACTION(1) REFERENCE 30-JUN-97
---------- ------------- --------- -------------- --------- ---------
$M $M $M $M $M
<S> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft leasing............. 102 22 124 (7) (i) 117
Expenses
Depreciation................. (38) (9) (47) 5 (i)(ii) (42)
Additional depreciation...... (34) -- (34) 34 (i)(ii) --
Provision for permanent
diminution in aircraft
value..................... -- (4) (4) 4 (ii) --
Net interest expense......... (71) (10) (81) 2 (iii) (79)
Other expenses............... (5) (9) (14) (1) (iv) (15)
----- ----- ----- ----- -----
Total expenses................. (148) (32) (180) 44 (136)
----- ----- ----- ----- -----
Net income/(loss) before tax... (46) (10) (56) 37 (19)
Benefit for taxes............ -- 1 1 1 (v) 2
----- ----- ----- ----- -----
Net income/(loss) before
reduction in indebtedness.... (46) (9) (55) 38 (17)
Reduction in indebtedness.... 46 -- 46 (29) (vi) 17
----- ----- ----- ----- -----
Net income/(loss).............. -- (9) (9) 9 --
===== ===== ===== ===== =====
</TABLE>
103
<PAGE> 105
UNAUDITED PRO-FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
MARCH 31, 1998 (IN MILLIONS)
<TABLE>
<CAPTION>
UNAUDITED HISTORICAL RESULTS
-----------------------------
NINE
TRANSFERRING
ALPS 94-1 AIRCRAFT SUB-TOTAL IMPACT OF NOTE 1 COMBINED
31-MAR-98 31-MAR-98 31-MAR-98 TRANSACTION(1) REFERENCE 31-MAR-98
--------- ------------ --------- -------------- --------- ---------
$M $M $M $M $M
<S> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft leasing.......... 76 16 92 (6) (i) 86
Expenses
Depreciation.............. (29) (7) (36) 4 (i)(ii) (32)
Provision for permanent
diminution in aircraft
value.................. (9) -- (9) 9 (ii) --
Net interest expense...... (52) (6) (58) (3) (iii) (61)
Other expenses............ (4) (5) (9) -- (iv) (9)
----- ----- ----- ----- -----
Total Expenses.............. (94) (18) (112) 10 (102)
----- ----- ----- ----- -----
Net income/(loss) before
tax....................... (18) (2) (20) 4 (16)
Benefit for taxes......... -- 1 1 -- (v) 1
----- ----- ----- ----- -----
Net income/(loss) before
reduction in
indebtedness.............. (18) (1) (19) 4 (15)
Reduction in
indebtedness........... 18 -- 18 (3) (vi) 15
----- ----- ----- ----- -----
Net income/(loss)........... -- (1) (1) 1 --
===== ===== ===== ===== =====
</TABLE>
- ---------------
104
<PAGE> 106
(1) Represents the adjustments to the combined historical statements of
operations of ALPS 94-1 and the Nine Transferring Aircraft to account for
the Transaction as if it had occurred on July 1, 1996, including:
(i) Leasing revenue and depreciation (including additional depreciation)
have been adjusted to reflect the sale of one B767-300ER owned by
ALPS 94-1 (in the period between pricing and closing of the Offering)
as if the sale had occurred on July 1, 1996. The resulting reductions
to the aircraft leasing revenue were $7 million in the year ended
June 30, 1997 and $6 million in the nine months ended March 31, 1998
and to the depreciation charges were $5 million and $2 million,
respectively.
(ii) The unaudited pro-forma combined statement of operations reflects
depreciation and provision for permanent diminution in the value of
the Initial Aircraft as if the Transaction had occurred on July 1,
1996 at a cost equivalent to the Initial Appraised Value of the
Initial Aircraft ($952 million). The resulting adjustments to the
depreciation charge (including additional depreciation) were a
reduction of (a) $34 million in the year ended June 30, 1997, (b) $2
million in the nine months ended March 31, 1998 and (c) with respect
to the provision for permanent diminution in the value of the Initial
Aircraft, a reduction of $4 million for the year ended June 30, 1997
and $9 million for the nine months ended March 31, 1998.
(iii) The unaudited pro-forma combined statement of operations reflects net
interest expense (including interest on the Subclass E-1 Notes) which
would have been incurred had the Transaction occurred on July 1, 1996
and had the AerCo Notes been issued on that date bearing interest at
the assumed rates set forth in "Description of the Notes --
Assumptions -- Interest, Expense and Operating Cost Assumptions".
Deferred transaction costs of $2 million for the year ended June 30,
1997 and $1 million for the nine months ended March 31, 1998 are also
charged in net interest expense.
(iv) As part of the Transaction, AerCo entered into the Servicing
Agreement, the Cash Management Agreement and the Administrative Agency
Agreement. The unaudited pro-forma combined statement of operations
reflects the assumed fees payable under those agreements as calculated
in accordance with the relevant assumption set forth in "Description
of the Notes -- Assumptions -- Interest, Expense and Operating Cost
Assumptions".
(v) The unaudited pro-forma combined statement of operations reflects the
taxation effect of the above pro-forma adjustments.
(vi) The reduction in indebtedness for each period reflects the reduction
which would have occurred as a consequence of the pro-forma
adjustments described above.
105
<PAGE> 107
The unaudited pro-forma combined statement of net assets set forth below
gives pro-forma effect to the Transaction as if the Transaction had occurred on
March 31, 1998.
UNAUDITED PRO-FORMA COMBINED STATEMENT OF NET ASSETS AT MARCH 31, 1998
<TABLE>
<CAPTION>
UNAUDITED
NINE
UNAUDITED TRANSFERRING
ALPS 94-1 AIRCRAFT SUB-TOTAL IMPACT OF NOTE 2 COMBINED
31-MAR-98 31-MAR-98 31-MAR-98 TRANSACTION(2) REFERENCE 31-MAR-98
--------- ------------ --------- -------------- --------- ---------
$M $M $M $M $M
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash....................... 91 -- 91 (35) (ii) 56
Due from GPA Group plc..... -- 27 27 (27) (iii) --
Accounts receivable........ 2 1 3 (1) (iv) 2
----- ----- ----- ----- -----
Total current assets......... 93 28 121 (63) 58
Fixed assets
Aircraft................... 819 170 989 (37) (i) 952
----- ----- ----- ----- -----
Total assets................. 912 198 1,110 (100) 1,010
===== ===== ===== ===== =====
Liabilities
Accrued expenses & other
liabilities............. 21 17 38 (12) (iv) 26
Indebtedness............... 709 54 763 29 (v) 792
Indebtedness to GPA........ 122 53 175 (49) (v) 126
Provision for
maintenance............. 46 6 52 (2) (vi) 50
Security deposits.......... 14 2 16 -- 16
----- ----- ----- ----- -----
Total liabilities............ 912 132 1,044 (34) 1,010
Net assets................... -- 66 66 (66) --
----- ----- ----- ----- -----
912 198 1,110 (100) 1,010
===== ===== ===== ===== =====
</TABLE>
- ---------------
(2) Represents the adjustments to the unaudited pro-forma combined balance sheet
and statement of net assets of ALPS 94-1 and the Nine Transferring Aircraft
to account for the Transaction and as if it had occurred on March 31, 1998.
(i) Aircraft has been adjusted by $37 million to reflect the reduction in
the fleet of $67 million and the inclusion of all remaining aircraft
at the Initial Appraised Value of $952 million.
(ii) The expected cash balances to be held by AerCo Group on completion of
the Transaction are $56 million equal to the initial Liquidity
Reserve Amount of $40 million and security deposits of $16 million
(as of March 31, 1998). The reduction in the cash balance reflects
the net cash outflow on financing the Transaction.
(iii) The receivable due from GPA of $27 million corresponds to a portion
of the indebtedness of the relevant Transferring Aircraft that is to
be repaid to GPA Group on completion of the Transaction.
(iv) Accounts receivable and accrued expenses and other liabilities reflect
only the assets and liabilities related to the Initial Aircraft on
completion of the Transaction.
(v) Adjustments have been made to reflect the settlement of the existing
indebtedness and the issuance of the AerCo Notes. The resulting
pro-forma indebtedness of $792 million at March 31 reflects the new
debt profile of the Notes net of capitalized funding costs of $8
million. Indebtedness to GPA of $126 million reflects Subclass D-1 and
Subclass E-1 Notes of $192 million as reduced by the excess of net
assets over net liabilities on completion of the Transaction.
(vi) Maintenance has been adjusted by $2 million to reflect the sale (in
the period between pricing and closing of the Offering) of the Boeing
767-300ER aircraft owned by ALPS 94-1 to GPA.
106
<PAGE> 108
RECONCILIATION OF PRO-FORMA COMBINED FINANCIAL INFORMATION AS STATED IN
ACCORDANCE WITH U.K. GAAP TO PRO-FORMA COMBINED FINANCIAL INFORMATION IN
ACCORDANCE WITH U.S. GAAP
The unaudited pro-forma combined financial information is prepared in
accordance with U.K. GAAP which differs in certain significant respects from
U.S. GAAP. The principal differences are set out below:
UNAUDITED PRO-FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30,
1997
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP
COMBINED U.S. GAAP NOTE 3 COMBINED
JUNE 30, 1997 ADJUSTMENT(3) REFERENCE JUNE 30, 1997
------------- ------------- --------- -------------
$M $M $M
<S> <C> <C> <C> <C>
Revenues
Aircraft leasing...................... 117 -- 117
Expenses
Depreciation.......................... (42) (1) (i) (43)
Net interest expense.................. (79) -- (79)
Other expenses........................ (15) -- (15)
----- ----- -----
Total expenses.......................... (136) (1) (137)
===== ===== =====
Net loss before tax..................... (19) (1) (20)
Benefit for taxes..................... 2 -- 2
----- ----- -----
Net loss before reduction in
indebtedness.......................... (17) (1) (18)
Reduction in indebtedness............. 17 (17) (ii) --
----- ----- -----
Net loss for the year................... -- (18) (18)
===== ===== =====
</TABLE>
UNAUDITED PRO-FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
MARCH 31, 1998
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP
COMBINED U.S. GAAP NOTE 3 COMBINED
MARCH 31, 1998 ADJUSTMENT(3) REFERENCE MARCH 31, 1998
-------------- ------------- --------- --------------
$M $M $M
<S> <C> <C> <C> <C>
Revenues
Aircraft leasing.................... 86 -- 86
Expenses
Depreciation........................ (32) 2 (i) (30)
Net interest expense................ (61) -- (61)
Other expenses...................... (9) -- (9)
----- ----- -----
Total expenses........................ (102) 2 (100)
===== ===== =====
Net income/(loss) before tax.......... (16) 2 (14)
Benefit for taxes................... 1 -- 1
----- ----- -----
Net income/(loss) before reduction in
indebtedness........................ (15) 2 (13)
Reduction in indebtedness........... 15 (15) (ii) --
----- ----- -----
Net loss for the period............... -- (13) (13)
===== ===== =====
</TABLE>
107
<PAGE> 109
UNAUDITED PRO-FORMA COMBINED STATEMENT OF NET ASSETS/(NET LIABILITIES) AT MARCH
31, 1998
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP
COMBINED U.S. GAAP NOTE 3 COMBINED
MARCH 31, 1998 ADJUSTMENT(3) REFERENCE MARCH 31, 1998
-------------- ------------- --------- --------------
$M $M $M
<S> <C> <C> <C> <C>
Current assets
Cash................................ 56 -- 56
Accounts receivable................. 2 -- 2
Deferred Financing Costs............ -- 8 (iii) 8
----- ----- -----
Total current assets.................. 58 8 66
Fixed assets
Aircraft............................ 952 (131) (i) 821
----- ----- -----
Total assets.......................... 1,010 (123) 887
===== ===== =====
Liabilities
Accrued expenses and other
liabilities...................... 26 -- 26
Indebtedness........................ 792 8 (iii) 800
Indebtedness to GPA................. 126 66 (ii) 192
Provision for maintenance........... 50 -- 50
Security deposits................... 16 -- 16
----- ----- -----
Total liabilities..................... 1,010 74 1,084
Net assets/(net liabilities).......... -- (197) (197)
----- ----- -----
1,010 (123) 887
===== ===== =====
</TABLE>
- ---------------
(3) The U.S. GAAP adjustments in the Unaudited Pro-Forma Combined Financial
Information relate primarily to the accounting treatment of the following:
(i) Under U.K. GAAP, the Initial Aircraft are included at their Appraised
Value at July 1, 1996 and depreciated from that date. The accounting
treatment under U.S. GAAP would be to record the aircraft at
Amortized Cost. The difference between the Initial Appraised Value
and the Amortized Cost is deemed a distribution to GPA which results
in a negative charge to net assets/(net liabilities).
(ii) Under U.K. GAAP, losses incurred are reflected as a reduction in
Subclass E-1 Note indebtedness. Under U.S. GAAP, the debt remains
until such time as the obligation is extinguished.
(iii) Under U.K. GAAP the capitalized funding costs of completing the
Transaction are disclosed as a reduction against the Class A-C Note
indebtedness. Under U.S. GAAP the capitalized funding costs are
disclosed separately as deferred financing costs.
108
<PAGE> 110
SELECTED RATIOS(1)(2)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
------------- -----------------
<S> <C> <C>
U.K. GAAP
Ratio of combined earnings to combined fixed charges(3)..... 0.975 0.984
U.S. GAAP
Ratio of combined earnings to combined fixed charges(3)..... 0.747 0.770
</TABLE>
- ---------------
(1) For a discussion of the differences between U.S. GAAP and U.K. GAAP in
respect of the unaudited pro-forma combined financial information, see
reconciliation of income as stated in accordance with U.K. GAAP to income
in accordance with U.S. GAAP set forth above.
(2) Earnings include pretax income from continuing operations plus fixed
charges. Fixed charges are the total of (i) interest, whether expensed or
capitalized, (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized and (iii)
such portion of rental expense as can be demonstrated to be representative
of the interest factor in the particular expense.
(3) Ratio of one indicates that earnings are inadequate to cover fixed charges.
The amount by which fixed charges exceeded earnings for the year ended June
30, 1997 and the nine months ended March 31, 1998 was (i) $2 million and $1
million, respectively, under U.K. GAAP and (ii) $20 million and $12
million, respectively, under U.S. GAAP.
109
<PAGE> 111
DESCRIPTION OF THE NOTES
The following summary is qualified in its entirety by reference to the
Indenture, the Cash Management Agreement, the Reference Agency Agreement, the
Administrative Agency Agreement, the Notes, the Secretarial Services Agreement,
the Security Trust Agreement, the Servicing Agreement and the Stock Purchase
Agreement, each dated as of July 15, 1998, and the Swap Agreements
(collectively, the "RELATED DOCUMENTS "). References to "Related Documents"
shall also include where the context requires, any Refinancing Notes and any
Additional Notes and guarantees, asset or stock purchase agreements, swap or
other interest rate agreements or other agreement entered into by any member of
AerCo Group in connection with any acquisition of Additional Aircraft and
issuance of Additional Notes.
GENERAL
The Old Notes were issued pursuant to the Indenture, a copy of which has
been filed as an exhibit to the Registration Statement, of which this Prospectus
is a part. The New Notes will also be issued pursuant to the Indenture, which
will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), upon effectiveness of the Registration Statement. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act.
The terms of the New Notes will be identical in all material respects to
the Old Notes, except that the offer of the New Notes will have been registered
under the Securities Act and, therefore, the New Notes will not be subject to
certain transfer restrictions, registration rights and certain provisions
providing for an increase in the interest rate on the Notes under certain
circumstances set out in the Registration Rights Agreement.
The New Notes, composed of Subclass A-1, Subclass A-2, Subclass B-1 and
Subclass C-1 Notes, will be issued in fully registered form only. The New Notes
will be issued in minimum denominations of $100,000 and integral multiples of
$1,000 in excess thereof.
The Notes are solely an obligation of AerCo and are not secured by the
Aircraft and do not represent obligations of any Lessee, GPA, the Trustee,
Babcock & Brown, or any affiliate of any of the foregoing other than AerCo.
The Indenture provides that the Company will pay the fees and expenses of
the Trustee and further provides that the Trustee will be entitled to
indemnification by the Company for, and will be held harmless against, any loss,
liability or expenses incurred by the Trustee (other than through its own wilful
misconduct, bad faith or negligence or by reason of a breach of any of its
representations or warranties set forth in the Indenture).
The Trustee may resign with respect to any subclass of AerCo Notes at any
time upon at least 90 days' prior written notice, in which event the Company
will be obligated to appoint a successor trustee for such subclass of AerCo
Notes. Noteholders of each subclass may have divergent or conflicting interests
from the Noteholders of other subclasses. As a result, the occurrence of certain
circumstances, including the occurrence of an Event of Default, may give rise to
a potential conflict of interest on the part of the Trustee in respect of more
than one subclass of Notes, upon which event the Trustee may be compelled to
resign as trustee in respect of more than one subclass of Notes. If the Trustee
ceases to be eligible to continue as trustee with respect to any subclass of
AerCo Notes, becomes incapable of acting as Trustee or becomes insolvent, the
Company may remove the Trustee, or any AerCo Noteholder of the applicable
subclass who has been a AerCo Noteholder in good faith for at least six months
may, on behalf of itself and all other AerCo Noteholders of the same subclass,
petition any court of competent jurisdiction for the removal of such Trustee and
the appointment of a successor trustee. In addition, holders evidencing not less
than a majority in aggregate Outstanding Principal Balance of any subclass of
AerCo Notes may at any time remove the Trustee with respect to such Subclass
without cause by delivering written notice of such removal in writing to the
Company, the Cash Manager and the Trustee. Any resignation or removal of the
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee. Pursuant to such
resignation, removal and successor trustee provisions, it is possible that a
different trustee could be appointed to act as the successor trustee with
respect to each subclass of AerCo Notes. All references
110
<PAGE> 112
in this Prospectus to the "TRUSTEE" should be read to include the Trustee and
any successor trustee appointed in the event of such a resignation or removal.
RATINGS
Each subclass of Notes is rated as of the date of this Prospectus as
follows:
<TABLE>
<CAPTION>
RATING AGENCIES
-----------------------------------
MOODY'S STANDARD & POOR'S DCR
------- ----------------- ---
<S> <C> <C> <C>
Subclass A-1 Notes....................................... Aa2 AA AA
Subclass A-2 Notes....................................... Aa2 AA AA
Subclass B-1 Notes....................................... A2 A A
Subclass C-1 Notes....................................... -- BBB BBB
</TABLE>
The ratings of the Notes address the likelihood of the timely payment of
interest and the ultimate payment of principal and premium, if any, on the
Notes. Payments of principal and interest on all subclasses of the Notes will be
payable only after any Expenses and certain other amounts have been paid in full
or provided for in full and only to the extent that Available Collections are
sufficient therefor in accordance with the priority of payments established for
the Notes. In addition, the Company's ability to pay Step-Up Interest or
principal in full on any subclass of the Notes on the Expected Final Payment
Date (or on any other date prior to the Final Maturity Date) has not been rated
by any of the Rating Agencies. The ratings assigned to the Notes do not address
the imposition of any withholding tax on any payments under the Leases, the
Notes or otherwise. See "Risk Factors -- Certain Income Tax Considerations",
"Risks Factors -- Lease Risks" and "Tax Considerations".
A rating is not a recommendation to buy, sell or hold Notes inasmuch as
such ratings do not comment as to market price or suitability for a particular
investor and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. In the event that the rating initially assigned to any
subclass of the Notes is subsequently lowered, suspended or withdrawn for any
reason, no person or entity is obliged to provide any additional support or
credit enhancement with respect to the Notes.
FORM
GLOBAL NOTES
The New Notes will be represented by Global Notes, each of which will be
issued in bearer form only (the "GLOBAL NOTES"). The Global Notes will be
deposited with the Book-Entry Depositary. Pursuant to the Deposit Agreement, the
Book-Entry Depositary will issue to DTC or its nominee CDIs for each subclass of
the New Notes, representing the principal amount of the Global Note for such
subclass. Book-Entry Interests in such CDIs will therefore be shown only on, and
transfers of Book-Entry Interests will be effected only through, records
maintained in book-entry form by DTC or its nominee and its participants
(including Euroclear and Cedel). See "Book-Entry Registration, Global Clearance
and Settlement" for a description of certain provisions of the Deposit Agreement
and the procedures of DTC, Cedel Bank and Euroclear in respect of book-entry
registration and clearance and settlement of transfers of, and distribution of
payments in respect of, the Book-Entry Interests.
DEFINITIVE NOTES
Under the terms of the Indenture and the Deposit Agreement, owners of
Book-Entry Interests will receive definitive Notes in registered form without
interest coupons ("DEFINITIVE NOTES") in exchange for their Book-Entry Interests
corresponding to Notes of a particular subclass only if (i) DTC notifies the
Book-Entry Depositary that it is no longer willing or able to properly discharge
its responsibilities as depositary with respect to the CDIs and a successor
depositary is not appointed by the Book-Entry Depositary at the request of the
Company within 90 days of such notice, (ii) the Company advises the Trustee in
writing that the Book-Entry Depositary is no longer willing or able to properly
discharge its responsibilities as Book-Entry Depositary
111
<PAGE> 113
and the Trustee or the Company is unable to appoint a qualified successor within
90 days of such notice or (iii) after the occurrence of an Event of Default with
respect to any class of Notes, owners of Book-Entry Interests corresponding to
Notes of a subclass within such class representing an aggregate of not less than
51% of the aggregate outstanding principal amount of Notes of such subclass
advise the Company, the Trustee, the Book-Entry Depositary and DTC through DTC
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in such owners' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all owners of Book-Entry
Interests corresponding to the Notes of each affected subclass, through DTC, of
the availability of Definitive Notes of such subclass. Upon transfer of the
relevant Book-Entry Interests to the account of the Book-Entry Depositary at
DTC, the Book-Entry Depositary will (i) promptly deliver the corresponding
Global Note or Global Notes of such subclass to the Trustee and request that the
Trustee exchange any part of the Global Note or Global Notes for Definitive
Notes registered in the names specified by DTC and (ii) instruct DTC to cancel
the Book-Entry Interests surrendered or transferred to the account of the
Book-Entry Depositary at DTC.
Holders should be aware that, under current Irish tax law, upon the
issuance to a Holder of a Definitive Note, such Holder may become subject to
Irish income tax (currently 24%) to be withheld on any payments of interest on
the Definitive Notes as set forth under "Tax Considerations -- Irish Tax
Considerations". If Definitive Notes are issued, AerCo will have no obligation
to pay to any Holder any additional amounts in respect of any such Irish or
other tax. See "Payment of Principal and Interest -- Redemption -- Redemption
for Taxation Purposes".
Distributions of principal of, and interest and premium, if any, on any
Definitive Notes will thereafter be made by the Trustee or a paying agent in
accordance with the procedures set forth in the Indenture directly to holders of
Definitive Notes in whose names the Definitive Notes were registered at the
close of business on the Record Date. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Trustee. The final payment on any such Definitive Notes, however, will be
made only upon presentation and surrender of such Definitive Notes at the office
or agency, including the Luxembourg Paying Agent, specified in the notice of
final distribution to Noteholders.
Definitive Notes will be freely transferable and exchangeable for
Definitive Notes of the same subclass at the office of the Trustee or the
offices of the co-transfer agent and the co-registrar in Luxembourg upon
compliance with the requirements set forth in the Indenture. No service charge
will be imposed for any registration of transfer or exchange, but payment of a
sum sufficient to cover any tax or other governmental charge may be required.
A Note that is mutilated, destroyed, lost or stolen may be exchanged or
replaced, as the case may be, at the offices of the Trustee or of the
co-transfer agent and the co-registrar in Luxembourg upon presentation of the
Note or satisfactory evidence of destruction, loss or theft thereof to the
Trustee or such co-transfer agent and co-registrar. An indemnity satisfactory to
the Trustee or such co-transfer agent and co-registrar may be required at the
expense of the Noteholder before a replacement Note will be issued. The
Noteholder will be required to pay any tax or other governmental charge imposed
in connection with such exchange or replacement and any other expenses
(including the fees and expenses of the Trustee and the co-transfer agent and
co-registrar) connected therewith.
REGISTRATION REQUIREMENTS
Holders of New Notes are not generally entitled to any registration rights
with respect to such New Notes. Pursuant to the Registration Rights Agreement,
AerCo has filed with the Commission the Registration Statement with respect to
the Exchange Offer to exchange the Old Notes for New Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit AerCo to effect the Exchange Offer, or under certain other
circumstances, AerCo shall, at AerCo's cost, use its best efforts to cause to
become effective a shelf registration statement (the "SHELF REGISTRATION
STATEMENT") with respect to resales of the Notes and to keep such registration
statement effective until July 15, 2000 or until all Notes
112
<PAGE> 114
have been sold thereunder. AerCo shall, in the event of such a shelf
registration, provide to each Noteholder copies of the prospectus, notifying
each Noteholder when the Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit resales of
the Notes. A Noteholder that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling security holder in
the related prospectus and to deliver a prospectus to purchasers. In addition,
such Noteholder will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
Noteholder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated, or a Shelf
Registration Statement is not declared effective on or prior to April 12, 1999,
then, from and after such date, the applicable annual interest rate borne by
each subclass of the Notes shall be increased by 0.50% per annum over the rate
then applicable to such subclass of Notes in accordance with the rate shown on
the cover page of this Prospectus until the Exchange Offer is consummated or the
Shelf Registration Statement is declared effective. So long as the Notes are
listed on the Luxembourg Stock Exchange, any such increase in the interest rates
applicable to any subclass of Notes shall be published in accordance with the
notification requirements specified in the Indenture. See "-- Notices to
Noteholders".
PAYMENTS AND DISTRIBUTIONS
On each Payment Date, payments of interest, principal and, in certain
limited circumstances described herein, premium, on each subclass of Notes will
be determined from time to time in accordance with the provisions described
below under "-- Priority of Payments".
On each Payment Date, the Trustee will pay (or will instruct a paying agent
appointed in Luxembourg to pay) to the Noteholders all payments of interest,
principal and premium, if any, on the Notes of each subclass, the receipt of
which is confirmed by such Trustee or paying agent by 1:00 p.m. (New York time)
on such Payment Date or, if such receipt is confirmed after 1:00 p.m. (New York
time) on such Payment Date or on any Business Day thereafter, then on the
Business Day following the Business Day on which payment is received. Each
payment on any Payment Date other than the Final Payment Date with respect to
any subclass of Notes will be made by the Trustee or paying agent to the
Noteholders as of the Record Date immediately preceding such Payment Date. The
final distribution with respect to any Note, however, will be made only upon
presentation and surrender of such Note by the Noteholder or its agent
(including any holder in street name) at the office or agency of the Trustee or
paying agent with respect to such final payment. So long as the Notes are listed
on the Luxembourg Stock Exchange, the Company shall appoint and maintain a
paying agent in Luxembourg. For a description of payments to owners of
Book-Entry Interests corresponding to the Notes, see "Book-Entry Registration,
Global Clearance and Settlement".
The following table sets forth the Expected Weighted Average Life, the
Expected Final Payment Date and the Final Maturity Date for each subclass of
Notes. The Expected Final Payment Date for each subclass of Notes represents the
date on which the final payment of principal of and interest on such subclass of
Notes is expected to be made based on the Assumptions. The Final Maturity Date
for each subclass of Notes represents the date on which all principal not
previously paid, if any, is due and payable. The actual final payment date for
each subclass of Notes is likely to occur earlier or later than the Expected
Final Payment Date as a result of numerous factors, including that the
Assumptions are unlikely to correspond to actual experience. For a description
of certain Redemption events and other factors which could cause the Notes to be
paid prior to the Expected Final Payment Date, see "-- Redemption". In addition,
Notes may be repaid later than the Expected Final Payment Date as a result of,
among other things, increased levels of Aircraft downtime, reduced Rental
Payments and early termination of Leases. See "Risk Factors -- Risks Relating to
Payments on the Notes". Holders of each of the Subclass A-1 Notes will receive
payments of Step-Up Interest in respect of any amounts Outstanding on and after
the Expected Final Payment Date for such subclass.
113
<PAGE> 115
EXPECTED WEIGHTED AVERAGE LIFE, EXPECTED FINAL PAYMENT DATES
AND FINAL MATURITY DATES OF THE NOTES
<TABLE>
<CAPTION>
EXPECTED
WEIGHTED
AVERAGE LIFE EXPECTED FINAL
SUBCLASS OF NOTES IN YEARS PAYMENT DATE FINAL MATURITY DATE
- ----------------- ------------ ----------------- -------------------
<S> <C> <C> <C>
Subclass A-1............................ 2.0 July 15, 2000 July 15, 2023
Subclass A-2............................ 3.8 December 15, 2005 July 15, 2023
Subclass B-1............................ 7.7 July 15, 2013 July 15, 2023
Subclass C-1............................ 10.5 July 15, 2013 July 15, 2023
</TABLE>
At such time, if any, as the Notes of any subclass are issued in the form
of Definitive Notes, payments from the applicable Note Account on a Payment Date
will be made by check mailed to each Noteholder of a Definitive Note on the
applicable Record Date at its address appearing on the register maintained with
respect to such subclass. Alternatively, upon application in writing to the
Trustee, not later than the applicable Record Date, by a Noteholder of one or
more Definitive Notes of such subclass having an aggregate principal amount of
not less than $1,000,000, any such distribution will be made by wire transfer to
an account designated by such Noteholder at a financial institution in New York,
New York; provided that the final distribution for each subclass of Notes will
be made only upon presentation and surrender of the Definitive Notes of such
subclass by the Noteholder or its agent (including any holder in street name) at
the office or agency of the Trustee specified in the notice of such final
distribution given by such Trustee. Such Trustee will mail such notice of the
final distribution of such subclass to each of the Noteholders of such subclass,
specifying the date and amount of such final distribution.
If any Payment Date or other date specified herein for distribution of any
payments to Noteholders is not a Business Day, distributions scheduled to be
made on such Payment Date or other date may be made on the next succeeding
Business Day.
ASSUMPTIONS
The Assumptions and tables set forth below represent possible revenue
scenarios designed to illustrate certain payment characteristics of the Notes
and are not intended to be projections, estimates, forecasts or forward-looking
statements. The tables have been developed by fixing certain of the Assumptions
and by varying other Assumptions and certain other factors which affect AerCo's
revenues and costs and expenses. The Assumptions do not represent a complete
list of factors which may affect the revenues and costs and expenses of AerCo,
but rather indicate those factors which are likely to significantly affect the
performance of AerCo in future years. In addition, the range of possible
outcomes with respect to each Assumption and the combinations of Assumptions set
forth above do not indicate a comprehensive set of possible results for AerCo.
In particular, more severe stresses may lead to payments of principal on the
Notes being delayed or decreased or, in certain cases, an Event of Default.
Accordingly, investors should understand that the following tables are
intended merely to illustrate certain, but not all, payment sensitivities of the
Notes to certain, but not all, market and economic stresses. AerCo does not
intend to update or revise the information presented to reflect changes
occurring after May 15, 1998. As of the date of this Prospectus, however, AerCo
is not aware of events or circumstances since May 15, 1998 that would cause the
Assumptions to be unreliable. It is highly likely that actual experience will
vary from the Assumptions and the possible revenue scenarios represented by the
tables. The principal factors that could cause AerCo Group's actual revenues to
differ materially from such scenarios are the Stresses and certain "Risk
Factors" as set out herein. See "Risk Factors".
114
<PAGE> 116
REVENUE ASSUMPTIONS
(i) One month LIBOR remains constant at 5.75% per annum and the U.S.
Treasury Rate used for premium calculations is 5.5%.
(ii) Six month LIBOR (the most common reference rate for the floating rate
Leases) remains constant at 5.75% per annum.
(iii) Funds on deposit in the Collection Account and any other cash
balances held by AerCo Group earn interest at a rate of one month LIBOR.
(iv) Aircraft coming off-lease in the future are assumed to be re-leased at
a monthly rate that is a function of the current contracted monthly lease rate
as of May 15, 1998 for, and age of, such Aircraft. Lease rates are assumed to
remain constant at the monthly lease rate for the first 60% of an Aircraft's
expected useful life, thereafter declining on a straight-line basis to 40% of
such lease rate over the remainder of its expected useful life (the "FUTURE
LEASE RATE"). Any Aircraft which is currently subject to an LOI is assumed to be
leased based upon the provisions in such LOI. All types of Initial Aircraft in
the Portfolio are assumed to have an expected useful life (the "EXPECTED USEFUL
LIFE") of 25 years, except that each of the two DC8-71F Aircraft in the
Portfolio are assumed to have an Expected Useful Life of 15 years from the date
of its conversion to freighter service.
(v) Initial Aircraft are assumed to have no scrap value at the end of
their Expected Useful Life.
(vi) All contracted and assumed future payments in respect of the Leases
are timely received by AerCo Group on the due date therefor.
(vii) Future Lease terms are assumed to be five years.
(viii) No new Purchase Options with respect to the Aircraft are granted to
Lessees by AerCo Group and no existing Purchase Options are exercised.
(ix) No new Lease termination or extension options are granted to Lessees
by AerCo Group and no existing termination or extension options are exercised.
(x) AerCo Group sells no Aircraft.
(xi) AerCo Group acquires no Additional Aircraft.
(xii) AerCo Group does not enter into any Permitted Tax-Related
Dispositions.
The above Assumptions (i) to (xii) are used to determine the assumed gross
monthly revenue to AerCo Group before interest payments, principal payments,
Swap Payments, selling, general and administrative expenses and before lost
rental payments and expenditures required due to Aircraft downtime, Lessee
defaults, aircraft repossession costs, bad debts and operating costs incurred in
the ordinary course of the operating lease business ("GROSS REVENUE"). See
Appendix 3 to this Prospectus for further data regarding Gross Revenue.
Interest, Expense and Operating Cost Assumptions:
(xiii) AerCo Notes are issued in amounts and with coupons as set forth in
the following table and payments are made in accordance with the order of
priorities set forth under "Description of the Notes -- Payment of Principal and
Interest -- Priority of Payments".
<TABLE>
<CAPTION>
SUBCLASS AMOUNT ASSUMED INTEREST RATE
- -------- ----------- ---------------------
($MILLIONS)
<S> <C> <C>
Subclass A-1......................................... 340.000 1 Month LIBOR + 0.19%
Subclass A-2......................................... 290.000 1 Month LIBOR + 0.32%
Subclass B-1......................................... 85.000 1 Month LIBOR + 0.60%
Subclass C-1......................................... 85.000 1 Month LIBOR + 1.35%
Subclass D-1......................................... 80.000 8.50%
Subclass E-1......................................... 111.973 *
-------
991.973
=======
</TABLE>
- ---------------
* The Class E Note Primary Interest Amount is 15%. See "Description of Notes --
Priority of Payments".
115
<PAGE> 117
(xiv) Refinancing Notes are assumed to be issued and sold on the Expected
Final Payment Date of the Subclass A-1 Notes (and on each subsequent expected
final payment dates of any Refinancing Notes) on the same terms with respect to
priority, coupon, issuance expenses and redemption as the Notes being refinanced
and with maturities and amortization schedules paid with the application of the
Minimum, Scheduled and Supplemental Principal Payment Amounts. Issuance expenses
are assumed to be 0.02% per month of the Outstanding Principal Balance.
(xv) AerCo Group realizes no actual liabilities in respect of contingent
liabilities of ALPS 94-1 or its subsidiaries, or any of the Transferring
Companies.
(xvi) The Servicer's fees are described under "Management of AerCo Group --
The Servicer". The Servicer's incentive fees are assumed to be 1% of aggregate
lease rentals. The Administrative Agent's fee is as described in "Management of
AerCo Group -- Corporate Management". AerCo Group's other selling, general and
administrative expenses in the amount of $2 million per annum are deducted from
Gross Revenue and include fees to the Cash Manager.
(xvii) Gross Revenues are reduced each year by 2% to account for certain
operating costs incurred in the ordinary course of the operating lease business
including insurance expenses, Aircraft-related costs and leasing transaction
expenses.
(xviii) Security deposits, Modification Payments and Subordinated Swap
Payments are assumed to be zero.
Assumed Case Stress Scenario:
(xviii) Gross Revenues are assumed to be reduced by 6% per annum in respect
of lost rental payments and expenditures required due to Aircraft downtime
(known in the industry as "aircraft on ground") ("AOG"), Lessee defaults,
aircraft repossession costs and bad debts ("STRESSES"). The following set of
Stresses are presented for illustrative purposes and only represent an example
of a combination of Stresses which result in approximately a 6% reduction in
Gross Revenues. Other Stress combinations could result in Gross Revenue
reductions which exceed 6%.
<TABLE>
<S> <C> <C>
A: Weighted Average Portfolio Turnover: .............. 20% per annum (Assumption (vii))
B: Average Re-marketing Time: ........................ 6 weeks (.115 years)
C: Weighted Average Default Rate: .................... 4% per annum
D: Average Repossession Time: ........................ 18 weeks (.346 years)
E: Average Repossession Cost: ........................ $650,000 per Aircraft
F: Weighted Average Bad Debt Expense: ................ 1% per annum
</TABLE>
AOG = (A X B) + (C X (B + D))
Annual Repossession Expense ("ARE") = C X(E/Average Annual Gross Revenue
per Aircraft)) (See Appendix 3)
<TABLE>
<S> <C> <C>
AOG = (20% X .115 yrs) + (4% X (.115 yrs + .346 yrs))....... 4.2%
ARE = (4% X 21%)............................................ 0.8
Bad Debt Expense............................................ +1.0
-----
Stress Related Gross Revenue Reduction...................... 6.0%
Operating costs (see Assumption (xvii))..................... +2.0
-----
Gross Revenue Reduction in the Assumed Case................. 8.0%
=====
</TABLE>
116
<PAGE> 118
Increasing the above Stresses would result in a greater reduction in annual
Gross Revenues. The following table shows the effect upon Gross Revenues of
doubling the severity of each Stress (other than Average Repossession Cost)
outlined in the above example (in each case holding other Stresses unchanged).
<TABLE>
<CAPTION>
GROSS REVENUE
STRESS SEVERITY REDUCTION
- ------ -------- -------------
<S> <C> <C>
Portfolio Turnover...................................... 40% per annum 10.3%
Re-marketing Time....................................... 12 weeks 10.8%
Default Rate............................................ 8% per annum 10.7%
Repossession Time....................................... 36 weeks 9.4%
Bad Debt Expense........................................ 2% per annum 9.0%
</TABLE>
It is highly likely that actual experience will differ from the Assumptions
and the Stresses and, therefore, principal payments on certain Notes will likely
occur earlier or later, and may occur significantly earlier or later, than
assumed.
PRINCIPAL REPAYMENTS UNDER THE ASSUMED CASE
The table below shows, for each Payment Date presented, the percentage of
the initial Outstanding Principal Balance of the aggregate Class A Notes,
including Refinancing Notes, and the Subclass A-1, Subclass A-2, Subclass B-1,
Subclass C-1 and Subclass D-1 Notes expected to be Outstanding on such Payment
Date based on the Assumptions. It is highly unlikely that the Assumptions will
correspond to actual experience. Therefore, principal payments on the Notes may
occur earlier or later than as set forth in the table. The failure of the
Company to pay principal of any subclass of AerCo Notes prior to the Final
Maturity Date of such subclass because funds are not available therefor in
accordance with the priorities described under "-- Priority of Payments" will
not of itself constitute an Event of Default.
PERCENT OF INITIAL OUTSTANDING PRINCIPAL BALANCE
OF THE NOTES BASED ON THE ASSUMED CASE
<TABLE>
<CAPTION>
AGGREGATE CLASS A
NOTES, INCLUDING
PAYMENT DATE OCCURRING IN JULY A-1 A-2 REFINANCING NOTES B-1 C-1
- ------------------------------ ---- ---- ----------------- ---- ----
<S> <C> <C> <C> <C> <C>
1998 (July 15,)............................... 100% 100% 100% 100% 100%
1999.......................................... 100% 87% 94% 96% 100%
2000.......................................... 0% 74% 88% 91% 99%
2001.......................................... 0% 62% 82% 85% 97%
2002.......................................... 0% 48% 76% 79% 95%
2003.......................................... 0% 34% 70% 72% 92%
2004.......................................... 0% 20% 63% 64% 88%
2005.......................................... 0% 6% 57% 56% 83%
2006.......................................... 0% 0% 50% 48% 76%
2007.......................................... 0% 0% 42% 39% 69%
2008.......................................... 0% 0% 34% 31% 60%
2009.......................................... 0% 0% 27% 24% 51%
2010.......................................... 0% 0% 20% 16% 40%
2011.......................................... 0% 0% 14% 10% 28%
2012.......................................... 0% 0% 8% 4% 15%
2013.......................................... 0% 0% 4% 0% 0%
2014.......................................... 0% 0% 0% 0% 0%
Weighted Average Life......................... 2.0 3.8 7.8 7.7 10.5
</TABLE>
- ---------------
(1) See Appendices 3 and 9, respectively, for further data regarding Gross
Revenues and Pool Factors.
117
<PAGE> 119
(2) The weighted average life of a Note equals (i) the sum of the products on
each Payment Date of (A) the principal payments assumed to be made on such
Payment Date and (B) the number of years from the date of issuance of such
Note to such Payment Date (ii) divided by the Initial Principal Balance of
such Note ("WEIGHTED AVERAGE LIFE").
DECLINING BALANCES OF THE NOTES AND ASSUMED PORTFOLIO VALUE
BASED ON THE ASSUMED CASE
LOGO
In each of the following tables, "ASSUMED MATURITY" means the period
(expressed in years) from July 15, 1998 through the expected final payment of
principal of the relevant Notes.
EFFECT OF INABILITY TO REFINANCE SUBCLASS A-1 NOTES
The table below is based on the Assumptions, except that no Refinancing
Notes are assumed to be issued and sold. If such Refinancings do not occur, the
Assumed Maturities ("EXP") and Weighted Average Lives ("AVG") of the respective
subclasses of Notes would be as set forth below.
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
<TABLE>
<CAPTION>
ASSUMED MATURITY/
WEIGHTED AVERAGE LIFE
----------------------------------
ASSUMED CASE NO REFINANCINGS
-------------- ----------------
EXP AVG EXP AVG
----- ----- ------ ------
<S> <C> <C> <C> <C>
Subclass A-1.............................................. 2.0 2.0 15.8 11.3
Subclass A-2.............................................. 7.4 3.8 7.4 3.8
Subclass B-1.............................................. 15.0 7.7 15.0 7.7
Subclass C-1.............................................. 15.0 10.5 15.0 10.5
</TABLE>
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE NOTES
The table below indicates the minimum percentage of Gross Revenue that will
be necessary to repay all interest and principal on each subclass of Notes by
their respective Final Maturity Dates. If the actual revenue received by AerCo
Group were to fall below the percentages of Gross Revenue indicated below and
all of the
118
<PAGE> 120
other Assumptions were to occur as assumed, the Company would be unable to meet
its required payment obligations for the subclasses of Notes, which would
constitute an Event of Default with respect to the Notes.
PERCENTAGE OF GROSS REVENUE NECESSARY TO REPAY THE
NOTES BY THE APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE ASSUMED CASE UNTIL THE BEGINNING OF THE YEAR
STATED
<TABLE>
<CAPTION>
JULY 15, 1998 YEAR 3 YEAR 6 YEAR 10
------------- ------ ------ -------
<S> <C> <C> <C> <C>
Aggregate Class A Notes............................ 58.4% 57.4% 54.6% 48.7%
Subclass B-1 Notes................................. 65.8% 64.4% 60.8% 53.1%
Subclass C-1 Notes................................. 74.3% 72.9% 70.3% 61.2%
</TABLE>
EFFECT OF A PERMANENT CHANGE IN GROSS REVENUE
The tables below have been prepared based on the Assumptions, except that
the revenue received by AerCo Group varies from Gross Revenue by the indicated
percentages, beginning in years 3 and 6. If the actual revenues received by
AerCo Group were to vary as indicated below and all of the other Assumptions
were to occur as assumed, then the Assumed Maturities and Weighted Average Lives
of the respective subclasses of Notes.
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE, BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-1......................... 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Subclass A-2......................... 6.3 3.4 7.4 3.8 7.4 3.8 8.5 3.9 8.5 4.3
Subclass B-1......................... 12.0 6.6 14.8 7.7 15.0 7.7 15.0 7.7 18.5 7.9
Subclass C-1......................... 12.9 10.1 15.0 10.5 15.0 10.5 15.0 10.5 19.8 13.6
</TABLE>
- ---------------
* Assumed case
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE, BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-1......................... 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Subclass A-2......................... 7.1 3.8 7.4 3.8 7.4 3.8 8.2 3.8 8.5 3.9
Subclass B-1......................... 12.0 6.7 14.8 7.7 15.0 7.7 15.0 7.7 15.0 7.7
Subclass C-1......................... 14.0 10.4 15.0 10.5 15.0 10.5 15.0 10.5 16.0 11.0
</TABLE>
- ---------------
* Assumed case
119
<PAGE> 121
EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
To the extent that the Adjusted Portfolio Value is significantly less than
the Assumed Portfolio Value, the Scheduled Principal Payment Amount payable to
holders of the Class A Notes may be increased. See "-- Principal Amortization".
Payment of such increased amount may shorten the Weighted Average Lives of the
Class A Notes and lengthen the Weighted Average Lives of the subclasses of Notes
that rank behind the Class A Notes in priority of payment. The following tables
show the Assumed Maturity and Weighted Average Life of each subclass of Notes if
the Adjusted Portfolio Value was to permanently decline to a given percentage of
the Assumed Portfolio Value, beginning in years 1 and 5, respectively.
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 1
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
EXPECTED PORTFOLIO VALUE BEGINNING IN YEAR 1
-----------------------------------------------------
100%* 90% 80% 70%
----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-1.................................... 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Subclass A-2.................................... 7.4 3.8 7.4 3.8 6.8 3.3 6.0 3.2
Subclass B-1.................................... 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.3
Subclass C-1.................................... 15.0 10.5 15.0 10.5 15.0 10.6 15.0 10.8
</TABLE>
- ---------------
* Assumed Case
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 5
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
EXPECTED PORTFOLIO VALUE BEGINNING IN YEAR 5
-----------------------------------------------------
100%* 90% 80% 70%
----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-1.................................... 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Subclass A-2.................................... 7.4 3.8 7.4 3.8 6.8 3.6 6.6 3.6
Subclass B-1.................................... 15.0 7.7 15.0 7.7 15.0 7.8 15.0 7.8
Subclass C-1.................................... 15.0 10.5 15.0 10.5 15.0 10.6 15.0 10.9
</TABLE>
- ---------------
* Assumed Case
EFFECT OF CYCLICAL VARIATIONS IN GROSS REVENUE AND PORTFOLIO VALUE --
"RECESSION SCENARIOS"
Historically, the aviation industry has experienced cyclical swings in the
supply and demand for aircraft. Operating lease companies, such as members of
AerCo Group, would be negatively affected by a decline in the demand for
aircraft. Such a decline or "RECESSION" (as used in this discussion) is assumed
to result in a decline in Aircraft values and an increase in defaults and
downtime, as well as a decline in operating lease rates. These effects would
result in a decline in Gross Revenues.
The following tables have been prepared on the basis of a number of
assumptions to show the effect on Assumed Maturities and Weighted Average Lives
of the Subclass B-1 and Subclass C-1 Notes if recessions having given durations
were to occur at certain given times in the future. Actual experience will
likely differ from that which is assumed and, therefore, the Assumed Maturities
and Weighted Average Lives actually experienced will likely differ from those
shown in the tables below. In preparing the following tables it has been assumed
that a recession would have the following effect on the operations of AerCo
Group: First, Aircraft values would fall on the first day of the recession to a
given percentage of the Assumed Portfolio Value which, in turn, would trigger an
effective increase in Scheduled Principal Payment Amounts being paid
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<PAGE> 122
if amounts are available to do so. Second, after a period of two years following
the first day of the recession, Gross Revenues fall by a given percentage as
Aircraft are re-leased or Lessees default which would result in less cash flow
being available to make payments of interest and principal on the Notes. Third,
the recession lasts a given period of time followed by the Adjusted Portfolio
Value returning to the then Assumed Portfolio Value on the first day after the
recession and, two years following the end of the recession, Gross Revenues
returning to the Assumed Case. However, AerCo can give no assurance that periods
of weak traffic growth and lower demand for aircraft will be followed by periods
of strong growth and high demand for aircraft nor can it be assured that
following a recession Aircraft values and Gross Revenues will return to Assumed
Case levels.
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-1
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
<S> <C> <C> <C> <C>
DECLINE IN GROSS REVENUES..................... 0% 8%* 10% 20%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE..................... 100% 100%* 90% 80%
</TABLE>
<TABLE>
<CAPTION>
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of
Year........................... 1 (July 15, 1998) 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.7
3 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.7
5 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.8
10 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.7
</TABLE>
- ---------------
* Assumed case
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-1
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
<S> <C> <C> <C> <C>
DECLINE IN GROSS REVENUES..................... 0% 8%* 10% 20%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE..................... 100% 100%* 90% 80%
</TABLE>
<TABLE>
<CAPTION>
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of
Year........................... 1 (July 15, 1998) 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.8
3 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.9
5 15.0 7.7 15.0 7.7 15.0 7.7 15.0 7.9
10 14.8 7.7 15.0 7.7 15.0 7.7 15.0 7.7
</TABLE>
- ---------------
* Assumed case
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-1
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
<S> <C> <C> <C> <C>
DECLINE IN GROSS REVENUES..................... 0% 8%* 10% 20%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE..................... 100% 100%* 90% 80%
</TABLE>
<TABLE>
<CAPTION>
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of
Year........................... 1 (July 15, 1998) 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.5
3 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.6
5 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.7
10 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.5
</TABLE>
- ---------------
* Assumed case
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<PAGE> 123
ASSUMED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-1
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
<S> <C> <C> <C> <C>
DECLINE IN GROSS REVENUES..................... 0% 8%* 10% 20%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE..................... 100% 100%* 90% 80%
</TABLE>
<TABLE>
<CAPTION>
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of
Year........................... 1 (July 15, 1998) 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.6
3 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.8
5 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.9
10 15.0 10.5 15.0 10.5 15.0 10.5 15.0 10.5
</TABLE>
- ---------------
* Assumed case
EFFECT OF PRINCIPAL ALLOCATION ACCORDING TO THE EXTENDED POOL FACTOR ONLY
FOR THE SUBCLASS A-2, SUBCLASS B-1, AND SUBCLASS C-1 NOTES
The following table has been prepared on the basis of a number of
assumptions to show the effect on Assumed Maturities and Weighted Average Lives
of Subclass A-2, Subclass B-1, and Subclass C-1 Notes if subclasses of
Additional Notes are issued to fund the acquisition of Additional Aircraft but
Gross Revenues from the Aircraft are only sufficient to amortize such subclasses
with the application of Available Collections in accordance with the applicable
Extended Pool Factors in accordance with clause "First" under "-- Allocation of
Principal Among Subclasses of Notes".
<TABLE>
<CAPTION>
SUBCLASSES OF NOTES EXP. AVG.
- ------------------- ---- ----
<S> <C> <C>
Subclass A-2................................................ 8.5 4.7
Subclass B-1................................................ 16.0 8.7
Subclass C-1................................................ 17.0 12.5
</TABLE>
PAYMENT OF PRINCIPAL AND INTEREST
GENERAL
The Company will issue the Notes pursuant to the Indenture.
Pursuant to the terms of the Leases, the Lessees are obliged to make rental
payments and certain other payments (collectively, the "RENTAL PAYMENTS") to
certain subsidiaries of the Company. Pursuant to the terms of the Leases, all
Rental Payments and Related Collateral amounts will be made directly to the
Rental Account held in the name of the Security Trustee on behalf of the Secured
Parties and then transferred, within one Business Day of receipt thereof, to the
Collection Account, except for certain limited amounts required to be left on
deposit for local legal reasons. Unsegregated amounts received by AerCo Group in
respect of the assets of AerCo Group will be transferred directly to the
Collection Account pursuant to the Indenture and the Cash Management Agreement.
Any amounts received by AerCo Group which are required to be segregated will be
transferred to the Lessee Funded Account. On the basis of the Assumptions, such
Rental Payments, together with such other amounts, are expected to be sufficient
to pay the principal, interest and premium, if any, on the Notes and all other
amounts payable by AerCo Group to the creditors referred to in the Cash
Management Agreement, including the Servicer, holders of the Class D and Class E
Notes, the Trustee, the Cash Manager, the Administrative Agent, the Company
Secretary, the Charitable Trust and each Swap Provider in each case when and as
due.
The Notes constitute direct, unsecured obligations of the Company and are
subordinated to the Expenses and certain obligations and rank equally with or
senior to certain other obligations specified in the Indenture. The only source
of payment for the Notes and the obligations of the Company to its creditors is
(i) the payments made by the Lessees under the Leases, (ii) proceeds from
dispositions, if any, of the assets of
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<PAGE> 124
AerCo Group, (iii) net payments, if any, under the Swap Agreements and (iv) net
cash proceeds received from the sale of Refinancing Notes. See "-- Priority of
Payments".
Each class and subclass of the Notes has the priority set forth in the
Indenture and the Notes. Pursuant to the subordination provisions of the
Indenture and the various classes of Notes, no payment of principal, interest
and premium, if any, on any class of Notes may be made on any Payment Date
unless certain required payments have been made in respect of the Notes of each
class ranking prior to such class of Notes on such Payment Date. The
subordination provisions contained in the Indenture may not be amended or
modified without the consent of each Swap Provider, each holder of the class of
Notes affected thereby and each holder of any class of Notes ranking senior to
such Notes. In no event shall the provisions relating to the priority of the
Expenses or any payments under Swap Agreements in the Indenture be amended or
modified.
In addition, the Administrative Agent, on behalf of the Company, may
replace the bank with which the Accounts are held (1) if such bank fails to
maintain a short-term unsecured debt rating of at least A-1+ by Standard &
Poor's, P-1 by Moody's or D-1+ by DCR (or at least A-1 by Standard & Poor's, P-1
by Moody's or D-1 by DCR if the amount on deposit at any time in any Accounts
held with such bank does not exceed 20% of the Outstanding Principal Balance of
the Notes for any period in excess of 30 days), (2) if such bank is adjudged a
bankrupt or an insolvent, (3) if a receiver or public officer takes charge of
such bank or its property, (4) if such bank becomes incapable of acting or (5)
upon 120 days' notice, for any reason, with Rating Agency approval.
Holders of each class of Notes (other than Class A Notes) will not be
permitted to give a Default Notice with respect to any Event of Default or to
exercise any remedy in respect of such Event of Default until all amounts with
respect to Notes of each class ranking senior to such class of Notes have been
paid in full. See "-- Events of Default and Remedies".
INTEREST
Each Note bears interest on the Outstanding Principal Balance thereof
payable monthly in arrears on each Payment Date. An Interest Accrual Period is
the period from and including the last preceding Payment Date and to but
excluding the next succeeding Payment Date. The final Interest Accrual Period
with respect to each subclass of Notes will end on but exclude the Final
Maturity Date, or, if earlier, the date upon which all principal, interest and
premium, if any, on such subclass of Notes is paid in full. Each subclass of
Notes will bear interest for each Interest Accrual Period at the rate per annum
set forth on the cover page of this Prospectus.
Interest on any subclass of Notes is calculated on the basis of a 360-day
year and the actual number of days elapsed in an Interest Accrual Period.
The interest rate borne by the Subclass A-1 Notes will increase after the
Expected Final Payment Date, to the extent such Notes are then Outstanding, by
the amount of Step-Up Interest. Payments of Step-Up Interest on the Subclass A-1
Notes will be subordinated to certain other obligations of AerCo Group,
including the payment of the Minimum Principal Payment Amounts and the Scheduled
Principal Payment Amounts with respect to, and accrued and unpaid interest on,
the Class A, Class B, Class C and Class D Notes and will not be rated by the
Rating Agencies. As long as the Notes are listed on the Luxembourg Stock
Exchange, any Step-Up Interest payable on the Subclass A-1 Notes shall be
published in accordance with the notification requirements specified in the
Indenture and notified to the Luxembourg Stock Exchange. See "-- Notice to
Noteholders".
REFERENCE AGENCY AGREEMENT
For the purpose of calculating the rate of interest payable on the Notes,
AerCo has entered into the Reference Agency Agreement with the Trustee, Bankers
Trust Company as reference agent (the "REFERENCE AGENT") and the Cash Manager.
The Reference Agent determines LIBOR for each Interest Accrual Period following
the Initial Interest Accrual Period, on a Reference Date (a date that is two
Business Days before the
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<PAGE> 125
Payment Date on which such Interest Accrual Period commences). The Reference
Agent determines LIBOR in accordance with the following provisions of the
Reference Agency Agreement:
On each Reference Date, the Reference Agent will determine LIBOR as the per
annum offered rate for deposits in U.S. dollars for a period of one month that
appears on the display designated as page "3750" on the Telerate Monitor (or
such other page or service as may replace it for the purpose of displaying LIBOR
of major banks for U.S. dollar deposits) at approximately 11:00 a.m. (London
time).
If the offered rate so appearing is replaced by the corresponding rates of
more than one bank then the determination described in the foregoing paragraph
shall be made, with any necessary consequential changes, on the basis of the
arithmetic mean of the rates (being at least two) which so appear, as determined
by the Reference Agent. If for any other reason such offered rate does not so
appear, or if the relevant page is unavailable, the Reference Agent will request
that each of the banks whose offered rates would have been used for the purposes
of the relevant page if the event leading to the application of this sentence
had not happened or any duly appointed substitute reference bank acting in each
case through its principal London office (the "REFERENCE BANKS"), to provide the
Reference Agent with its offered quotation to prime banks for dollar deposits in
London for the next Interest Accrual Period concerned as at 11:00 a.m. (London
time) on the applicable Reference Date. The floating rates of interest for such
Interest Accrual Period for each subclass of Notes shall be the aggregate of the
arithmetic mean of such quotations (or of such of them, being at least two, as
are so provided), as determined by the Reference Agent, plus the applicable
interest rate spread over LIBOR set forth opposite such subclass on the cover
page of this Prospectus, plus Step-Up Interest, if applicable.
If, on any Reference Date, one only or none of the Reference Banks provides
such quotation, the interest rate for the next Interest Accrual Period shall be
the rate per annum which the Reference Agent determines to be the aggregate of
the arithmetic mean of the U.S. dollar lending rates which New York City banks
selected by the Reference Agent are quoting on the relevant Reference Date to
leading European banks for the next Interest Accrual Period, plus the applicable
interest rate spread over LIBOR set forth opposite such subclass on the cover
page of this Prospectus, plus, if applicable, any Step-up Interest on the
Subclass A-1 Notes, except that, if the banks so selected by the Reference Agent
are not quoting as mentioned above, the applicable rate of interest shall be the
interest rate in effect for the last preceding Interest Accrual Period.
Once having obtained LIBOR or its substitute, the Reference Agent will
calculate the interest rate for each subclass of Notes and the amount of
interest payable on the relevant Payment Date in respect of each subclass of
Notes. The interest amount for each such subclass of Notes will be calculated by
the Reference Agent by multiplying the rate of interest for such subclass for
the relevant Interest Accrual Period by the estimated Outstanding Principal
Balance of such subclass of Notes on the first day of such Interest Accrual
Period and by multiplying the product by the actual number of days in such
Interest Accrual Period divided by 360 and rounding the resulting amount to the
nearest cent (with half a cent being rounded upwards). The Reference Agent's
determination of LIBOR, the interest rate and the interest amount for each such
subclass of Notes (in the absence of negligence, wilful default, bad faith or
manifest error) will be conclusive and binding upon all parties.
As promptly as is practicable after the determination thereof, the
Reference Agent will give notice of applicable LIBOR, the Payment Date, the
interest rate for each subclass of Notes for the relevant Interest Accrual
Period and the amount of interest on each subclass of Notes to the Company, the
Listing Agent for the Luxembourg Stock Exchange and the Cash Manager.
Noteholders may obtain such information at the offices of the Listing Agent or
paying agent in Luxembourg or otherwise in the Cash Reports provided to
Noteholders by the Trustee on the second Business Day before each Payment Date
and any other date for distribution of any payments with respect to the Notes.
If the Reference Agent does not determine the interest rate for each
subclass of Notes or calculate the amount of interest on each subclass of Notes
for the relevant Interest Accrual Period in accordance with the provisions
described above, the Cash Manager will determine such rate of interest or
calculate such interest amount in accordance with the provisions described
above, and each such determination or calculation will be deemed to have been
made by the Reference Agent.
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<PAGE> 126
The Company reserves the right to terminate the appointment of the
Reference Agent at any time on 30 days' notice and to appoint a replacement
reference agent in its place. Notice of any such termination will be given to
the holders of the Notes. The Reference Agent may not be removed or resign its
duties without a successor having been appointed.
PRINCIPAL AMORTIZATION
With respect to each class of the Notes, there may be distributed on any
Payment Date, to the extent there are sufficient funds in the Collection
Account, the sum of the Minimum Principal Payment Amount, if any, the Scheduled
Principal Payment Amount, if any, and with respect to the Class A and B Notes
only, the Supplemental Principal Payment Amount, if any, and, principal
redemptions pursuant to priorities (xxi) through (xxiv) set forth under "--
Priority of Payments". If AerCo issues any Additional Notes or Refinancing
Notes, each such issuance constitutes a new and subsequent subclass of the
relevant class of Notes. See "-- Allocation of Principal Among Subclasses of
Notes".
Minimum Principal Payment Amount. With respect to each class of Notes and
the Class D Notes, the "MINIMUM PRINCIPAL PAYMENT AMOUNT" will equal the
difference, if positive, between the Outstanding Principal Balance of such class
and the Minimum Target Principal Balance for such class on such Payment Date.
On each Payment Date, the "MINIMUM TARGET PRINCIPAL BALANCE" for the Class
A and Class B Notes will equal the product of (i) the applicable "MINIMUM CLASS
PERCENTAGE" on such Payment Date (as set forth in Appendices 5 and 6 to this
Prospectus and (ii) the Assumed Portfolio Value (as set forth in Appendix 4 to
this Prospectus with respect to the Initial Aircraft) in respect of such Payment
Date; provided that with respect to only the Class A Notes, if on any Payment
Date the Outstanding Principal Balance of the Class A Notes (including
Refinancing Notes and Additional Notes) is greater than the Adjusted Portfolio
Value in respect of such Payment Date, then the Minimum Target Principal Balance
of the Class A Notes shall be equal to the Scheduled Target Principal Balance of
the Class A Notes.
For each Payment Date, the Minimum Target Principal Balance for the Class C
and Class D Notes is set out in Appendices 7 and 8 to this Prospectus.
In respect of each Payment Date, the "ASSUMED PORTFOLIO VALUE" with respect
to the Initial Aircraft will equal the aggregate sum of the products of (A) the
Initial Appraised Value of each Aircraft in the Portfolio on the Calculation
Date preceding such Payment Date and (B) the quotient obtained by dividing the
applicable Depreciation Factor (each, a "DEPRECIATION FACTOR") for such Aircraft
(as set forth below) on such Calculation Date by the Depreciation Factor for
such Aircraft on July 15, 1998. The Depreciation Factors produce a "depreciation
curve" that assumes an accelerating decline in the value of Initial Aircraft of
increasing age. The accelerating annual decline in aircraft values that is
assumed by the deprecation curve has been expressed as an equation below:
Depreciation Factor = (1 - (kn)) X (1 + g)(n) but not less than zero
Where, with respect to the Initial Aircraft:
<TABLE>
<S> <C>
n = age of the Aircraft expressed in years
1
k =
-----------------------------------------
Expected Useful Life
g = 0.02
</TABLE>
The Depreciation Factors are used solely for the purpose of determining
repayments of principal of the Notes and do not correlate to or predict actual
declines in aircraft values over any period. Furthermore, the Depreciation
Factor variables and therefore the depreciation curve will change as the
composition of the Portfolio changes through acquisitions and sales of
Additional Aircraft and Initial Aircraft. Finally, AerCo Group may in the future
apply different depreciation factors or alternative methodologies more generally
to express the assumed decline in values of Additional Aircraft. In addition,
the Minimum Class Percentages,
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<PAGE> 127
the Scheduled Class Percentages and the Supplemental Class Percentages for the
Class A and Class B Notes and Minimum Target Principal Balances and Scheduled
Target Principal Balances for the Class C and Class D Notes will change as
Additional Aircraft are acquired; however, the Pool Factors and the Extended
Pool Factors for each subclass will not change as the composition of the
Portfolio changes.
Scheduled Principal Payment Amount. With respect to each class of Notes
and the Class D Notes, the "SCHEDULED PRINCIPAL PAYMENT AMOUNT" on any Payment
Date will equal the difference, if positive, between the Outstanding Principal
Balance of such class (after giving effect to any Payment of the Minimum
Principal Payment amount for such class) and the Scheduled Target Principal
Balance for such class on such Payment Date.
On each Payment Date, the "SCHEDULED TARGET PRINCIPAL BALANCE" for the
Class A Notes will equal the product of (i) the applicable "SCHEDULED CLASS
PERCENTAGE" on such Payment Date (as set forth in Appendix 5 to this Prospectus)
and (ii) the lesser of (A) the Assumed Portfolio Value in respect of such
Payment Date and (B) the Product of the Adjusted Portfolio Value in respect of
such Payment Date and 105%. On each Payment Date, the Scheduled Target Principal
Balance for the Class B Notes will equal the product of (i) the applicable
Scheduled Class Percentage on such Payment Date (as set forth in Appendix 6 to
this Prospectus) and (ii) the Assumed Portfolio Value in respect of such Payment
Date.
For each Payment Date, the Scheduled Target Principal Balance of the Class
C and Class D Notes is set out in Appendices 7 and 8 to this Prospectus.
In respect of each Payment Date, the "ADJUSTED PORTFOLIO VALUE" will equal
the sum of the products, for each Aircraft in the Portfolio on the Calculation
Date preceding such Payment Date, of (A) the Adjusted Base Value of such
Aircraft and (B) the quotient obtained by dividing the applicable Depreciation
Factor for such Aircraft on such Calculation Date by the Depreciation Factor for
such Aircraft as of the Relevant Appraisal.
The "ADJUSTED BASE VALUE" of each Aircraft will be the Base Value of such
Aircraft as determined in the most recent Appraisal (the "RELEVANT APPRAISAL")
preceding such Calculation Date.
Supplemental Principal Payment Amount. With respect to the Class A and
Class B Notes, the "SUPPLEMENTAL PRINCIPAL PAYMENT AMOUNT" on any Payment Date
will equal the difference, if positive, between the Outstanding Principal
Balance of such class (after giving effect to the payment of any Minimum
Principal Payment Amount and Scheduled Principal Payment Amount) and the
Supplemental Target Principal Balance for such class on such Payment Date.
On each Payment Date, the "SUPPLEMENTAL TARGET PRINCIPAL BALANCE" for the
Class A and Class B Notes will equal the product of (i) the applicable
"SUPPLEMENTAL CLASS PERCENTAGE" on such Payment Date (as set forth in Appendices
5 and 6 to this Prospectus) and (ii) the Assumed Portfolio Value in respect of
such Payment Date.
ALLOCATION OF PRINCIPAL AMONG SUBCLASSES OF NOTES
On the Expected Final Payment Date of the Subclass A-1 Notes, AerCo intends
to refinance 100% of the Outstanding Principal Balance of the Subclass A-1 Notes
by issuing Refinancing Notes and selling such Refinancing Notes in the capital
markets. Failure to repay any Subclass A-1 Note in full at its Expected Final
Payment Date will not result in an Event of Default.
AerCo may also refinance any other subclass of Notes, at any time, at the
Redemption Price that would be payable if AerCo were to have redeemed such Notes
instead. See "-- Refinancing" and "-- Indenture Covenants -- Limitation on
Indebtedness".
The terms of the Subclass A-2, Subclass B-1, Subclass C-1 and Subclass D-1
Notes will require amortization of the Outstanding Principal Balance thereof on
each or certain Payment Dates prior to each of their respective Expected Final
Payment Dates, to the extent there are funds available therefor in accordance
with the order of priorities set forth under "-- Priority of Payments".
To the extent that any principal amount is required to be paid in
accordance with the priorities as described in "-- Priority of Payments" with
respect to any class of AerCo Notes on any Payment Date,
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<PAGE> 128
Available Collections will be applied to the various subclasses of the relevant
class in the following order after giving effect to all prior subclass principal
payments of such class:
(i) First, to each subclass in order of the earliest issued subclass, the
difference, if positive, between the Outstanding Principal Balance of
each such subclass and the product of the applicable Extended Pool
Factor (as set forth in Appendix 10 to this Prospectus) on such
Payment Date and the Initial Principal Balance of each such subclass
(the "EXTENSION AMOUNT"); provided that in the case of two or more
subclasses issued on the same date, Available Collections will be
applied to each subclass pro rata according to the amount of, but not
to exceed, the Extension Amount of such subclass.
(ii) Second, to each subclass, in no order of priority inter se, but pro
rata according to the amount of, but not to exceed, the difference,
if positive, between the Outstanding Principal Balance of each such
subclass (after giving effect to any Payment under clause (i) above)
and the product of the applicable Pool Factor (as set forth in
Appendix 9 to this Prospectus) on such Payment Date and the Initial
Principal Balance of each such subclass.
(iii) Third, to each subclass with an Expected Final Payment Date on or
before such Payment Date, in order of the earliest issued subclass;
provided that in the case of two or more subclasses issued on the
same date, Available Collections will be applied to such subclasses
in order of the subclass with the earliest Expected Final Payment
Date and, with respect to any two or more subclasses having the same
Expected Final Payment Date, Available Collections will be applied to
such subclasses pro rata according to the Outstanding Principal
Balance of each such subclass (after giving effect to any payments
under clauses (i) and (ii) above) on such Payment Date.
(iv) Fourth, to each subclass with an Excess Amortization Date on or before
such Payment Date, in no order inter se, but pro rata according to the
Outstanding Principal Balance of each such subclass (after giving
effect to any payment under clauses (i), (ii) and (iii) above) on such
Payment Date.
(v) Fifth, to each subclass in order of the earliest Expected Final
Payment Date, provided, in the case of two or more subclasses having
the same Expected Final Payment Date, in no order of priority inter
se, but pro rata according to the Outstanding Principal Balance of
each such subclass (after giving effect to any payments under clauses
(i), (ii), (iii) and (iv) above) on such Payment Date.
"INITIAL PRINCIPAL BALANCE" means the initial Outstanding Principal Balance
on the relevant closing date of the Notes or the Class D Notes of such subclass.
The "EXCESS AMORTIZATION DATE" for each subclass of the Notes and the
Subclass D-1 Notes is as set out below:
<TABLE>
<CAPTION>
SUBCLASS OF NOTES EXCESS AMORTIZATION DATE
- ----------------- ------------------------
<S> <C>
Subclass A-1................................................ July 15, 2000
Subclass A-2................................................ August 17, 1998
Subclass B-1................................................ August 17, 1998
Subclass C-1................................................ August 17, 1998
Subclass D-1................................................ July 15, 2010
</TABLE>
REFINANCING
AerCo may repay any subclass of the Notes or the Class D Notes, in whole
but not in part, on any date (a "REFINANCING DATE") with the proceeds of the
issuance of any Refinancing Note issued in accordance with the "Limitation on
Indebtedness" covenant under the Indenture (any such repayment, a
"REFINANCING"). See "-- Indenture Covenants -- Limitation on Indebtedness". The
amount to be repaid by AerCo in connection with the Refinancing of any subclass
of Notes or the Class D Notes shall be equal to the Redemption Price for such
subclass on the Refinancing Date plus accrued and unpaid interest.
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In respect of any Refinancing of any subclass of Notes or the Class D
Notes, at least five days but not more than 30 days before the proposed
Refinancing Date, the Trustee will give notice of such Refinancing (a "NOTICE OF
REFINANCING") to each holder of such subclass of Notes or the Class D Notes in
accordance with the notice provisions contained in the Indenture. See "--
Notices to Noteholders". In connection with any Refinancing, AerCo will deposit,
or will cause to be deposited, in the Refinancing Account an amount equal to the
Redemption Price, together with an amount sufficient to pay or provide for all
accrued and unpaid interest as of the Refinancing Date. Each Notice of
Refinancing will state (i) the applicable Refinancing Date, (ii) the Redemption
Price of the Notes or the Class D Notes to be repaid and the amount of accrued
but unpaid interest payable thereon, (iii) that Notes or the Class D Notes of
the subclass to be repaid must be surrendered (which action may be taken by any
holder of the Notes or the Class D Notes or its authorized agent) and (iv) that,
unless AerCo defaults in the payment of the Redemption Price and any accrued and
unpaid interest, interest on the subclass of Notes or the Class D Notes to be
refinanced will cease to accrue on and after the Refinancing Date. Once a Notice
of Refinancing in respect of any Refinancing is published, each subclass of
Notes or the Class D Notes to which such Notice of Refinancing applies will
become due and payable on the Refinancing Date stated in such Notice of
Refinancing at their Redemption Price, together with accrued and unpaid
interest.
REDEMPTION
AerCo may redeem any subclass of the Notes or the Class D Notes out of
amounts available for such purpose, if any, on any Payment Date (any such date,
a "REDEMPTION DATE"), in whole or in part, at the Redemption Price plus accrued
but unpaid interest. In addition, the Company will be required on each Payment
Date to redeem Notes or the Class D Notes to the extent of any Available
Collections in the manner described in "Principal Amortization" above and
"Priority of Payments" below at the Redemption Price plus accrued but unpaid
interest. Within each class or subclass of Notes or the Class D Notes being
redeemed in part, the amount of the Outstanding Principal Balance being prepaid
will be applied in each case pro rata among all Notes or the Class D Notes of
such subclass.
The Redemption Price on the Subclass A-1, Subclass A-2, Subclass B-1 and
Subclass C-1 Notes paid (i) with the application of funds other than from
Available Collections (including proceeds from Refinancing Notes and proceeds
from third parties) will equal the product of the applicable Redemption Premium
set out below and the Outstanding Principal Balance of the amount of such
subclass being redeemed and (ii) with respect to the outstanding Available
Collections, will equal the Outstanding Principal Balance the amount of such
subclass being redeemed, without premium.
The Redemption Price of the Subclass D-1 Notes will equal (i) if such
redemption occurs prior to July 15, 2003, the higher of (A) the discounted
present value of Scheduled Principal Payment Amounts and interest from the
Redemption Date through, but not including, July 15, 2003, plus the product of
the applicable Redemption Premium set out below and the assumed Outstanding
Principal Balance for July 15, 2003 discounted at a rate equal to the applicable
Treasury Yield plus 1.00% and (B) the Outstanding Principal Balance of such
subclass being redeemed or (ii) if such redemption occurs on or after July 15,
2003, the product of the applicable Redemption Premium set out below and the
Outstanding Principal Balance of such subclass being redeemed.
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<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PREMIUM
- --------------- -------------------------------------------------------------
SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
A-1 NOTES A-2 NOTES B-1 NOTES C-1 NOTES D-1 NOTES
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
After July 15, 1998................... 100.50% 101.00% 101.50% 102.50% --
On or after July 15, 1999............. 100.25% 100.75% 101.25% 102.25% --
On or after July 15, 2000............. 100.00% 100.50% 101.00% 102.00% --
On or after July 15, 2001............. 100.25% 100.75% 101.75% --
On or after July 15, 2002............. -- 100.25% 100.50% 101.50% --
On or after July 15, 2003............. -- 100.25% 100.25% 101.25% 105.25%
On or after July 15, 2004............. -- 100.25% 100.25% 101.00% 104.50%
On or after July 15, 2005............. -- 100.00% 100.25% 100.75% 103.75%
On or after July 15, 2006............. -- -- 100.25% 100.50% 103.00%
On or after July 15, 2007............. -- -- 100.25% 100.25% 102.25%
On or after July 15, 2008............. -- -- 100.25% 100.25% 101.50%
On or after July 15, 2009............. -- -- 100.00% 100.25% 100.75%
On or after July 15, 2010............. -- -- -- 100.25% 100.00%
On or after July 15, 2011............. -- -- -- 100.00% --
</TABLE>
"TREASURY YIELD" means a per annum rate (expressed as a monthly equivalent
yield) determined to be the per annum rate equal to the semiannual yield to
maturity of the 5 3/4% United States Treasury Note maturing on August 15, 2003,
as published in the most recent H.15 (519).
"H.15 (519)" means the weekly statistical release designated as such or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
Redemption for Taxation Purposes. All payments of principal, interest and
premium, if any, made by the Company in respect of the Notes or the Class D
Notes or any inter-company payments supporting the obligations under the Notes
or the Class D Notes will be made without withholding or deduction for or on
account of any present or future taxes or duties of whatever nature unless
required by law. Should such withholding or deduction be required by law, AerCo
will not be obliged to pay any additional amounts in respect of such withholding
or deduction. If at any time:
(a) The Company is, or on the next Payment Date will be, required to make
any withholding or deduction under the laws or regulations of any
applicable tax authority with respect to any payment in respect of any
subclass of Notes or the Class D Notes; or
(b) The Company is or will be subject to any circumstance (whether by
reason of any law, regulation, regulatory requirement or
double-taxation convention, or the interpretation or application
thereof, or otherwise) leading to the imposition of a tax (whether by
direct assessment or by withholding at source) or other similar
imposition by any jurisdiction which would (i) materially increase the
cost to the Company of making payments in respect of any subclass of
Notes or the Class D Notes or of complying with its obligations under
or in connection with the Notes or the Class D Notes; (ii) materially
increase the operating or administrative expenses of the Company or
the Charitable Trust under which the ordinary share capital of the
Company is held; or (iii) otherwise obligate the Company or any of its
subsidiaries to make any material payment on, or calculated by
reference to, the amount of any sum received or receivable by the
Company, or by the Cash Manager on behalf of the Company as
contemplated by the Cash Management Agreement;
then the Company will inform the Trustee at such time of any such requirement or
imposition and shall use its or their best efforts to avoid the effect of the
same; provided that no actions shall be taken by the Company to avoid such
effects unless each Rating Agency has confirmed that such action will not result
in the lowering or withdrawal by it of its current rating of any subclass of
AerCo Notes then outstanding. If, after using its best
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efforts to avoid the adverse effect described above, the Company or any of its
subsidiaries has not avoided such effects, the Company may, at its election,
redeem the Notes or the Class D Notes of any or all subclasses to which such
withholding or deduction applies in whole with accrued and unpaid interest but
without premium on any Payment Date. However, any such redemptions may not occur
more than 30 days prior to such time as the requirement or imposition described
in (a) or (b) above is to become effective.
Method of Redemption. In respect of any redemption of any subclass of
Notes to be made out of amounts available for such purposes, if any, other than
Available Collections on any Payment Date, at least 20 days but not more than 60
days before such Redemption Date, the Trustee will give notice of such
redemption (a "NOTICE OF REDEMPTION") to each holder of such subclass of Notes;
provided that the Trustee shall have determined in advance of giving any such
notice that funds are or will, on the Redemption Date, be available therefor. If
a Redemption is of less than all of the Notes of any subclass, Notes of such
subclass to be redeemed will be repaid principal pro rata, to the extent moneys
are available therefor. In the case of any Redemption in whole (other than a
Redemption resulting from taxation reasons), the Company will deposit, or will
cause to be deposited, in the Defeasance/Redemption Account an amount equal to
the Redemption Price, together with an amount sufficient to pay or provide for
all of the accrued and unpaid interest as of the Redemption Date. In the case of
any required Redemption by the Company from Available Collections on any Payment
Date pursuant to the priority of payments, such redemptions will be made only in
conformance with the order of payments set forth under "Priority of Payments",
and no Notice of Redemption will be sent. Each Notice of Redemption will state
(i) the applicable Redemption Date, (ii) the Trustee's arrangements for making
payments due, (iii) the redemption price of the Notes to be redeemed, (iv) in
the case of redemptions in whole, that Notes of the subclass to be redeemed must
be surrendered (which action may be taken by any holder of the Notes or its
authorized agent) to the Trustee to collect the Redemption Price and accrued and
unpaid interest on such Notes, and (v) in the case of redemptions in whole,
that, unless the Company defaults in the payment of the Redemption Price and any
accrued and unpaid interest thereon, interest on the subclass of Notes called
for redemption will cease to accrue on and after the Redemption Date. Once a
Notice of Redemption in respect of a redemption in whole is mailed, each
subclass of Notes to which such Notice of Redemption applies will become due and
payable on the Redemption Date stated in such Notice of Redemption at their
Redemption Price, together with accrued and unpaid interest thereon.
DEFEASANCE
AerCo at any time may terminate all of its obligations under the AerCo
Notes and the Indenture ("LEGAL DEFEASANCE"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the AerCo Notes, to replace mutilated, destroyed, lost
or stolen AerCo Notes and to maintain a register in respect of the AerCo Notes.
The Company at any time may terminate its obligations under the covenants
described under "Indenture Covenants" and "Operating Covenants" and the events
of default described under "Events of Default and Remedies" other than clauses
(a), (b), (c), (f) and (g) (solely with respect to the Company) set forth under
"-- Events of Default and Remedies" ("COVENANT DEFEASANCE").
The Company may exercise its legal defeasance options notwithstanding its
prior exercise of the covenant defeasance option. If the Company exercises its
legal defeasance options, payment of the AerCo Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance options, payment of the AerCo Notes may not be
accelerated because of the events of default described under "Events of Default
and Remedies" other than clauses (a),(b),(c),(f) and (g) (solely with respect to
the Company) set forth under "-- Events of Default and Remedies".
In order to exercise either defeasance option, AerCo must irrevocably
deposit in trust (the "DEFEASANCE TRUST") with the Trustee any combination of
cash or obligations of the U.S. Government, as will be sufficient for the
payment of principal, premium (if any), and interest on the AerCo Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivering to the Trustee an opinion of counsel to the
effect that holders of the AerCo Notes will not recognize income, gain or loss
for United States Federal income tax purposes as a result of such deposit and
defeasance and will be subject to United States Federal income tax on the same
amount and in the same manner and at the same times as would have
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<PAGE> 132
been the case if such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such opinion of counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable United States Federal
income tax law).
PRIORITY OF PAYMENTS
Pursuant to the terms of the Indenture and the Cash Management Agreement,
on each Payment Date, the Cash Manager will withdraw all amounts on deposit in
the Collection Account and distribute such amounts in the order of priority set
forth below but, in each case, only to the extent that all amounts ranking prior
thereto have been paid in full.
(i) First, to the Expense Account, or in certain cases directly to the
relevant Expense payees, an amount equal to the Required Expense Amount
and then to the relevant Expense payees;
(ii) Second, in no order of priority inter se, but pro rata, (A) to the
holders of each subclass of Class A Notes, all accrued and unpaid
interest excluding Step-Up Interest, if applicable, on such subclass of
Class A Notes in no order of priority inter se, but pro rata according
to the amount of accrued and unpaid interest on such subclass of Class
A Notes; and (B) pro rata, to any Swap Provider, an amount equal to any
payment (other than Subordinated Swap Payments) due from AerCo pursuant
to any Swap Agreement;
(iii) Third, first, to any persons providing Primary Eligible Credit
Facilities, any amounts then payable to such persons under the terms of
their respective Eligible Credit Facilities, and then, retain in the
Collection Account an amount (the "FIRST COLLECTION ACCOUNT TOP-UP"),
if positive, equal to (A) the Minimum Liquidity Reserve Amount less (B)
amounts available for drawing under any Primary Eligible Credit
Facilities;
(iv) Fourth, to the holders of Class A Notes, in the order of priority by
subclass set forth under "-- Allocation of Principal Among Subclasses
of Notes", an amount equal to the Minimum Principal Payment Amount with
respect to the Class A Notes;
(v) Fifth, to the holders of each subclass of Class B Notes, all accrued
and unpaid interest, excluding Step-Up Interest, if applicable, on such
subclass of Class B Notes in no order of priority inter se, but pro
rata according to the amount of accrued and unpaid interest on such
subclass of Class B Notes;
(vi) Sixth, to the holders of Class B Notes, in the order of priority by
subclass set forth under "-- Allocation of Principal Among Subclasses
of Notes", an amount equal to the Minimum Principal Payment Amount with
respect to the Class B Notes;
(vii) Seventh, to the holders of each subclass of Class C Notes, all
accrued and unpaid interest, excluding Step-Up Interest, if applicable,
on such subclass of Class C Notes in no order of priority inter se, but
pro rata according to the amount of such accrued and unpaid interest on
such subclass of Class C Notes;
(viii) Eighth, to the holders of Class C Notes, in the order of priority by
subclass set forth under "-- Allocation of Principal Among Subclasses
of Notes", an amount equal to the Minimum Principal Payment Amount with
respect to the Class C Notes;
(ix) Ninth, to the holders of each subclass of Class D Notes, all accrued
and unpaid interest, excluding Step-Up Interest, if applicable, on such
subclass of Class D Notes in no order of priority inter se, but pro
rata according to the amount of such accrued and unpaid interest on
such subclass of Class D Notes;
(x) Tenth, to the holders of Class D Notes, in the order of priority by
subclass set forth under "-- Allocation of Principal Among Subclasses
of Notes", an amount equal to the Minimum Principal Payment Amount with
respect to the Class D Notes;
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(xi) Eleventh, first, to any Persons providing any Credit Facilities that
are not Primary Eligible Credit Facilities, any amounts then payable to
such Persons under the terms of their respective Credit Facilities and
then, retain in the Collection Account an amount (the "SECOND
COLLECTION ACCOUNT TOP-UP"), if positive, equal to (A) the Liquidity
Reserve Amount less (B) the sum of the amount of cash reserved under
(iii) above plus the amounts available for drawing under any Eligible
Credit Facilities;
(xii) Twelfth, to the holders of Class A Notes, in the order of priority
by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Scheduled Principal
Payment Amount with respect to the Class A Notes;
(xiii) Thirteenth, to the holders of Class B Notes, in the order of
priority by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Scheduled Principal
Payment Amount with respect to the Class B Notes;
(xiv) Fourteenth, to the holders of Class C Notes, in the order of priority
by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Scheduled Principal
Payment Amount with respect to the Class C Notes;
(xv) Fifteenth, to the holders of Class D Notes, in the order of priority
by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Scheduled Principal
Payment Amount with respect to the Class D Notes;
(xvi) Sixteenth, to the Permitted Accruals balance in the Expense Account,
an amount equal to Permitted Accruals in respect of any Modification
Payments (or any part thereof);
(xvii) Seventeenth, to the holders of each subclass of Notes entitled
thereto, an amount equal to all accrued and unpaid Step-Up Interest on
such subclass, if any, in no order of priority inter se, but pro rata
according to the amount of such accrued and unpaid Step-Up Interest;
(xviii) Eighteenth, to the holders of Class A Notes, in the order of
priority by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Supplemental Principal
Payment Amount with respect to the Class A Notes;
(xix) Nineteenth, to the holders of each subclass of the Class E Notes, the
Class E Note Primary Interest Amount, in no order of priority inter se,
but pro rata according to the amount due on each subclass of AerCo
Group Class E Notes;
(xx) Twentieth, to the holders of Class B Notes, in the order of priority
by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Supplemental Principal
Payment Amount with respect to the Class B Notes;
(xxi) Twenty-first, to the holders of Class A Notes, in the order of
priority by subclass set forth under "Allocation of Principal Among
Subclasses of Notes" an amount equal to the Redemption Price of the
Outstanding Principal Balance, if any, of the Class A Notes;
(xxii) Twenty-second, to the holders of Class B Notes, in the order of
priority by subclass set forth under "Allocation of Principal Among
Subclasses of Notes" an amount equal to the Redemption Price of the
Outstanding Principal Balance, if any, of the Class B Notes;
(xxiii) Twenty-third, to the holders of Class C Notes, in the order of
priority by subclass set forth under "Allocation of Principal Among
Subclasses of Notes" an amount equal to the Redemption Price of the
Outstanding Principal Balance, if any, of the Class C Notes;
(xxiv) Twenty-fourth, to the holders of Class D Notes, in the order of
priority by subclass set forth under "Allocation of Principal Among
Subclasses of Notes" an amount equal to the Redemption Price of the
Outstanding Principal Balance, if any, of the Class D Notes;
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(xxv) Twenty-fifth, in no order of priority inter se, but pro rata, to Swap
Providers in an amount equal to any amounts then payable under the
relevant Swap Agreements which are subordinated in accordance with the
terms thereof ("SUBORDINATED SWAP PAYMENTS");
(xxvi) Twenty-sixth, to investors or other persons in respect of
obligations incurred in connection with Permitted Tax-Related
Dispositions, if any, which are subordinated in accordance with the
terms of the relevant Permitted Tax-Related Dispositions ("SUBORDINATED
TAX-RELATED DISPOSITION PAYMENTS") an amount equal to the amount of
such Subordinated Tax-Related Disposition Payments then payable;
(xxvii) Twenty-seventh, to the holders of the Class E Notes, an amount
equal to all accrued and unpaid interest on the Class E Notes and an
amount equal to the cash portion of the Liquidity Reserve Amount then
on deposit in the Collection Account, in no order of priority inter se,
but pro rata according to the amount due on each subclass of AerCo
Group Class E Notes;
(xxviii)Twenty-eighth, to the holders of the Class E Notes, in the order of
priority by subclass set forth under "-- Allocation of Principal Among
Subclasses of Notes", an amount equal to the Outstanding Principal
Balance of the Class E Notes; and
(xxix) Twenty-ninth, to the Charitable Trust Trustee, all remaining
amounts.
PRIORITY OF PAYMENTS FOLLOWING A DEFAULT NOTICE
Following delivery to AerCo or the Cash Manager of a Default Notice or if
any Event of Default described in clause (e) or (f) under "-- Events of Default
and Remedies" shall have occurred and be continuing, the allocation of payments
described above will not apply and all amounts on deposit in the Collection
Account and the Expense Account will be applied in the following order of
priority:
(i) First, to the Expense Account, or in certain cases directly to the
relevant Expense payees, an amount equal to the Required Expense Amount
and then to the relevant Expense payees;
(ii) Second, in no order of priority inter se, but pro rata, to the
providers of any Primary Eligible Credit Facilities, such amounts as are
required to make any payments due to such providers pursuant to their
respective Primary Eligible Credit Facilities;
(iii) Third, in no order of priority inter se, but (A) pro rata to the
holders of each subclass of Class A Notes, all accrued and unpaid
interest (including Step-Up Interest, if any) on, and all Outstanding
principal of, such subclass and (B) pro rata to any Swap Provider, such
amounts as are required to make any payments (other than Subordinated
Swap Payments) due to such Swap Provider pursuant to any Swap Agreement;
(iv) Fourth, in no order of priority inter se, but pro rata, to the holders
of each subclass of Class B Notes, all accrued and unpaid interest
(including Step-Up Interest, if any) on and all Outstanding principal of
such subclass of Class B Notes;
(v) Fifth, in no order of priority inter se, but pro rata, to the holders
of each subclass of Class C Notes, all accrued and unpaid interest
(including Step-Up Interest, if any) on and all Outstanding principal of
such subclass of Class C Notes;
(vi) Sixth, in no order of priority inter se, but pro rata, to the holders
of each subclass of Class D Notes, all accrued and unpaid interest
(including Step-Up Interest, if any) on and all Outstanding principal of
such subclass of Class D Notes;
(vii) Seventh, in no order of priority inter se, but pro rata, to the
providers of any credit or liquidity enhancement facilities in favor of
AerCo other than Primary Eligible Credit Facilities, such amounts as are
required to make any payment due to such providers pursuant to their
respective facilities;
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(viii) Eighth, in no order of priority inter se, but pro rata, to any Swap
Provider, such amounts as are required to make any Subordinated Swap
Payments due to such Swap Provider pursuant to any Swap Agreement;
(ix) Ninth, in no order of priority inter se, but pro rata, to any investor
or other person in respect of any obligation incurred in connection with
any Permitted Tax-Related Disposition, such amounts as are required to
make any Subordinated Tax-Related Disposition Payments due to such
investor or other person;
(x) Tenth, in no order of priority inter se, but pro rata, to the holders
of each subclass of the Class E Notes all accrued and unpaid interest on
and all Outstanding Principal of such subclass of Class E Notes; and
(xi) Eleventh, to the Charitable Trust Trustee, all remaining amounts.
INDENTURE COVENANTS
No Release of Obligations. The Company will not take, or knowingly permit
any subsidiary to take, any action which would amend, terminate (other than any
termination in connection with the replacement of such agreement with an
agreement on terms substantially no less favorable to the Company and its
subsidiaries than the agreement being terminated) or discharge or prejudice the
validity or effectiveness of the Indenture (other than as permitted therein),
the Security Trust Agreement, the Intercompany Loans, the Cash Management
Agreement, the Administrative Agency Agreement, the Deposit Agreement or any
Servicing Agreement or permit any party to any such document to be released from
such obligations, except, in each case, as permitted or contemplated by the
terms of such document, and provided that such actions may be taken or
permitted, and such releases may be permitted, if the Company shall have first
obtained an authorizing resolution of the Directors of the Company determining
that such action, permitted action or release does not materially adversely
affect the interests of the Noteholders and having given notice thereof to the
Rating Agencies; and provided further, that in any case (i) the Company will not
take any action which would result in any amendment or modification to the
conflicts standard or duty of care in such agreements and (ii) there must be at
all times an administrative agent, a cash manager and, unless a Servicer resigns
prior to the appointment of a replacement servicer as a result of any failure to
pay amounts due and owing to it and notice of such resignation is given to the
Rating Agencies, one or more Servicers with respect to all Aircraft in the
Portfolio.
Limitation on Encumbrances. Under the terms of the Indenture, the Company
will not, and will not permit any subsidiary to, create, incur, assume or suffer
to exist any mortgage, pledge, lien, encumbrance, charge or security interest
(in each case, an "ENCUMBRANCE"), including, without limitation, any conditional
sale, any sale with recourse against the seller or any affiliate of the seller,
or any agreement to give any security interest over or with respect to any of
the Company's or subsidiary's assets (excluding Segregated Funds) including,
without limitation, all shares of capital stock, all beneficial interests in
trusts, all ordinary shares and preferred shares, any options, warrants and
other rights to acquire such shares or interests ("STOCK") and any Indebtedness
of any subsidiary held by the Company or a subsidiary thereof.
Notwithstanding the foregoing, the Company may create, incur, assume or
suffer to exist (i) any Permitted Encumbrance, (ii) any security interest
created or required to be created under the Security Trust Agreement, (iii)
Encumbrances over rights in or derived from leases, upon confirmation from the
Rating Agencies in advance that such action or event will not result in the
lowering or withdrawal of any rating assigned by any Rating Agency to any of the
AerCo Notes then Outstanding, provided that any transaction or series of
transactions resulting in such Encumbrance, taken as a whole, does not
materially adversely affect the amount of Collections that would have been
received by the Company from such Lease had such Encumbrance not been created,
(iv) Encumbrances over any Aircraft, Leases or funds on deposit in the Tax
Defeasance Account or investments in respect thereof created in connection with
any Permitted Tax-Related Disposition or (v) any other Encumbrance the validity
or applicability of which is being contested in good faith in appropriate
proceedings by the Company or any of its subsidiaries.
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As used in this Prospectus, "AFFILIATE" means, with respect to any person,
any other person that, directly or indirectly, controls, is controlled by or is
under common control with, such person or is a director or officer of such
person; "CONTROL" of a person means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting Stock, by contract or otherwise;
and "PERMITTED ENCUMBRANCE" means (i) any lien for taxes, assessments and
governmental charges or levies not yet due and payable or which are being
contested in good faith by appropriate proceedings; (ii) in respect of any
Aircraft, any liens of a repairer, carrier or hanger keeper arising in the
ordinary course of business by operation of law or any engine or parts-pooling
arrangements or other similar lien; (iii) any permitted lien or encumbrance on
any Aircraft, Engines or Parts as defined under any Lease thereof (other than
liens or encumbrances created by the relevant lessor); (iv) any liens created by
or through or arising from debt or liabilities or any act or omission of any
Lessee in each case either in contravention of the relevant Lease (whether or
not such Lease has been terminated) or without the consent of the relevant
Lessor (provided that if such Lessor becomes aware of any such lien, such Lessor
shall use commercially reasonable efforts to have any such liens lifted); (v)
any head lease, lease, conditional sale agreement or Purchase Option existing on
the Closing Date, with respect to the Initial Aircraft, or, with respect to any
Additional Aircraft, on the date such Aircraft is acquired, or Aircraft
Agreement meeting the requirements of clauses (iii), (v) or (vi) of the second
paragraph under the "Limitation on Aircraft Sales" covenant: (vi) any lien for
air navigation authority, airport tending, gate or handling (or similar) charges
or levies; (vii) any lien created in favor of the Company, or any of its
subsidiaries or the Security Trustee and (viii) any lien not referred to in (i)
through (vii) above which would not adversely affect the owner's rights and does
not exceed the greater of 1% of the aggregate Initial Appraised Value of the
Portfolio and $250,000 per Aircraft.
Limitation on Restricted Payments. Under the terms of the Indenture, the
Company will not, and will not permit any of its subsidiaries, to (i) declare or
pay any dividend or make any distribution on its Stock held by persons other
than the Company or any of its subsidiaries; (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Stock of the Company or any of its
subsidiaries held by and on behalf of persons other than the Company, any of its
subsidiaries or other Persons permitted under the requirements of (ii)(B) under
the "Limitation on the Issuance, Delivery and Sale of Capital Stock" covenant;
(iii) make any interest, principal or premium payment, if any, on the AerCo
Notes or make any voluntary or optional repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of the Company or any of its
subsidiaries that is not owed to the Company or any of its subsidiaries other
than in accordance with, "-- Payment of Principal and Interest" or (iv) make any
investments (other than Permitted Account Investments, investments permitted
under the "Limitation on Engaging in Business Activities" covenant, Allowed
Restructurings and investments in any subsidiaries that own or lease Aircraft;
provided that written notification of the organization or acquisition of each
such subsidiary shall have been given to each Rating Agency).
The term "INVESTMENT" for purposes of the above restriction shall mean any
loan or advance to a person or entity, any purchase or other acquisition of any
capital stock, warrants, rights, options, obligations or other securities of
such person or entity, any capital contribution to such person or entity or any
other investment in such person or entity. For the avoidance of doubt,
"investment" shall not include any obligation of a purchaser of an Aircraft to
make deferred or installment payments pursuant to any Aircraft Agreement
specified in clauses (iii), (v) or (vi) of the second paragraph under
"Limitations on Aircraft Sales" below so long as AerCo Group retains a security
interest in the relevant Aircraft until all such obligations are discharged.
Limitation on Dividends and Other Payment Restrictions. Under the terms of
the Indenture, the Company will not, and will not permit any of its subsidiaries
to, create or otherwise suffer to exist any consensual encumbrance or
restriction of any kind on the ability of any subsidiary to (i) declare or pay
dividends or make any other distributions permitted by applicable law, or
purchase, redeem or otherwise acquire for value, the Stock of the Company or
such subsidiary, as the case may be, (ii) pay any Indebtedness owed to the
Company or such subsidiary, (iii) make loans or advances to the Company or such
subsidiary or (iv) transfer any of its property or assets to the Company or any
other subsidiary thereof.
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The foregoing provisions shall not restrict any consensual encumbrances or
other restrictions: (i) existing on July 15, 1998, with respect to the Initial
Aircraft, or, with respect to any Additional Aircraft, on the date such Aircraft
is acquired, under any Related Document, and any amendments, extensions,
refinancings, renewals or replacements of such documents; provided that such
consensual encumbrances and restrictions in any such amendments, extensions,
refinancings, renewals or replacements are no less favorable in any material
respect to the holders of the AerCo Notes than those previously in effect and
being amended, extended, refinanced, renewed or replaced; or (ii) in the case of
clause (iv) in the preceding paragraph, (A) that restrict in a customary manner
the subletting, assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset or (B) existing by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or consensual encumbrance on, any property or assets of the Company or any
subsidiary not otherwise prohibited by the Indenture. Nothing contained in this
covenant shall prevent the Company or any subsidiary from creating, incurring,
assuming or suffering to exist any Encumbrances not otherwise prohibited under
the Indenture.
Limitation on Engaging in Business Activities. Under the terms of the
Indenture, the Company will not, and will not permit any subsidiary to, engage
in any business or activity other than:
(i) (A) purchasing or otherwise acquiring aircraft assets both directly
and indirectly through the acquisition of aircraft-owning entities
(subject to the limitations set forth in the "Limitation on Aircraft
Acquisitions" covenant), (B) owning (including, subject to the
limitations set forth in the "Limitation on Aircraft Acquisitions"
covenant, acquiring Additional Aircraft), holding, converting,
maintaining, modifying, managing, operating, leasing, re-leasing and,
subject to the limitations set forth in the "Limitations on Aircraft
Sales" covenant, selling or otherwise disposing of the Aircraft
(including Permitted Tax-Related Dispositions) and (C) in the case of
AerCo Ireland II, entering into the AerFi Share Purchase Agreement
and entering into all contracts and engaging in all related
activities incidental thereto, including from time to time accepting,
exchanging, holding or permitting any of its subsidiaries to accept,
exchange or hold (an "ALLOWED RESTRUCTURING") promissory notes,
contingent payment obligations or equity interests, of Lessees or
their affiliates issued in connection with the bankruptcy,
reorganization or other similar process, or in settlement of
delinquent obligations or obligations anticipated to be delinquent,
of such Lessees or their respective affiliates in the ordinary course
of business;
(ii) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of, any AerCo Group Member or any Future
AerCo Entity, in each case on such terms and in such manner as the
Directors see fit and (whether or not the Company, any member of the
AerCo Group or any future AerCo Entity derives a benefit therefrom)
so long as such loans, guarantees or other supports are provided in
connection with the purposes set forth in clause (i) of this
covenant;
(iii) financing or refinancing the business activities described in clause
(i) of this covenant through the offer, sale and issuance of any
securities of the Company, upon such terms and conditions as the
Directors see fit, for cash or in payment or in partial payment for
any property purchased or otherwise acquired by AerCo Group or any
Future AerCo Entity;
(iv) engaging in currency and interest rate exchange transactions for the
purposes of avoiding, reducing, minimizing, hedging against or
otherwise managing the risk of any loss, cost, expense or liability
arising, or which may arise, directly or indirectly, from any change
or changes in any interest rate or currency exchange rate or in the
price or value of any of the property or assets of the Company or any
of its subsidiaries within limits determined by the Directors from
time to time and submitted to the Rating Agencies, including but not
limited to dealings, whether involving purchases, sales or otherwise,
in foreign currency, spot and forward interest rate exchange
contracts, forward interest rate agreements, caps, floors and collars,
futures, options, swaps, and any other currency, interest rate and
other similar hedging arrangements and such other instruments as are
similar to, or derivatives of, any of the foregoing; provided however
that the Company shall not and shall not permit any of its
subsidiaries to, enter into any such hedging arrangements or other
instruments (x)
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that are primarily entered into for speculative purposes or (y) that are
not U.S. dollar-denominated interest rate swaps, swaptions, caps or
floors without Rating Agency Confirmation;
(v) (A) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, syndicates or partnerships of all
kinds in any part of the world for the purposes set forth in clause
(i) above; provided that written notification shall have been given to
each Rating Agency that such company, trust, syndicate or partnership
is set up in compliance with the Indenture, (B) acquiring, holding and
disposing of shares, securities and other interests in any such
company, syndicate or partnership and (C) disposing of shares,
securities and other interests in, or causing the dissolution of, any
existing subsidiary provided that any such disposition which results
in the disposition of an Aircraft meets the requirements set forth
under the "Limitation on Aircraft Sales" covenant; and
(vi) taking out, acquiring, surrendering and assigning policies of
insurance and assurances with any insurance company or companies which
the Company or any of its subsidiaries may think fit and paying the
premiums thereon.
Limitation on Indebtedness. Under the terms of the Indenture, the Company
will not, and will not permit any of its subsidiaries to, incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, whether present or
future (in any such case, to "INCUR"), Indebtedness.
For the purposes of the Indenture, "INDEBTEDNESS" means, with respect to
any person at any date of determination (without duplication), (i) all
indebtedness of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto), (iv) all
obligations of such person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of purchasing such property or service or taking delivery and title thereto
or the completion of such services, and payment deferrals arranged primarily as
a method of raising finance or financing the acquisition of such property or
service, (v) all obligations of such person under a lease of (or other agreement
conveying the right to use) any property, whether real, personal or mixed, that
is required to be classified and accounted for as a capital lease obligation
under U.S. GAAP, (vi) all Indebtedness (as defined in clauses (i) through (v) of
this paragraph) of other persons secured by a lien on any asset of such person,
whether or not such Indebtedness is assumed by such person, and (vii) all
Indebtedness (as defined in clauses (i) through (v) of this paragraph) of other
persons guaranteed by such person.
Notwithstanding the foregoing, the Company and any subsidiary may incur
each and all of the following: (i) Indebtedness in respect of any AerCo Note
issued on July 15, 1998 and any Subclass D-1 Notes and Subclass E-1 Notes issued
in respect of any Remaining Aircraft or Substitute Aircraft; (ii) Indebtedness
in respect of any Refinancing Notes or other Indebtedness issued in connection
with the repurchase, acquisition, defeasance or retirement for value of AerCo
Notes other than the Class E Notes; provided that (A) such Refinancing Notes or
other Indebtedness receive ratings from the Rating Agencies at the close of such
Refinancing or issuance equal to or higher than those of the subclass being
refinanced or repurchased, acquired, defeased or retired (determined at the date
of incurrence), (B) taking into account such Refinancing or repurchase,
acquisition, defeasance or retirement for value, the Company receives
confirmation prior to such transaction from the Rating Agencies that such
transaction will not result in the lowering or withdrawal of any rating assigned
by any Rating Agency to any AerCo Notes Outstanding at such time, and (C) the
net proceeds of any such Refinancing or issuance shall be used only to repay the
Outstanding Principal Balance of the subclass of the AerCo Notes being so
refinanced or repurchased, acquired, defeased or retired (plus any Redemption
Premium and transaction expenses relating thereto); (iii) Indebtedness in
respect of guarantees by AerCo or any subsidiary of any other member of AerCo
Group (other than guarantees described in clause (v)); provided that no such
Indebtedness in respect of any member of AerCo Group other than AerCo or any
subsidiary of AerCo shall be incurred if it would materially adversely affect
the AerCo Noteholders; (iv) Indebtedness in respect of any Additional Notes
incurred in connection with a
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Permitted Additional Aircraft Acquisition; provided that (A) taking into account
the incurrence of such Indebtedness, AerCo receives confirmation prior thereto
that the incurrence of such Indebtedness will not result in the lowering or
withdrawal of any rating assigned by any Rating Agency to any subclass of the
AerCo Notes Outstanding at such time and (B) the net proceeds of such
Indebtedness shall be used only to finance such Permitted Additional Aircraft
Acquisition and (C) such Additional Notes will be cross-collateralized with all
AerCo Notes Outstanding by the collateral under the Security Trust Agreement;
(v) Indebtedness in respect of guarantees by AerCo or any subsidiary of
Indebtedness incurred by any Future AerCo Entity (other than a subsidiary of
AerCo) in connection with a Permitted Additional Aircraft Acquisition; provided
that (A) such Future AerCo Entity shall have guaranteed the AerCo Notes, (B) the
Indebtedness being guaranteed would be permitted pursuant to clause (ii) or (iv)
above if such Indebtedness were incurred directly by AerCo or any subsidiary in
connection with such Permitted Additional Aircraft Acquisition and (C) the
Indebtedness being guaranteed was issued by such Future AerCo Entity under an
indenture, the terms of which (including the covenants and other obligations of
such Future AerCo Entity thereunder) are substantially similar to those of the
Indenture; (vi) Indebtedness to aircraft sellers pursuant to aircraft
acquisition or similar agreements; (vii) Indebtedness under intercompany loans
or any agreement between AerCo or any of its subsidiaries and any other members
of AerCo Group (each an "INTERCOMPANY LOAN"); provided that any Indebtedness
owed by any member of AerCo Group to AerCo shall be evidenced by promissory
notes that are pledged to the Security Trustee and written notification shall
have been given to each Rating Agency of the incurrence of such Indebtedness,
(viii) Indebtedness of AerCo Group under any credit or liquidity enhancement
facility provided in favor of AerCo Group, provided that the Issuer shall
receive Rating Agency Confirmation prior to entering into any Primary Eligible
Credit Facility; and (ix) obligations to each investor or other person in
respect of the cash proceeds in the Tax Defeasance Account and any Subordinated
Tax-Related Payments pursuant to the related Permitted Tax-Related Disposition
and any related assignment and assumption agreements and documents related
thereto.
As used in this Prospectus, "GUARANTEE" means any obligation, contingent or
otherwise, of any person directly or indirectly guaranteeing any Indebtedness or
other obligation of any other person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other person or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the
term "guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "guarantee" when used as a verb has a
corresponding meaning.
Limitation on Aircraft Sales. Under the terms of the Indenture, the
Company will not, and will not permit any of its subsidiaries to, sell, transfer
or otherwise dispose of any Aircraft or any interest therein.
Notwithstanding the foregoing, the Company and any of its subsidiaries will
be permitted to sell, transfer or otherwise dispose of, directly or indirectly,
(a) any engines owned on July 15, 1998, with respect to the Initial Aircraft,
or, with respect to any Remaining Aircraft, Substitute Aircraft or Additional
Aircraft, on the date such Aircraft is acquired, or any replacements thereof
("ENGINES") or parts installed in or attached to any Aircraft other than Engines
("PARTS"), or (b) one or more Aircraft or an interest therein (i) pursuant to a
Purchase Option or other agreements of a similar character existing on July 15,
1998, with respect to the Initial Aircraft, or, with respect to any Remaining
Aircraft, Substitute Aircraft or Additional Aircraft, on the date such Aircraft
is acquired, (ii) within or among the Company and its subsidiaries without
limitation, and among the Company or any of its subsidiaries and any other
member of AerCo Group if such sale, transfer or disposition, as the case may be,
would not materially adversely affect the AerCo Noteholders; provided, further,
that written notification shall have been given to each Rating Agency of such
sale, transfer or disposition, (iii) pursuant to any Aircraft Agreement as long
as such sale does not result in a Concentration Default, and the net present
value of the cash Net Sale Proceeds is not less than the Note Target Price, (iv)
pursuant to receipt of insurance proceeds in connection with an event of loss,
(v) pursuant to an Aircraft Agreement that is designed to allow a person
unrelated to the Company or any other member of the AerCo Group to realize tax
benefits associated with the Aircraft or other assets being sold (any such sale,
transfer or
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other disposition, a "PERMITTED TAX-RELATED DISPOSITION"), provided that the
Company receives confirmation prior to entering into such Aircraft Agreement
that the performance of such agreement will not result in the lowering or
withdrawal of any rating assigned by any Rating Agency to each subclass of AerCo
Notes Outstanding at such time and all obligations of the Company or any other
member of AerCo Group (other than the obligation to pay the Tax Defeasance
Amount) under such Aircraft Agreement or to any person providing credit support
for such obligations are payable only under Subordinated Tax-Related Disposition
Payments as set forth under "-- Priority of Payments", or (vi) pursuant to an
Aircraft Agreement and, in any one calendar year, not exceeding 10% of the
Adjusted Portfolio Value as determined by the most recent Appraisal obtained for
such calendar year; provided that (x) the Directors unanimously confirm that
each such sale does not materially adversely affect AerCo and the AerCo
Noteholders and (y) such sale does not result in a Concentration Default.
For the purpose of this covenant, the net present value of the cash Net
Sale Proceeds of any sale, transfer or other disposition of any Aircraft shall
mean the present value of all payments received or to be received by AerCo Group
in respect of such Aircraft from the date of execution or option granting date,
as the case may be, of the relevant Aircraft Agreement through and including the
date of transfer of title to such Aircraft, discounted back to the date of
execution or option granting date, as the case may be, of such Aircraft
Agreement at the weighted average cost of funds of AerCo Group (based on the
cost of funds on the Payment Date immediately preceding such date (excluding for
such purpose any interest paid or accrued on the Class E Notes other than the
Class E Notes Interest Amount, but taking into account any Swap Agreements)).
The "NOTE TARGET PRICE" means, in respect of any Aircraft, an amount equal
to 103% of the aggregate Outstanding Principal Balance of Class A, Class B,
Class C and Class D Notes, together with any accrued but unpaid interest thereon
and any related Swap Breakage Costs, allocable to such Aircraft on the date of
the sale agreement or purchase option date, as the case may be. On any date, the
Outstanding Principal Balance of Class A, Class B, Class C and Class D Notes
allocable to an Aircraft will equal the product of (i) (A) the Adjusted Base
Value of such Aircraft divided by (B) the Adjusted Portfolio Value and (ii) the
aggregate Outstanding Principal Balance of the Class A, Class B, Class C and
Class D Notes, in each case on the most recent Payment Date.
"AIRCRAFT AGREEMENT" means any lease, sub-lease, conditional sale
agreement, finance lease, hire purchase agreement or other agreement (other than
an agreement relating to maintenance, modification or repairs) or any purchase
option granted to a person other than the Company or its subsidiaries or any
other member of AerCo Group to purchase an Aircraft pursuant to a purchase
option agreement, in each case pursuant to which any person acquires or is
entitled to acquire legal title, or the economic benefits of ownership of, such
Aircraft.
"NET SALE PROCEEDS" means, with respect to any sale or other disposition of
any assets, the aggregate amount of cash received or to be received from time to
time (whether as initial or deferred consideration) by or on behalf of the
seller in connection with such transaction after deducting therefrom (without
duplication) (a) reasonable and customary brokers' commissions and other similar
fees and commissions (including fees received by the Servicer under the
Servicing Agreement) and (b) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid to a person that is not an affiliate of the seller and are
properly attributable to such transaction or to the asset that is the subject
thereof.
"CONCENTRATION DEFAULT" means an Event of Default under "Operating
Covenants -- Concentration Limits", as such covenant may be adjusted from time
to time upon approval of the Rating Agencies, which would arise if effect were
given to any sale, transfer or other disposition or any purchase or other
acquisition as of the date of the binding sale or purchase agreement regardless
of whether such sale, transfer or other disposition or purchase or other
acquisition is scheduled or expected to occur after the date of such binding
agreement.
Limitation on Aircraft Acquisitions. Under the terms of the Indenture, the
Company will not, and will not permit any of its subsidiaries, to purchase or
otherwise acquire any Aircraft other than the Initial Aircraft or any interest
therein.
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Notwithstanding the foregoing, the Company and any of its subsidiaries will
be permitted to: (A) purchase or otherwise acquire, directly or indirectly,
Additional Aircraft; provided that (i) no Event of Default shall have occurred
and be continuing, (ii) all Scheduled Principal Payment Amounts on the AerCo
Notes have been paid, (iii) the acquisition does not result in a Concentration
Default, and (iv) after giving effect to such acquisition, no more than 90% by
appraised Base Value of the Portfolio consists of Stage 3 narrowbody aircraft
and regional jets, no more than 50% consists of Stage 3 widebody aircraft and no
more than 15% consists of Stage 2 aircraft and turboprop aircraft without the
Directors of the Company having obtained confirmation in advance that such
action will not result in the lowering or withdrawal of any rating assigned by
any Rating Agency to any of the AerCo Notes Outstanding at such time; (B) act as
sponsor of a Future AerCo Entity other than a subsidiary of AerCo that would
fund an acquisition of aircraft assets with indebtedness guaranteed by AerCo
pursuant to the "Limitation on Indebtedness" covenant as described above;
provided that, if such acquisition of aircraft assets had been consummated
directly by AerCo, such acquisition would have been permitted pursuant to the
preceding clause (A) (each of the transactions described in clauses (A) and (B),
a "PERMITTED ADDITIONAL AIRCRAFT ACQUISITION"); and (C) purchase or otherwise
acquire, directly or indirectly, Remaining Aircraft or Substitute Aircraft.
Limitation on Modification Payments and Capital Expenditures. Under the
terms of the Indenture, the Company will not, and will not permit any of its
subsidiaries to, make any capital expenditures for the purpose of effecting any
optional improvement or modification of any Aircraft, or for the optional
conversion of any Aircraft from a passenger aircraft to a freighter or mixed-use
aircraft, for the purpose of purchasing or otherwise acquiring any Engines or
Parts outside of the ordinary course of business (each such expenditure, a
"MODIFICATION PAYMENT"). Notwithstanding the foregoing, the Company may, and may
permit any of its subsidiaries to, make Modification Payments; provided that (i)
each Modification Payment, together with all other Modification Payments made
after July 15, 1998 pursuant to the covenant with respect to any single
Aircraft, do not exceed the aggregate amount of funds that would be necessary to
perform one incidence of heavy maintenance (as described in the applicable
servicing agreement) on such Aircraft, including the airframe and the related
Engines thereof; (ii) such Modification Payment is included in the annual
operating budget of AerCo Group and approved by the Directors; (iii) the amount
of funds necessary to make such Modification Payment shall have been accrued in
advance as a Permitted Accrual in the Expense Account through transfers into the
Expense Account pursuant to the Indenture or otherwise allowed to be paid under
Permitted Indebtedness; and (iv) the aggregate amount of all Modification
Payments made by members of AerCo Group, taken as a whole, pursuant to this
covenant after July 15, 1998, including such Modification Payment, shall not
exceed 5% of the aggregate Initial Appraised Value of all Aircraft acquired by
AerCo Group.
Limitation on Consolidation, Merger and Transfer of Assets. Under the
terms of the Indenture, the Company will not, and will not permit any subsidiary
to, consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of its property and assets (as an entirety or substantially an
entirety in one transaction or in a series of related transactions) to, any
other person, or permit any other person to merge with or into the Company or
any subsidiary, unless (i) the resulting entity is a special purpose
corporation, the charter of which is substantially similar to the Memorandum and
Articles of Association of the Company or the equivalent charter document of
such subsidiary, as the case may be, and, after such consolidation, merger,
sale, conveyance, transfer, lease or other disposition, payments from such
resulting entity to the holders of the AerCo Notes do not give rise to any
withholding tax payments less favorable to the holders of the AerCo Notes than
the amount of any withholding tax payments which would have been required had
such event not occurred, (ii) in the case of consolidation, merger or transfer
by the Company, the surviving successor or transferee entity shall expressly
assume all of the obligations of the Company in the Indenture, the AerCo Notes
and each other Related Document to which the Company is then a party, (iii) the
Directors shall have obtained confirmation in advance that such action or event
will not result in the lowering or withdrawal of any rating assigned by any
Rating Agency to any of the AerCo Notes, (iv) immediately after giving effect to
such transaction, no Event of Default shall have occurred and be continuing, and
(v) the Company delivers to the Trustee an officers' certificate and an opinion
of counsel, in each case stating that such consolidation, merger or transfer and
such supplemental indenture comply with the above criteria and, if applicable,
the "Limitation on Aircraft Sales" covenant and that all conditions precedent
provided for in the Indenture relating to such
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transaction have been complied with; provided that this covenant shall not apply
to any such consolidation, merger, sale, conveyance, transfer, lease or
disposition (a) within and among the Company and any of its subsidiaries and
among AerCo Group if such consolidation, merger, sale, conveyance, transfer,
lease or disposition, as the case may be, would not materially adversely affect
the holders of the AerCo Notes, (b) complying with the terms of the "Limitation
on Aircraft Sales" covenant or (c) effected as part of a single transaction
providing for the redemption or defeasance of the AerCo Notes in accordance with
the terms thereof as described under "-- Redemption" or "-- Defeasance",
respectively.
Limitation on Transactions with Affiliates. Under the terms of the
Indenture, the Company will not, and will not permit any subsidiary to, directly
or indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with GPA or any affiliate of the Company or any
subsidiary, except upon fair and reasonable terms no less favorable to the
Company or such subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing therefor,
in a comparable arm's-length transaction with a person that is not such an
affiliate.
The foregoing limitation does not limit, and shall not apply to: (i) any
transaction pursuant to the terms of the Related Documents; (ii) any transaction
within and among the Company or any of its subsidiaries and any other member of
the AerCo Group, provided, that no such transaction, other than between the
Company and any of its subsidiaries, shall be consummated if it would materially
adversely affect the holders of the AerCo Notes; (iii) the payment of reasonable
and customary regular fees to, and the provision of reasonable and customary
liability insurance in respect of, Directors; (iv) any Permitted Additional
Aircraft Acquisition or any transaction complying with the "Limitation on
Aircraft Sales" covenant; (v) any payments of the types referred to in clauses
(i) or (ii) of the "Limitation on Restricted Payments" covenant and not
prohibited thereunder; and (vi) entering into any transaction effected as part
of a single transaction providing for the redemption or defeasance of the AerCo
Notes in accordance with the terms thereof as described under "-- Redemption" or
"-- Defeasance", respectively.
Limitation on the Issuance, Delivery and Sale of Stock. Under the terms of
the Indenture, the Company will not (i) issue, deliver or sell any shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting, other than such shares, interests, participations or other
equivalents existing on July 15, 1998) in equity, including without limitation,
all ordinary shares of the Company, or (ii) sell, or permit any subsidiary,
directly or indirectly, to issue, deliver or sell, any shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting, other than such shares, interests, participations or other
equivalents existing on July 15, 1998) in equity except (A) to the Charitable
Trust Trustee (or its nominees), (B) issuances or sales of shares of Stock of
foreign subsidiaries of the Company to nationals in the jurisdiction of
incorporation or organization of such subsidiary, as the case may be, to the
extent required by applicable law or necessary in the determination of the
Directors to avoid an adverse tax consequence in any such jurisdiction, (C) the
pledge of shares in AerCo's subsidiaries pursuant to the Security Trust
Agreement, (D) the sale, delivery or transfer of any Stock of any member of
AerCo Group in connection with the redemption or defeasance of the AerCo Notes,
in accordance with the terms set forth under "-- Redemption" or "-- Defeasance",
respectively, (E) the sale of any Stock in connection with any sale of Aircraft
in compliance with the terms of the "Limitation on Aircraft Sales" covenant and
(F) the sale, delivery, transfer or pledge of any Stock of any AerCo Group
member to or for the benefit of any other AerCo Group member; provided that
notification is given to the Rating Agencies.
In addition, under the terms of the Shareholders Undertaking, the
Charitable Trust Trustee and GPA Group have agreed that while the AerCo Notes
are outstanding they will not, without prior written approval of the Trustee and
all of the Directors, take any action in their capacity as shareholders of the
Company to alter the share capital or issue any additional shares of the
Company.
Bankruptcy and Insolvency. Under the terms of the Indenture, the Company
(i) will promptly provide the Trustee and the Rating Agencies with notice of the
institution of any proceeding by or against the Company or any of its
subsidiaries, as the case may be, seeking to adjudicate any of them a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or
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composition of their debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for either or
for any substantial part of their property and (ii) will not, without an
affirmative unanimous written resolution of the Directors take any action to
waive, repeal, amend, vary, supplement or otherwise modify its charter
documents.
In addition, under the terms of the Shareholders Undertaking, the
Charitable Trust Trustee and GPA Group have agreed that while the AerCo Notes
are outstanding they will not, without prior written approval of the Trustee and
all of the Directors, take any action in their capacity as shareholders of the
Company (i) to cause the Company to institute any proceeding seeking liquidation
or insolvency (or similar proceeding), (ii) in the case of any such proceeding
instituted against the Company, to authorize or consent to such proceedings,
(iii) to terminate the Company's corporate existence, (iv) to waive or amend the
Memorandum and Articles of Association of the Company or (v) to transfer any
part of the capital stock of the Company or any interest therein unless the
transferee (a) in the case of the Capital Stock held by the Nominees for the
Charitable Trust Trustee, is a trustee of a trust formed for charitable purposes
substantially identical to those for which the Charitable Trust is established
and (b) enters into an agreement substantially identical to the Shareholders
Undertaking in favor of the Trustee.
OPERATING COVENANTS
Concentration Limits. Unless the Directors obtain prior written
confirmation from each of the Rating Agencies that no lowering or withdrawal of
the then current rating of any subclass of AerCo Notes will result, AerCo will
not permit any of its subsidiaries to lease or re-lease any Aircraft if entering
into such proposed lease would cause the Portfolio (excluding any Aircraft then
subject to an Aircraft Agreement and to be disposed of within one year from the
date of effectiveness of such lease (other than any Aircraft with respect to
which AerCo Group has entered into a binding agreement to acquire and which the
Directors reasonably expect to acquire within 180 days from the date of
effectiveness of such agreement) but including any Aircraft with respect to
which a member of AerCo Group retains an interest including a right to lease
rentals or other payments, finance lease payments, installment purchase payments
or any other payments with respect to such Aircraft) to exceed any of the
concentration limits set forth below (the "CONCENTRATION LIMITS"); provided that
the Indenture will permit breaches of such Concentration Limits upon any
renewal, extension or restructuring of any Lease.
<TABLE>
<CAPTION>
LESSEE CONCENTRATION LIMITS PERCENTAGE OF
MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
---------------------
<S> <C>
Single Lessees rated BBB/Baa2 (or the equivalent) or
better................................................ 15%
Other Single Lessees................................... 10%
Five largest Lessees................................... 35%
</TABLE>
<TABLE>
<CAPTION>
COUNTRY CONCENTRATION LIMITS PERCENTAGE OF
MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
---------------------
<S> <C>
United States.......................................... 25%
Countries rated BBB/Baa2 (or the equivalent) or
better(1)............................................. 20%
Other.................................................. 15%
</TABLE>
<TABLE>
<CAPTION>
REGION CONCENTRATION LIMITS PERCENTAGE OF
MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
---------------------
<S> <C>
Developed Market Region(3)............................. 50%
Emerging Market Region(3).............................. 25%
Other(3)............................................... 20%(4)
Asia/Pacific(3)........................................ 55%
</TABLE>
--------------------
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(1) Based on the sovereign foreign currency debt rating assigned by the
Rating Agencies to the country in which a Lessee is habitually based at
the time the relevant Lease is executed.
(2) Percentage to be obtained by dividing the aggregate most recent
Appraised Values of all Aircraft operating or to be operated by Lessees
habitually based in the applicable country or region by the aggregate
most recent Appraised Values of all Aircraft then owned by AerCo Group.
(3) The designations of Emerging Markets and Developed Markets are as
determined and published by Capital International Perspective S.A.
("MSCI") from time to time based on, among other things, gross domestic
product levels, regulation of foreign ownership of assets, applicable
regulatory environment, exchange controls and perceived investment risk.
The current designations are as set out below:
<TABLE>
<CAPTION>
REGION COUNTRY
------ -------
<S> <C>
Developed Markets
Europe....................... EU (except Greece and Luxembourg), Norway and Switzerland
North America................ Canada and United States
Pacific...................... Australia, Hong Kong, Japan, New Zealand and Singapore
Emerging Markets
Asia......................... China, India, Indonesia, South Korea, Malaysia, Pakistan,
Philippines, Sri Lanka, Taiwan and Thailand
Europe and
Middle East............... Czech Republic, Greece, Hungary, Israel, Jordan, Poland,
Russia and Turkey
Latin America................ Argentina, Brazil, Chile, Colombia, Mexico, Peru and
Venezuela
Other.......................... All other countries (generally those that have small or
underdeveloped capital markets, including Fiji)
</TABLE>
(4) In addition, within the "Other" designation, no more than 10% of the
most recent Appraised Value of the Portfolio shall be leased to Lessees
habitually based in "Other" countries rated below BBB/Baa2 (or the
equivalent) and no more than 5% of the most recent Appraised Value of
the Portfolio shall be leased to Lessees habitually based in "Other"
countries in Africa.
In addition, the Indenture will not permit the Company or any subsidiary to
lease Aircraft operated or to be operated by Lessees domiciled in (i) certain
countries and (ii) certain other countries without procuring political risk
insurance. The list of prohibited countries and countries with respect to which
political risk insurance must be procured may be modified from time to time upon
the approval of the Rating Agencies.
The Indenture contains no limitations with respect to the country or region
where any sublessees of Aircraft operated or to be operated are domiciled if (i)
such sublease is permitted under the relevant Lease (including by reason of
consent or waiver, if applicable) or renewed Lease (including by reason of
consent or waiver, if applicable) and (ii) the relevant Lessee is either a
signatory to a Lease or a renewed Lease.
Compliance with Law, Maintenance of Permits. Under the terms of the
Indenture, the Company will (i) comply, and cause each of its subsidiaries to
comply, in all material respects with all applicable laws, (ii) obtain, and
cause each of its subsidiaries to obtain, all material governmental (including
regulatory) registrations, certificates, licenses, permits and authorizations
required for such person's use and operation of the Aircraft, including, without
limitation, a current certificate of airworthiness for each Aircraft (issued by
the applicable aviation authority and in the appropriate category for the nature
of operations of such Aircraft), except that (A) no certificate of airworthiness
shall be required for any Aircraft (x) during any period when such Aircraft is
undergoing maintenance, modification or repair, (y) following the withdrawal or
suspension by such applicable aviation authority of certificates of
airworthiness in respect of all aircraft of the same model or period of
manufacture as such Aircraft (in which case the Company shall comply, and cause
each of its subsidiaries to comply, with all directions of such applicable
aviation authority in connection with such
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<PAGE> 145
withdrawal or suspension), (B) no registration, certificates, licenses, permits
or authorizations required for the use or operation of any Aircraft need be
obtained with respect to any period when such Aircraft is not being operated and
(C) no such registrations, certificates, licenses, permits or authorizations
shall be required to be maintained for any Aircraft that is not the subject of a
Lease, except to the extent required under applicable laws, (iii) not cause or
knowingly permit, directly or indirectly, through any of its subsidiaries, any
Lessee to operate any Aircraft under any Lease in any material respect contrary
to any applicable law and (iv) not knowingly permit, directly or indirectly,
through any of its subsidiaries, any Lessee not to obtain all material
governmental (including regulatory) registrations, certificates, licenses,
permits and authorizations required for such Lessee's use and operation of any
Aircraft under any operating Lease except as provided, mutatis mutandis, in
clauses (ii)(A) and (ii)(B) above.
The foregoing covenant shall not be deemed to have been breached by virtue
of any act or omission of a Lessee or sub-lessee, or of any person which has
possession of the Aircraft or any Engine for the purpose of repairs,
maintenance, notification or storage, or by virtue of any requisition, seizure,
or confiscation of the Aircraft (other than seizure or confiscation arising from
a breach by the Company or a subsidiary of such covenant) (each, a "THIRD PARTY
EVENT"); provided that (i) no member of AerCo Group consents or has consented to
such Third Party Event; and (ii) the member of AerCo Group which is the lessor
or owner of such Aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor or owner
would reasonably take in respect of such Third Party Event, including, as deemed
appropriate (taking into account, among other things, the laws of the
jurisdictions in which the Aircraft are located), seeking to compel such Lessee
or other relevant person to remedy such Third Party Event or seeking to
repossess the relevant Aircraft or Engine.
Appraisal of Portfolio. Under the terms of the Indenture, the Company
will, no earlier than 90 nor later than 30 days prior to March 31 of each year,
deliver to the Trustee and each Rating Agency appraisals of the Base Value of
each of the Aircraft, from at least three independent appraisers that are
members of the International Society of Transport Aircraft Trading or any
similar organization, each such appraisal to be dated within 30 days prior to
its delivery to the Trustee.
Maintenance of Assets. Under the terms of the Indenture, the Company will
(i) with respect to each Aircraft and Engine that is subject to a Lease, cause
directly or indirectly, through any of its subsidiaries, such Aircraft and
Engine to be maintained in a state of repair and condition consistent with the
requirements of reasonable commercial practice of leading international aircraft
operating lessors with respect to similar aircraft under lease, taking into
consideration, among other things, the identity of the relevant Lessee
(including the credit standing and operating experience thereof), the age and
condition of the Aircraft and the jurisdiction in which such Aircraft will be
operated or registered under such Lease, and (ii) with respect to each Aircraft
that is not subject to a Lease, maintain, and cause each of its subsidiaries to
maintain, such Aircraft in a state of repair and condition consistent with the
reasonable commercial practice of leading international aircraft operating
lessors with respect to aircraft not under lease. No breach of this covenant,
however, shall be deemed to have occurred by virtue of any Third Party Event;
provided that (i) no member of AerCo Group consents or has consented to such
Third Party Event; and (ii) the member of AerCo Group which is the lessor or
owner of such Aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor would
reasonably take in respect of such Third Party Event, including as deemed
appropriate, seeking to compel such Lessee or other relevant person to remedy
such Third Party Event or seeking to repossess the relevant Aircraft or Engine.
Notification of Trustee, Cash Manager and Administrative Agent. Under the
terms of the Indenture, the Company will notify the Trustee, Cash Manager and
Administrative Agent as soon as the Company or any of its subsidiaries becomes
aware of any loss, theft, damage or destruction to any Aircraft or Engine if the
potential cost of repair or replacement of such asset (without regard to any
insurance claim related thereto) may exceed $2,000,000 and the Company will
notify the Trustee of any breach of the Share Purchase Agreement by GPA Group.
Leases. Under the terms of the Indenture, the Company shall adopt and will
agree to cause the Servicer to use, and will adopt and will agree to cause any
additional Servicer (including any servicer appointed in
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respect of any Additional Aircraft or to replace the Servicer in respect of the
Initial Aircraft, an "ADDITIONAL SERVICER") to use, the pro forma lease
agreement or agreements then used by the Servicer or such Additional Servicer,
as the case may be, in connection with its aircraft operating leasing services
business generally, as such pro forma lease agreement or agreements may be
revised from time to time by the Servicer or such Additional Servicer (the
"SERVICER'S PRO FORMA LEASE"), on behalf of each member of AerCo Group as a
starting point in the negotiation of Future Leases with persons who are not
members of AerCo Group; provided, that with respect to any Future Lease entered
into in connection with (x) the renewal or extension of a Lease, (y) the leasing
of an Aircraft to a person that is or was a Lessee under a pre-existing Lease or
(z) the leasing of an Aircraft to a person that is or was a lessee under an
operating lease of an aircraft that is being managed or serviced by the Servicer
or such Additional Servicer, as the case may be (such Future Lease, a "RENEWAL
LEASE"), a form of lease substantially similar to such pre-existing Lease or
operating lease (a "PRECEDENT LEASE"), as the case may be, may, in lieu of the
Servicer's Pro Forma Lease, be used by the Servicer or such Additional Servicer,
as the case may be, on behalf of any member of AerCo Group as a starting point
in the negotiation of such future lease with persons who are not members of
AerCo Group or a Future AerCo Entity and provided further, however, that if the
Directors determine, in an annual review of the Servicer's Pro Forma Lease that
any revision to the Servicer's Pro Forma Lease made from time to time since the
preceding review by the Directors (or, with respect to the first anniversary of
July 15, 1998, since July 15, 1998 is substantially inconsistent with the core
lease provisions of the Issuer set forth in the Indenture (as such provisions
may be amended from time to time, the "CORE LEASE PROVISIONS") in a manner and
to such a degree as to have a material adverse effect on the Noteholders, taking
into consideration, among other things, such revision and any risk that the
Aircraft might not be able to be leased on terms consistent with the provisions
of the Servicer's Pro Forma Lease, then the Directors shall direct the Servicer
not to include such revision in the Servicer's Pro Forma Lease to be used
thereafter as the starting point in the negotiation of any Future Lease with
respect to the Aircraft. If the Directors determine that any such revision to
the Servicer's Pro Forma Lease will not have a material adverse effect on the
Noteholders, then the Directors shall amend the applicable Core Lease Provisions
and notify the Rating Agencies of any Future Lease entered into the terms of
which are materially less favorable from the point of view of the lessor than
any of the Leases to Lessees with similar credit ratings then in effect,
including without limitation, such changes to the Core Lease Provisions. The
Company shall not enter into, and shall not permit any AerCo Group Member to
enter into, any Future Lease the rental payments under which are denominated in
a currency other than U.S. dollars without Rating Agency Confirmation.
Opinions. Under the terms of the Indenture, the Company will not enter
into, and will not permit any of its subsidiaries to enter into, any Future
Lease with any person that is not a member of AerCo Group or change the
jurisdiction of registration of any Aircraft that is subject to a Lease, unless,
upon entering into such Future Lease or changing the jurisdiction of
registration of such Aircraft (or within a commercially reasonable period
thereafter), the Servicer or Additional Servicer, as the case may be, obtains
such legal opinions, if any, with regard to compliance with the registration
requirements of the relevant jurisdiction, enforceability of the Future Lease
and such other matters customary for such transactions to the extent that
receiving such legal opinions is consistent with the reasonable commercial
practice of leading international aircraft operating lessors.
Insurance. Under the terms of the Indenture, the Company will maintain or
cause, directly or indirectly through its subsidiaries, to be maintained with
reputable and responsible insurers or with insurers that maintain relevant
reinsurance with reputable and responsible reinsurers (i) airline hull insurance
for each Aircraft in an amount at least equal to the Note Target Price for such
Aircraft (or the equivalent thereof from time to time if such insurance is
denominated in a currency other than U.S. dollars), (ii) airline liability
insurance for each Aircraft and occurrence in an amount at least equal to the
relevant amounts set forth in the Indenture for each model of aircraft (as
amended from time to time with the approval of the Rating Agencies) and (iii)
airline political risk insurance ("PRI") for each Aircraft subject to a Lease
and habitually based in a jurisdiction determined in accordance with the PRI
guidelines, as set forth in the Indenture and as amended from time to time by
the Directors with the approval of the Rating Agencies in an amount at least
equal to the Note Target Price (or the equivalent thereof from time to time if
such insurance is denominated in a currency other than U.S. dollars) for such
Aircraft; provided further that for a period commencing sixty
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<PAGE> 147
days after July 15, 1998 to one year from July 15, 1998 (any period may be
extended for up to one year if so requested in writing by any Rating Agency),
the Company shall, upon request from any Rating Agency, obtain PRI with respect
to Aircraft leased to Lessees habitually based in certain countries other than
Developed Markets specified by each such Rating Agency; provided, however, that,
with respect to any such insurance for any Aircraft, such insurance may be
subject to commercially reasonable deductibles and self-insurance arrangements
(taking into account, inter alia, the creditworthiness and experience of the
Lessee, if any, the type of aircraft and market practices in the aircraft
insurance industry generally). The coverage and terms (including endorsements)
of any insurance maintained with respect to any Aircraft not subject to a Lease
shall be substantially consistent with the commercial practices of leading
international aircraft operating lessors regarding similar aircraft.
In determining the amount of insurance required to be maintained, the
Company may take into account any indemnification from, or insurance provided
by, any governmental, supranational or inter-governmental authority or agency
(other than, with respect to PRI, any governmental authority or agency of any
jurisdiction for which PRI must be obtained), the sovereign foreign currency
debt rating of which is rated AA, or the equivalent, by at least one of the
Rating Agencies, against any risk with respect to an Aircraft at least in an
amount which, when added to the amount of insurance against such risk maintained
by the Company (or which the Company has caused to be maintained), shall be at
least equal to the amount of insurance against such risk otherwise required by
the covenant (taking into account self-insurance permitted by the covenant). Any
such indemnification or insurance provided by such government shall provide
substantially similar protection as the insurance required by the covenant. The
Company will not be required to maintain (or to cause to be maintained) any
insurance otherwise required hereunder to the extent that such insurance is not
generally available in the relevant insurance market from time to time.
Indemnity. Under the terms of the Indenture, the Company will, and will
cause each of its subsidiaries to include in each Lease between a member of the
AerCo Group and a person who is not a member of the AerCo Group an indemnity in
respect of the Lease in respect of any losses or liabilities arising from the
use or operation of the Aircraft during the term of such Lease, subject to such
exceptions, limitations and qualifications as are consistent with the reasonable
commercial practices of leading international aircraft operating lessors.
EVENTS OF DEFAULT AND REMEDIES
Each of the following events will constitute an "EVENT OF DEFAULT" with
respect to any class of AerCo Notes under the Indenture (unless otherwise
specified below):
(a) failure to pay interest on the AerCo Notes of such class or any
subclass thereof (other than Step-Up Interest), in each case when such
amount becomes due, and such default continues for a period of five or
more Business Days;
(b) failure to pay principal on any AerCo Notes of such class or any
subclass thereof either on or prior to the applicable Final Maturity
Date;
(c) failure to pay any amount (other than interest) when due and payable
in connection with any AerCo Note of such class or any subclass
thereof, to the extent that there are at such time Available
Collections therefor, and such default continues for a period of five
or more Business Days;
(d) failure by the Company to comply with any of the covenants,
obligations, conditions or provisions binding on it under the
Indenture or the AerCo Notes (other than a payment default for which
provision is made in clause (a), (b) or (c) above) if such failure or
such breach materially adversely affects the holders of such class of
AerCo Notes and continues for a period of 30 days or more after
written notice thereof has been given to the Company by the Cash
Manager, the Administrative Agent, the Servicer or Additional
Servicer, as the case may be, or by holders of at least 25% of the
aggregate Outstanding Principal Balance of the AerCo Notes of the
Senior Class;
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(e) a court having jurisdiction in the premises enters a decree or order
for (i) relief in respect of the Company, or any subsidiary thereof
which owns or leases Aircraft having an aggregate Base Value of more
than 2% of the Adjusted Portfolio Value at that time (each, a
"SIGNIFICANT SUBSIDIARY"), under any applicable law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, examination, relief of debtors or other similar law
now or hereafter in effect, (ii) appointment of a receiver,
liquidator, examiner, assignee, custodian, trustee, sequestrator or
similar official of the Company, or any Significant Subsidiary; or
(iii) the winding up or liquidation of the affairs of the Company, or
any Significant Subsidiary and, in each case, such decree or order
shall remain unstayed or such writ or other process shall not have
been stayed or dismissed within 90 days from entry thereof;
(f) the Company, or any Significant Subsidiary (i) commences a voluntary
case under any applicable law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization, examination,
relief of debtors or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in any voluntary case
under any such law, (ii) consents to the appointment of or taking
possession by a receiver, liquidator, examiner, assignee, custodian,
trustee, sequestrator or similar official of the Company, or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company, or any Significant Subsidiary or (iii)
effects any general assignment for the benefit of creditors;
(g) any judgment or order for the payment of money in excess of 5% of the
aggregate Adjusted Portfolio Value shall be rendered against the
Company or any subsidiary or any other member of AerCo Group and
either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period
of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; provided, however, that any such judgment or order
shall not be an Event of Default under the Indenture if and for so
long as (i) the amount of such judgment or order is covered by a valid
and binding policy of insurance between the defendant and the insurer
covering payment thereof and (ii) such insurer, which shall be rated
at least A by A.M. Best Company or any similar successor entity, has
been notified of, and has not disputed the claim made for payment of,
the amount of such judgment or order;
(h) the constitutional documents of the Company cease to be in full force
and effect without replacement documents having the same terms being
in full force and effect.
If an Event of Default (other than an Event of Default under (e) or (f)
above) with respect to the Senior Class of AerCo Notes then outstanding shall
have occurred and be continuing, the Senior Trustee may, and, when instructed by
the holders of 25% of the aggregate Outstanding Principal Balance of the Senior
Class of AerCo Notes, shall, give a Default Notice to the Company and the Cash
Manager declaring the Outstanding Principal Balance of the AerCo Notes and all
accrued and unpaid interest thereon to be due and payable. At any time after the
Senior Trustee has declared the Outstanding Principal Balance of the AerCo Notes
to be due and payable and prior to the exercise of any other remedies pursuant
to the Indenture, holders of a majority of the Outstanding Principal Balance of
the Senior Class of AerCo Notes, by written notice to the Company, the Senior
Trustee and the Cash Manager, may rescind and annul such declaration and thereby
annul its consequences if: (i) there has been paid to or deposited with the
Senior Trustee an amount sufficient to pay all overdue installments of interest
on the AerCo Notes, and the principal of and premium, if any, on the AerCo Notes
that would have become due otherwise than by such declaration of acceleration,
(ii) the rescission would not conflict with any judgment or decree and (iii) all
other defaults and Events of Default, other than nonpayment of interest and
principal on the AerCo Notes that have become due solely because of such
acceleration, have been cured or waived. If an Event of Default under clause (e)
or (f) occurs, the Outstanding Principal Balance of the AerCo Notes and all
accrued and unpaid interest thereon shall automatically become due and payable
without any further action by any party. After the occurrence and during the
continuation of an Event of Default: (i) the Class B Noteholders will not be
permitted to give or direct the giving of a Default Notice or to exercise any
remedy in respect of such Event of Default until all interest and principal on
the Class A Notes have been paid in full; (ii) the Class C Noteholders will not
be
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permitted to give a Default Notice or to exercise any remedy in respect of such
Event of Default until all interest and principal on the Class A Notes and the
Class B Notes have been paid in full; (iii) the Class D Noteholders will not be
permitted to give a Default Notice or to exercise any remedy in respect of such
Event of Default until all interest and principal on the Class A Notes, the
Class B Notes and the Class C Notes have been paid in full and (iv) the Class E
Noteholders will not be permitted to give a Default Notice or to exercise any
remedy in respect of such Event of Default until all interest and principal on
the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes
have been paid in full. The Trustee shall provide each Rating Agency with a copy
of any Default Notice it receives pursuant to the Indenture.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the holders of any class of the Notes before proceeding to
exercise any right or power under the Indenture or the Cash Management Agreement
at the request or direction of such holders. Except in limited circumstances, no
holder of the Notes will have the right, other than through the Senior Trustee
acting in accordance with the Indenture, to sue for recovery or take any other
actions to enforce the obligations of the Company to pay any and all amounts due
and payable under the Notes, and no holder of the Notes will have the right to
take any steps to cause the filing for bankruptcy of the Company. The Senior
Trustee is entitled to exercise any and all remedies available under the
Indenture.
For purposes of the Indenture, the term "DEFAULT" shall mean the occurrence
of any event which is, or after notice or lapse of time, or both, would
constitute an Event of Default.
INTERCREDITOR RIGHTS
Subject to the terms of the Indenture, the Senior Trustee will have sole
discretion as to whether to direct the Cash Manager to exercise and enforce any
and all remedies with respect to the Notes. The Senior Trustee may take various
actions in respect of the Notes, without regard to the interests of any other
creditors.
MODIFICATION AND WAIVER
In the event that the Trustee receives a request for its consent to an
amendment, modification or waiver under the Indenture, the AerCo Notes or any
Related Document relating to the AerCo Notes, the Trustee shall mail a notice of
such proposed amendment, modification or waiver to each Noteholder requesting
direction from the Noteholders as to whether or not to consent to such
amendment, modification or waiver.
The Indenture provides that, with the consent of the holders of a majority
of the Outstanding Principal Balance of the AerCo Notes (acting as a single
class), modifications may be made to the AerCo Notes or the Indenture; provided
that any modification of the provisions setting forth the frequency or the
currency of payment of, the maturity of, or the method of calculation of the
amount of any interest, principal and premium, if any, payable in respect of any
subclass of AerCo Notes, or reducing the percentage of the aggregate Outstanding
Principal Balance of any subclass of AerCo Notes required to approve any such
amendment or waiver, or altering the manner or priority of payment of such
subclass of AerCo Notes (each, a "BASIC TERMS MODIFICATION") is not permitted
without the consent of any Swap Provider and the holder of each Outstanding
AerCo Note affected thereby; provided further however, that the Senior Trustee
may waive any Event of Default. Any such modification approved by the required
holders of any subclass of AerCo Notes will be binding on the holders of the
relevant subclass of AerCo Notes and each party to the Indenture. The foregoing,
however, shall not prevent the Company or any subsidiary from amending any
Lease; provided that such amendment is otherwise permitted by the Indenture.
The subordination provisions contained in the Indenture may not be amended
or modified without the consent of each Swap Provider, each holder of the class
of AerCo Notes affected thereby and each holder of any class of Notes ranking
senior to such AerCo Notes.
Without the consent of each Noteholder, no amendment or modification of the
Indenture or the Cash Management Agreement may, inter alia, (a) modify the
provisions of the Indenture or the Cash Management Agreement with respect to
Account payment instructions and the payment thereunder by the Cash Manager
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or (b) result in the sale of the Company's assets other than pursuant to the
provisions of "Indenture Covenants". In no event shall the provisions relating
to the priority of the Expenses, Swap Payments or Swap Breakage Costs in the
Indenture be amended or modified.
NOTICES TO NOTEHOLDERS
Save as provided below, any notice to the Noteholders (in the case of
Definitive Notes or Global Notes) shall be validly given (i) by publication in
the Luxemburger Wort or, if such newspaper shall cease to be published in such
English language newspaper or newspapers as the Trustee shall approve having a
general circulation in Europe, (ii) by either of (a) the information contained
in such notice appearing on the relevant page of the Reuters Screen or such
other medium for the electronic display of data as may be approved by the
Trustee and notified to Noteholders or (b) publication in the Financial Times
and The Wall Street Journal (National Edition) or, if such newspaper shall cease
to be published or timely publication therein shall not be practicable, in such
English language newspaper or newspapers as the Trustee shall approve having a
general circulation in Europe and the United States and (iii) until such time as
any Definitive Notes are issued and, so \long as Book-Entry Interests are held
by Euroclear and/or Cedel Bank, delivery of the relevant notice to DTC,
Euroclear and/or Cedel Bank for communication by them to Noteholders.
The Trustee shall be at liberty to sanction some other method of giving
notice to the Noteholders if, in its opinion, such other method is reasonable,
having regard to the number and identity of the Noteholders and/or to market
practice then prevailing, is in the best interests of the Noteholders and will
comply with the rules of the Luxembourg Stock Exchange or such other stock
exchange (if any) on which the Notes are then listed, and any such notice shall
be deemed to have been given on such date as the Trustee may approve; provided
that notice of such method is given to the Noteholders in such manner as the
Trustee shall require.
Notice specifying the interest rate and the amount of any repayment of
principal on any Notes pursuant to any optional redemption shall, for so long as
the Notes are listed on the Luxembourg Stock Exchange and so long as the rules
of the Luxembourg Stock Exchange so require, be given to the Luxembourg Stock
Exchange. Any such notice shall be deemed to have been given on the first day on
which requirements for such notification shall have been met.
GOVERNING LAW AND JURISDICTION
The Indenture and the Cash Management Agreement are governed by and
construed in accordance with the laws of the State of New York. In the Indenture
and the Cash Management Agreement, the Company has submitted to the jurisdiction
of the United States Federal and New York State courts located in The City of
New York for all purposes of or in connection with the Notes and Cash Management
Agreement, as the case may be, and have each designated a person in The City of
New York to accept service of any process on its behalf.
THE SUBCLASS D-1 NOTES
The Subclass D-1 Notes have been issued by and constitute direct
obligations of the Company pursuant to the Indenture and have been issued in an
aggregate principal amount of $80 million. The Subclass D-1 Notes have initially
been issued in fully certificated form. The Subclass D-1 Notes will accrue
interest for each Interest Accrual Period at a rate of 8.50% per annum, payable
monthly in arrears on each Payment Date, commencing August 17, 1998. The
Subclass D-1 Notes are not being offered or sold, directly or indirectly,
pursuant to this Prospectus. The Subclass D-1 Notes have been rated BB or the
equivalent by one or more nationally recognized statistical rating agencies.
All of the aggregate principal amount of the Subclass D-1 Notes have
initially been issued to GPA Group in a transaction exempt from the registration
requirements of the Securities Act. In connection with the initial issuance of
the Subclass D-1 Notes to GPA Group, AerCo granted to GPA Group registration
rights with respect to the Subclass D-1 Notes owned by it. Pursuant to a
registration rights agreement entered into on July 15, 1998 between AerCo and
GPA Group, GPA Group has the right to require AerCo to file a registration
statement with the Commission to register the resale of the Subclass D-1 Notes
under the
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Securities Act. If AerCo issues any Additional Notes, AerCo also expects to
issue at the same time one or more additional subclasses of Class D Notes, which
may be initially issued to GPA Group or its subsidiaries on the basis described
above or to other purchasers in transactions that are either registered under
the Securities Act or exempt from the registration requirements thereunder.
The Class D Notes rank junior in priority of payment to certain payments on
the Notes and certain other obligations of the Company and, to the extent held
by more than one person, pari passu among such persons. See "-- Priority of
Payments". Holders of the Class D Notes will not be permitted to give a Default
Notice with respect to any Event of Default or to exercise any remedy in respect
of any such Event of Default until all amounts owing under each other class of
the Notes have been paid in full. In addition, any amendment to or modification
of the subordination provisions contained in the Indenture will require the
consent of each noteholder if such amendment or modification would adversely
affect the rights of such noteholders.
THE SUBCLASS E-1 NOTES
The Subclass E-1 Notes have been issued by and constitute direct
obligations of the Company pursuant to the Indenture and have been issued in an
aggregate principal amount of approximately $112 million. The Subclass E-1 Notes
have initially been issued to GPA Group in a transaction exempt from the
registration requirements of the Securities Act. If AerCo issues any Additional
Notes, AerCo also expects to issue at the same time one or more additional
subclasses of Class E Notes.
The Subclass E-1 Notes rank junior in priority of payment to certain
payments on the Notes and the Subclass D-1 Notes and certain other obligations
of the Company. Pursuant to the subordination provisions of the Indenture and
the Subclass E-1 Notes, payments on the Subclass E-1 Notes, other than the Class
E Note Primary Interest Amount, as set forth in "-- Priority of Payments", are
subordinated to all payments of interest and principal on the Notes and the
Class D Notes. Holders of the Subclass E-1 Notes will not be permitted to give a
Default Notice with respect to any Event of Default or to exercise any remedy in
respect of any such Event of Default until all amounts owing under each other
class of the AerCo Notes have been paid in full.
The Subclass E-1 Notes have been issued in fully certificated form. The
Subclass E-1 Notes will accrue interest for each Interest Accrual Period at a
rate of 20% per annum, payable monthly in arrears on each Payment Date,
commencing August 17, 1998. The stated interest rate on the Subclass E-1 Notes
is adjusted by reference to the U.S. Consumer Price Index. Except for the Class
E Note Primary Interest Amount, which will be paid at a rate of 15% per annum
multiplied by the initial Outstanding Principal Balance of the Subclass E-1 Note
on July 15, 1998, no interest is payable on the Subclass E-1 Notes until all of
the interest, principal and premium, if any, on the AerCo Notes have been repaid
in full. The Class E Note Primary Interest Amount will be paid on each Payment
Date only to the extent that AerCo Group has Available Collections sufficient to
make such payment after paying or providing for each of the items ranking prior
to such payment in the order of priority described under "-- Priority of
Payments". To the extent that Available Collections are insufficient to pay the
Class E Note Primary Interest Amount on any Payment Date, the unpaid portion of
the Class E Note Primary Interest Amount will not be payable as part of the
Class E Note Primary Interest Amount on any subsequent Payment Date. The Class E
Note Accrued Interest Amount will accrue interest at the rate described above
and will be payable in the order of priority described under "-- Priority of
Payments" at the twenty-seventh priority level.
Principal of the Subclass E-1 Notes will not be payable until the
Outstanding Principal Balance of the AerCo Notes and the Class D Notes is
reduced to zero.
The terms of the Subclass E-1 Notes require, among other things, that the
Subclass E-1 Noteholders pay over to the Cash Manager any money (including
principal or interest) paid to them in the event that the Cash Manager, acting
in good faith, determines subsequently that such monies were not paid in
accordance with the priority of payment obligations described above under "--
Priority of Payments" or as a result of any other mistake of fact or law on the
part of the Cash Manager in making such payment.
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Under the Company's Articles of Association, the holder or holders of a
majority in aggregate principal amount of the Class E Notes have the right to
appoint two of the Company's Directors while the Class E Notes are Outstanding.
GPA Group, as holder of a majority of the initial aggregate principal amount of
the Class E Notes, appointed Edward Hansom and Rose Hynes as such Directors.
THE CASH MANAGEMENT AGREEMENT
The following summary description of the Cash Management Agreement is
subject to, and qualified in its entirety by reference to, the provisions of the
Indenture and the Cash Management Agreement.
Each payment of cash in respect of any subclass of Notes and all other
payments to be received by the Company or made by the Company pursuant to the
Indenture will be directed by the Cash Management Agreement.
The Cash Management Agreement was entered into by the Company, ALPS 94-1,
AerCo Ireland, AerCo Ireland II, AerCo USA, the Cash Manager, GPA Group, the
Trustee and the Security Trustee. The Cash Management Agreement appoints the
Cash Manager to establish and administer the Accounts, to prepare reports with
respect to such performance and to perform certain other specified
administrative tasks on behalf of AerCo. The Cash Manager shall ensure that the
proceeds of the AerCo assets are deposited in the Collection Account. The Cash
Management Agreement and the Indenture set forth a number of covenants of AerCo
with respect to the conduct of AerCo's business and the AerCo assets and
provides for the establishment and operation of the Accounts.
THE ACCOUNTS
The Cash Manager, acting on behalf of the Security Trustee, has established
the following accounts: (i) the Collection Account, (ii) the Lessee Funded
Account, (iii) the initial Rental Accounts, (iv) the Expense Account, (v) the
Aircraft Purchase Account, (vi) the Refinancing Account and (vii) the
Defeasance/Redemption Account (collectively with the Tax Defeasance Account, and
including any ledger or subledger accounts maintained therein, the "ACCOUNTS").
Each of the Collection Account, the Rental Accounts, the Expense Account, the
Lessee Funded Account and the Aircraft Purchase Account has been established at
a bank having (i) a long-term unsecured debt rating of not less than AA, or the
equivalent, by the Rating Agencies or (ii) a certificate of deposit rating of
A-1+ by Standard & Poor's and P-1 by Moody's and that is acceptable to the other
Rating Agency. Where required by the terms of the relevant Leases, certain
Rental Accounts may be established at banks having ratings of less than AA, or
the equivalent, by the Rating Agencies, or a certificate of deposit rating of
less than A-1+ by Standard & Poor's and P-1 by Moody's. Except where local legal
or regulatory reasons do not permit, all of such accounts will be held in the
names of the Security Trustee, who will have sole dominion and control over the
Accounts, including, inter alia, the sole power to direct withdrawals from or
transfers among such accounts. Subject to certain conditions set forth in the
Cash Management Agreement, the Security Trustee will delegate such authority
over the Accounts to the Cash Manager; provided that the Security Trustee will
not be responsible for the acts or omissions of the Cash Manager.
For as long as any AerCo Notes remain Outstanding, funds on deposit in the
Accounts other than the Tax Defeasance Account will be invested and reinvested
by the Cash Manager at AerCo's written direction (or, following delivery to
AerCo or the Cash Manager of a Default Notice or if any Event of Default
described in clause (e) or (f) under "-- Events of Default and Remedies" shall
have occurred and be continuing, at the Security Trustee's written direction) in
one or more Permitted Account Investments maturing, in the case of the
Collection Account and Expense Account, such that sufficient funds shall be
available to make required payments on the first succeeding scheduled Payment
Date after such Permitted Account Investments are made; provided that investment
and reinvestment of funds in the Lessee Funded Account must be made in a manner
and with maturities that conform to the requirements of the related Leases or
Aircraft Agreements, as the case may be. Investment earnings on funds deposited
in any Account, net of losses and investment expenses, will, to the extent
permitted by the terms of such related Leases or Aircraft Agreements, as the
case
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may be in the case of such funds in the Lessee Funded Account, be deposited in
the Collection Account and treated as collections.
RENTAL ACCOUNTS
The Lessees will make all payments under the Leases directly into the
applicable Rental Accounts. Pursuant to the Cash Management Agreement, the Cash
Manager will transfer, or cause to be transferred, all funds deposited into the
Rental Accounts into the Collection Account as collections within one Business
Day of receipt thereof (other than certain limited amounts, if any, required to
be left on deposit for local legal or regulatory reasons).
THE COLLECTION ACCOUNT
Collections include all amounts received by AerCo Group, including (i)
Rental Payments, (ii) payments under any letter of credit, letter of comfort,
letter of guarantee or other assurance in respect of a Lessee's obligations
under a Lease, (iii) the Liquidity Reserve Amount deposited into the Collection
Account on the Closing Date and on the closing date of any acquisition of
Additional Aircraft, (iv) amounts received in respect of claims for damages or
in respect of any breach of contract for nonpayment of any of the foregoing
(including any amounts received from any AerCo subsidiary, whether by way of
distribution, dividend, repayment of a loan or otherwise and any proceeds
received in connection with any Allowed Restructuring), (v) net proceeds of any
Aircraft sale or amounts received under any Aircraft Agreement, (vi) proceeds of
any insurance payments in respect of any Aircraft or any indemnification
proceeds, (vii) certain amounts transferred from the Lessee Funded Account to
the Collection Account, (viii) net payments to AerCo under any Swap Agreement,
(ix) investment income, if any, on all amounts on deposit in the Accounts (in
each case to the extent consistent with the terms of applicable related Leases),
(x) the portion of the purchase price or other net proceeds from any Permitted
Tax-Related Disposition that is not required to be retained in the Tax
Defeasance Account and (xi) any other amounts received by any member of the
AerCo Group other than segregated funds, certain funds to be applied in
connection with a redemption, certain funds received in connection with a
Refinancing and other amounts required to be paid over to any third-party
pursuant to any Related Document (collectively, the "COLLECTIONS").
Collections on deposit in the Collection Account will be calculated by the
Cash Manager on the Calculation Date. The portion of the Required Expense Amount
that has not been paid directly by the Cash Manager to Expense payees will be
transferred into the Expense Account on each Payment Date and the Cash Manager
may, from time to time, transfer other amounts into the Expense Account in
respect of unanticipated Expenses falling due and payable within such Interest
Accrual Period. To the extent funds are available therefor on any Payment Date,
the Cash Manager will also transfer amounts in respect of expenses and costs
that are not regular, monthly recurring expenses anticipated to become due and
payable in any future Interest Accrual Period ("PERMITTED ACCRUALS"). Amounts
received in respect of certain segregated Security Deposits and Maintenance
Reserves (as described below) will be transferred directly into the Lessee
Funded Account.
LIQUIDITY RESERVE AMOUNT
All Collections received by AerCo will either be transferred to another
Account as described above and below, paid to the appropriate third party on
behalf of AerCo or held in the Collection Account as a part of the cash portion
of the Liquidity Reserve Amount, a balance required to be held by AerCo in the
Collection Account pursuant to the Cash Management Agreement and the Indenture.
The Liquidity Reserve Amount is intended to provide liquidity for AerCo Group to
meet its aircraft maintenance obligations and its lessee security deposit
repayment obligations and to provide for certain other contingencies that may
arise in the course of AerCo Group's activities. The Liquidity Reserve Amount
may be funded with cash in the Collection Account and with letters of credit,
guarantees or other credit support instruments ("ELIGIBLE CREDIT FACILITIES")
provided by, or supported with credit support instruments provided by, a person
whose short-term unsecured debt is rated P-1 by Moody's, A-1+ by Standard &
Poor's and D-1+ by DCR. There are currently no Eligible Credit Facilities in
place.
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As of October 9, 1998, the initial Liquidity Reserve Amount was equal to
approximately $40 million plus the amount of Security Deposits of approximately
$16 million as of that date. The Liquidity Reserve Amount may be increased or
decreased from time to time for any reason (including upon acquisitions of
Additional Aircraft by an action of the Board in light of significant changes
in, inter alia, the condition of the Aircraft, the terms and conditions of
Future Leases, the financial condition of the Lessees or prevailing industry
conditions), provided that AerCo Group will obtain confirmation in advance in
writing from the Rating Agencies that any proposed reduction in the Liquidity
Reserve Amount (other than a reduction attributable solely to a decrease in the
Security Deposit Reserve Amount as a result of AerCo entering into Future Leases
requiring lower security deposits than expired Leases) will not result in a
lowering or withdrawal by any such Rating Agencies of their respective ratings
of any subclass of AerCo Notes. If the balance of cash on deposit in the
Collection Account, together with the amount available for drawing under any
Eligible Credit Facilities, should fall below the Liquidity Reserve Amount at
any time (including as a result of AerCo's determination that the Liquidity
Reserve Amount should be increased, as required by the Rating Agencies or
otherwise), AerCo may continue to make all payments, and any credit or liquidity
enhancement facilities may be drawn to fund such payments, including required
payments on the Notes, which rank prior to, or pari passu with, payments of
accrued and unpaid interest on the Class D Notes under "-- Priority of Payments"
and any Permitted Accruals other than in respect of Modification Payments,
provided that the balance of funds in the Collection Account, together with the
amount available for drawing under any Eligible Credit Facilities, does not fall
below the Minimum Liquidity Reserve Amount at its then current level. However,
the balance of funds in the Collection Account, together with the amount
available for drawing under any Eligible Credit Facilities, may fall below the
Minimum Liquidity Reserve Amount at its then current level and AerCo may
continue to make payments of all accrued and unpaid interest on any subclass of
the most senior class of Notes then Outstanding to avoid an Event of Default,
and, on the Final Maturity Date of any subclass thereof, principal of such
subclass of the most senior class of Notes then Outstanding to avoid an Event of
Default.
Amounts drawn under any Eligible Credit Facility will either be repayable
at the third level in the priority of payments, as set forth in "Description of
the Notes -- Priority of Payments", before the First Collection Account Top-Up
(any such facility, a "PRIMARY ELIGIBLE CREDIT FACILITY") or at the eleventh
level in the priority of payments, as set forth in "Description of the Notes --
Payment of Principal and Interest -- Priority of Payments", before the Second
Collection Account Top-Up (any such facility, a "SECONDARY ELIGIBLE CREDIT
FACILITY").
At such time as the aggregate Outstanding Principal Balance of the Notes is
less than or equal to the Liquidity Reserve Amount, the balance of funds, if
any, in the Collection Account will be distributed in accordance with the
priority of payments established for the Notes.
THE LESSEE FUNDED ACCOUNT
Pursuant to the terms of the Leases, certain Lessee Security Deposits and
supplemental rent payments to provide for Maintenance Reserves may be required
to be segregated from other AerCo funds. Amounts received from Lessees in
respect of such Security Deposits and maintenance obligations will be held in
the Lessee Funded Account. Amounts on deposit in the Lessee Funded Account will
be accounted for, and, if required by any Lease, segregated, on a per Lease
basis. Funds on deposit in the Lessee Funded Account will be used to make
certain maintenance and security deposit repayment related payments (or such
other payments as may be required or permitted under the terms of the relevant
Leases) or may be applied against maintenance-related payments otherwise
required to be made by the lessee during the term of the related Lease and will
not be used to make payments in respect of the Notes at any time, including
after the delivery of a Default Notice. In certain circumstances where Lessees
relinquish their rights to receive certain maintenance and security deposit
payments upon the expiration of a lease, surplus funds may be credited from the
Lessee Funded Account to the Collection Account.
THE EXPENSE ACCOUNT
On each Payment Date, the Cash Manager will withdraw from the funds
deposited in the Collection Account, in the priority of payments established for
the Notes, an amount equal to the Required Expense Amount, which amount will
then be used to pay the Expenses. To the extent that the Required Expense
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Amount has not been paid directly by the Cash Manager to Expense payees, the
Required Expense Amount will be deposited into the Expense Account. In addition,
in the period between Payment Dates, the Cash Manager may make further
withdrawals of cash from the Collection Account in order to satisfy Expenses due
and payable prior to the next Payment Date that were not previously anticipated
to become so due and payable on the previous Payment Date. If funds on deposit
in the Collection Account are less than the Required Expense Amount on any
Payment Date, AerCo Group will be unable to pay the Required Expense Amount in
full on such date, which may lead to a default under one or more of the Related
Documents or AerCo's various service agreements. All Available Collections
remaining in the Collection Account will be used by the Cash Manager to make
payments on the AerCo Notes, in accordance with the priority of payments
established therefor under "-- Priority of Payments".
THE TAX DEFEASANCE ACCOUNT
If AerCo enters into any Permitted Tax-Related Disposition, one or more Tax
Defeasance Accounts may be established. The Tax Defeasance Account will be
established at either (i) the bank where the Collection Account, the Lessee
Funded Account and the Expense Account are held or (ii) a bank whose credit
rating is equal to or greater than the credit rating of the most senior class of
AerCo Notes outstanding. The purchase price for, or other proceeds from, any
Permitted Tax-Related Disposition will be deposited in the Tax Defeasance
Account. On each Payment Date, the Cash Manager will withdraw from the funds
deposited in the Tax Defeasance Account an amount equal to the excess, if any,
of such purchase price or other proceeds over the amount necessary to meet the
obligations of AerCo under the head lease or other relevant Aircraft Agreement
such that the ability of AerCo and the Lessee of such Aircraft to perform their
respective obligations and receive their respective benefits under the relevant
Lease is not impaired and deposit such amount in the Collection Account.
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REPORTS TO NOTEHOLDERS
On each Payment Date and any other date for distribution of any payments
with respect to each subclass of Notes then Outstanding, the Trustee will
include with each distribution of any payment to a Noteholder a Monthly Report,
setting forth the following information:
<TABLE>
<S> <C> <C>
With respect to each Payment Date, (A) the balances on deposit on the
(i) Calculation Date immediately preceding the prior Payment Date, (B) the
aggregate amounts of deposits and withdrawals between such Calculation
Date and the Calculation Date immediately preceding the Payment Date
and (C) the balances on deposit in the Expense Account, Collection
Account, the Aircraft Purchase Account, and Lessee Funded Account on
the Calculation Date immediately preceding such Payment Date.
(ii) Analysis of Expense Account Activity
Balance on Preceding Calculation Date.......................
Net Transfer to the Expense Account during the period
between the prior Calculation Date and the relevant
Calculation Date............................................
Payments during period between prior Calculation Date and
the relevant
Calculation Date;
(1) Payments on prior Payment Date..........................
(2) Other payments..........................................
Balance on relevant Calculation Date........................
(iii) Analysis of Collection Account Activity
Balance on Preceding Calculation Date.......................
-- Required Expense Amount (including on preceding Payment
Date).......................................................
-- Net Transfer to Lessee Funded Accounts during period.....
-- Collections during period................................
-- Transfer from the Aircraft Purchase Account..............
-- Transfer from the Tax Defeasance Account.................
-- Drawings under credit or liquidity enhancement
facilities..................................................
-- Aggregate Note Payments..................................
-- Swap Payments/Receipts...................................
-- Repayments of drawings under credit or liquidity
enhancement facilities......................................
Balance on relevant Calculation Date (separately stating the
components of
the Liquidity Reserve Amount)...............................
Analysis of current Payment Date distributions..............
(iv) Payments on the Notes
(a) Floating Rate Notes (by subclass).......................
-- Applicable LIBOR for the current Interest Accrual
Period......................................................
-- Applicable Margin for the current Interest Accrual
Period......................................................
-- Applicable Interest Rate for the current Interest Accrual
Period......................................................
-- Interest Amount Payable..................................
-- Step-Up Interest.........................................
-- Opening Outstanding Principal Balance....................
-- Minimum Principal Payment Amount.........................
-- Scheduled Principal Payment Amount.......................
-- Supplemental Principal Payment Amount....................
-- Redemption Amount........................................
-- amount allocable to principal............................
-- amount allocable to premium..............................
-- Closing Outstanding Principal Balance....................
</TABLE>
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<TABLE>
<S> <C> <C>
(b) Fixed Rate Notes (by class and, if applicable,
subclass)...................................................
Applicable Interest Rate....................................
Interest Amount Payable.....................................
(v) Floating Rate Note information for next Interest Accrual
Period
(by subclass)
Applicable LIBOR............................................
Applicable Margin...........................................
Applicable Interest Rate....................................
(vi) Payments per $100,000 Initial Outstanding Principal Balance
of Notes
(by subclass)
Opening Outstanding Principal Balance.......................
Total Principal Payments....................................
Closing Outstanding Principal Balance.......................
Total Interest..............................................
Total Premium...............................................
</TABLE>
Following effectiveness of the Registration Statement (of which this
Prospectus is a part), AerCo expects to furnish such Monthly Reports and
Quarterly Reports to the Commission in a Report on Form 6-K. AerCo expects to
furnish the Quarterly Reports within 45 days of the end of each of AerCo Group's
fiscal quarters each year. Following effectiveness of the Registration Statement
(of which this Prospectus is a part), AerCo expects to file the Annual Report on
Form 20-F with the Commission within 180 days of the fiscal year end. See
"Available Information".
After the end of each calendar year, the Trustee will furnish to each
person who at any time during such calendar year was a holder of any subclass of
Notes a statement containing the sum of the amounts determined pursuant to
clause (iv) above with respect to such subclass for such calendar year or, in
the event such person was a holder of record of any subclass of Notes during a
portion of such calendar year, for the applicable portion of such calendar year,
and such other items as are readily available to such Trustee and which a
Noteholder shall reasonably request as necessary for the purpose of such
Noteholder's preparation of its U.S. federal income tax returns. So long as the
Notes of any class or subclass are registered in the name of DTC or its nominee,
such report and such other items will be prepared on the basis of such
information supplied to such Trustee by DTC and the DTC Participants, and will
be delivered by the Trustee to such DTC Participants to be available for
forwarding by such DTC Participants to the applicable Noteholders in the manner
described above.
The Trustee will publish or cause to be published following each Payment
Date and other date specified above in a daily newspaper in Luxembourg (expected
to be the Luxemburger Wort) a notice to the effect that the Monthly and
Quarterly Reports and the other information described above will be available
for review at the main office of the Listing Agent for the Notes in Luxembourg,
Banque Internationale a Luxembourg S.A., 69 route d'Esch, L-1470 Luxembourg. The
Luxembourg Stock Exchange will receive notice promptly following each Payment
Date. In addition, the Trustee intends to provide such information to Bloomberg
Financial Markets promptly following each Payment Date for publication on the
BLOOMBERG.
If the Notes of any subclass are ever issued in the form of Definitive
Notes, the Trustee will prepare and deliver the information described above to
each holder of record of a Definitive Note of such subclass as the name and
period of beneficial ownership of such holder of record of a Definitive Note of
such subclass appears on the records of the Trustee. The Trustee maintains the
records concerning the holders of such Notes.
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AVAILABLE INFORMATION
AerCo is not currently subject to the information reporting requirements of
the Exchange Act. AerCo will become subject to such requirements upon the
effectiveness of the Registration Statement and will file reports and other
information with the Commission. Any reports and other information filed by
AerCo with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and will also be available for inspection
and copying at the regional offices of the Commission located at 7 World Trade
Center, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661 at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports and
other information, including the Registration Statement (of which this
Prospectus is a part) filed by AerCo.
AerCo has filed with the Commission a Registration Statement on Form F-4
under the Securities Act with respect to the New Notes being offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and the related exhibits and schedules, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to AerCo and the securities
offered by this Prospectus, reference is made to the Registration Statement and
the exhibits filed or incorporated as a part of the Registration Statement,
which are on file at the offices of the Commission and may be obtained upon
payment of the fee prescribed by the Commission, or may be examined without
charge at the offices of the Commission. Statements contained in this Prospectus
as to the contents of any documents referred to are not necessarily complete,
and, in each such instance, are qualified in all respects by reference to the
applicable documents filed with the Commission.
The Old Notes were listed on the Luxembourg Stock Exchange on July 15,
1998, and the New Notes will be listed upon issuance, subject only to notice of
issuance. The constitutive documents of AerCo and the legal notice relating to
the issuance of the Notes have been deposited with the Registrar of the District
Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de et a
Luxembourg) where such documents will be available for inspection and where such
documents will be obtainable upon request. Copies of the Prospectus, the annual
report of independent public accountants and the reports to Noteholders referred
to under "Reports to Noteholders" are available at the office of the listing
agent (the "LISTING AGENT") in Luxembourg: Banque Internationale a Luxembourg,
69, route d'Esch, L-1470 Luxembourg. Financial information regarding AerCo will
be included in AerCo's Quarterly Reports on Form 6-K and Annual Reports on Form
20-F and will be available at the office of the Listing Agent in Luxembourg
after the respective reports are filed with the Commission.
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BOOK-ENTRY REGISTRATION, GLOBAL CLEARANCE AND SETTLEMENT
BOOK-ENTRY REGISTRATION; DEPOSIT AGREEMENT
The Global Notes will be deposited with the Book-Entry Depositary pursuant
to the terms of the Deposit Agreement. The Book-Entry Depositary will issue CDIs
for each subclass of New Notes to DTC or its nominee, representing the aggregate
principal amount of the Global Note for such subclass. Unless and until
Book-Entry Interests are exchanged for Definitive Notes, the CDIs held by DTC
may not be transferred except as a whole by DTC to its nominee or by a nominee
of DTC to DTC or another of its nominees or by DTC or any such nominee to a
successor of DTC or a nominee of such successor.
Book-Entry Interests will be shown only on, and transfers of Book-Entry
Interests will be effected only through, records maintained in book-entry form
by DTC or its nominee and its participants, including Euroclear and Cedel ("DTC
PARTICIPANTS").
So long as the Book-Entry Depositary is the holder of the Global Notes, the
Book-Entry Depositary will be considered the sole holder of the Global Notes for
all purposes under the Indenture. Unless and until Book-Entry Interests are
exchanged for Definitive Notes, all references herein to actions by Noteholders
will refer to actions taken by the Book-Entry Depositary upon instructions of
DTC or its nominee, acting in accordance with the procedures of DTC, and all
references herein to distributions, notices, reports and statements to
Noteholders will refer to distributions, notices, reports and statements to the
Book-Entry Depositary for further distribution to DTC and DTC Participants,
including Euroclear and Cedel, in accordance with the Deposit Agreement and the
procedures of DTC and DTC Participants. Holders of Book-Entry Interests will be
entitled to receive Definitive Notes in exchange for Book-Entry Interests only
in the limited circumstances described in "Description of the Notes -- Form --
Definitive Notes". Accordingly, each person owning a Book-Entry Interest must
rely on the procedures of the Book-Entry Depositary and DTC and, if such person
is not a participant in DTC, on the procedures of the participant through which
such person owns its interest, to exercise any rights and obligations of a
holder under the Indenture.
ACTION BY OWNERS OF BOOK-ENTRY INTERESTS
Not later than 10 days after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or request for a waiver or other action by the
Book-Entry Depositary as Noteholder, the Book-Entry Depositary will mail to DTC
a notice containing (a) such information as is contained in such notice, (b) a
statement that at the close of business on a specified record date DTC will be
entitled to instruct the Book-Entry Depositary as to the consent, waiver or
other action, if any, pertaining to the CDIs or the Global Notes and (c) a
statement as to the manner in which such instructions may be given. Upon the
written request of DTC, which shall have solicited instructions from the
registered owners of Book-Entry Interests in accordance with its rules and
procedures, the Book-Entry Depositary shall endeavor insofar as practicable to
take such action regarding the requested consent, waiver or other action in
respect of the Global Notes in accordance with any instruction set forth in such
request. The Book-Entry Depositary will not exercise any discretion in the
granting of consents or waivers or the taking of any other action in respect of
the CDIs or the Global Notes.
REPORTS
The Book-Entry Depositary will immediately, and in no event later than 10
days from receipt, send to DTC a copy of any notices, reports and other
communications received relating to the Company or the Notes. See "Reports to
Noteholders".
ACTION BY BOOK-ENTRY DEPOSITARY
Subject to certain limitations, upon the occurrence of a default with
respect to the Notes, or in connection with any other right of a holder of Notes
under the Indenture or the Deposit Agreement, if requested in writing by DTC,
the Book-Entry Depositary will take any such action as shall be requested in
such notice.
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CHARGES OF BOOK-ENTRY DEPOSITARY
The Company has agreed to pay all charges of the Book-Entry Depositary
under the Deposit Agreement. The Company has also agreed to indemnify the
Book-Entry Depositary against certain liabilities incurred by it under the
Deposit Agreement.
AMENDMENT AND TERMINATION
The Deposit Agreement may, under certain circumstances, be amended by
agreement among the Company and the Book-Entry Depositary. The consent of DTC
shall not be required in connection with any amendment to the Deposit Agreement
(i) to cure any inconsistency, omission, defect or ambiguity in such agreement;
(ii) to add to the covenants and agreements of the Book-Entry Depositary or the
Company; (iii) to evidence succession of another person to the Company in
accordance with the Indenture; (iv) to effectuate the assignment of the
Book-Entry Depositary's rights and duties to a qualified successor; (v) to
comply with the Securities Act, the Exchange Act, the U.S. Investment Company
Act of 1940, as amended, or the Trust Indenture Act of 1939, as amended; or (vi)
to modify, alter, amend or supplement the Deposit Agreement in any other manner
that is not adverse to DTC or the owners of Book-Entry Interests. Except as set
forth above, no amendment that adversely affects DTC or the owners of Book-Entry
Interests may be made to the Deposit Agreement or the Book-Entry Interests
without the consent of DTC or the owners of Book-Entry Interests corresponding
to a majority in principal amount at maturity of the Notes.
Upon the issuance of Definitive Notes in exchange for all of the Global
Notes and satisfaction of certain other conditions, the Deposit Agreement will
terminate. The provisions of the Deposit Agreement may be terminated upon the
resignation of the Book-Entry Depositary if no successor has been appointed
within 90 days as set forth under "-- Resignation or Removal of Book-Entry
Depositary" below.
RESIGNATION OR REMOVAL OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
by written notice delivered to each of the Company and the Trustee, such
resignation to take effect upon the appointment by the Company of a successor
book-entry depositary and its acceptance of such appointment. If at the end of
90 days after delivery of such notice, no successor depositary has been
appointed and has accepted such appointment, the Book-Entry Depositary may
terminate the Deposit Agreement.
OBLIGATIONS OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary will assume no obligation or liability under the
Deposit Agreement other than to use good faith and reasonable care in the
performance of its duties under such Agreement.
GLOBAL CLEARANCE AND SETTLEMENT
DTC
Transfers of Book-Entry Interests between DTC Participants will occur in
the ordinary way in accordance with DTC rules. Transfers between participating
organizations whose securities are held by Cedel Bank (the "CEDEL PARTICIPANTS")
and participants in Euroclear (the "EUROCLEAR PARTICIPANTS") will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Cedel and Euroclear.
Cedel Bank and Euroclear will hold omnibus positions of Book-Entry
Interests on behalf of their participants through customers' securities accounts
in Cedel Bank's and Morgan Guaranty's names on the books of their respective
Depositaries which, in turn, will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. Citibank, N.A. will act
as depositary for Cedel Bank and Morgan Guaranty Trust Company of New York
("MORGAN GUARANTY") will act as depositary for Euroclear (in such capacities,
the "DEPOSITARIES").
Cross-market transfers between persons holding directly or indirectly
through DTC Participants, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be
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effected by DTC in accordance with DTC rules on behalf of Cedel or Euroclear, as
the case may be, by its respective Depositary. However, such cross-market
transactions will require delivery of instructions to Cedel or Euroclear, as the
case may be, by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines. If the transaction meets its
settlement requirements, Cedel Bank or Euroclear, as the case may be, will
deliver instructions to its respective Depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of Book-Entry Interests received
in Cedel Bank or Euroclear as a result of a transaction with a DTC Participant
will be made during the securities settlement processing day dated the Business
Day following the DTC settlement date. Such credits or any transactions in such
Book-Entry Interests settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such Business Day. Cash
received in Cedel Bank or Euroclear as a result of sales of Book-Entry Interests
by or through a Cedel Participant or Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available in
the relevant Cedel or Euroclear cash account only as of the business day
following settlement in DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for DTC Participants and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entry changes in accounts of DTC
Participants, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies and clearing corporations and
may in the future include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant either directly or indirectly ("INDIRECT PARTICIPANTS"). Owners of
Book-Entry Interests who are not DTC Participants but desire to purchase, sell
or otherwise transfer ownership of, or other interests in, the Book-Entry
Interests may do so only through DTC Participants. Indirect Participants are
required to effect transfers through a DTC Participant.
Payments of interest, principal, and premium, if any, in respect of the
Book-Entry Interests will be made to DTC and are the responsibility of AerCo.
Owners of Book-Entry Interests will receive all distributions of interest,
principal and premium, if any, in respect of the Book-Entry Interests from the
Trustee or other paying agent through DTC Participants and Indirect
Participants. Disbursement of such payments to DTC Participants will be the
responsibility of DTC and disbursement of such payments to the owners of
Book-Entry Interests will be the responsibility of DTC Participants and Indirect
Participants. DTC's practice is to credit DTC Participants' accounts on the
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by DTC Participants to owners of Book-Entry Interests
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such DTC
Participant. Unless and until Definitive Notes are exchanged for Book-Entry
Interests, owners of Book-Entry Interests, Noteholders will be permitted to
exercise the rights of holders under the Indenture only indirectly through DTC
and DTC Participants.
Under the rules, regulations and procedures governing DTC and its
operations (the "RULES"), DTC is required to make book-entry transfers of
Book-Entry Interests among the DTC Participants on whose behalf it acts with
respect to Book-Entry Interests and to receive and transmit distributions of
interest, principal and premium if any, in respect of Book-Entry Interests. DTC
Participants and Indirect Participants with which Holders have accounts with
respect to the Book-Entry Interests similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Book-Entry Interests. The Rules provide a mechanism by which Holders will
receive payments and will be able to transfer their interests.
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DTC has advised the Company that it will take any action permitted to be
taken by a Holder in respect of each subclass of Book-Entry Interests under the
Indenture only at the direction of one or more DTC Participants to whose
accounts that class or subclass of Book-Entry Interests is credited.
Additionally, DTC has advised the Company that it will take such actions with
respect to any percentage of the outstanding principal amount of any subclass of
Book-Entry Interests only at the direction of and on behalf of the DTC
Participants whose holders own such outstanding principal amount. DTC may take
conflicting actions with respect to different classes or subclasses of Notes to
the extent that such actions are taken on behalf of DTC Participants whose
holdings include such different subclasses of Book-Entry Interests.
DTC's Year 2000 Efforts. DTC management is aware that some computer
applications, systems, and the like for processing data ("Systems") that are
dependent upon calendar dates, including dates before, on and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed its Participants and
other members of the financial community (the "Industry") that it has developed
and is implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and income payments) to
securityholders, book-entry deliveries, and settlement of trades within DTC
("DTC Services"), continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
CEDEL
Distributions with respect to Book-Entry Interests held beneficially
through Cedel will be credited to cash accounts of Cedel Participants in
accordance with Cedel's rules and procedures, to the extent received by its
Depositary. Cedel will take any other action permitted to be taken by a
Noteholder under the Indenture on behalf of a Cedel Participant only in
accordance with its rules and procedures and subject to its Depositary's ability
to effect such actions on its behalf through DTC.
EUROCLEAR
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities of a particular class (or, in the case of the Notes,
subclass) in Euroclear are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants, and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Book-Entry Interests held through Euroclear
will be credited to the cash accounts of Euroclear Participants in accordance
with the Terms and Conditions, to the extent received by its Depositary. The
Euroclear Operator will take any other action permitted to be taken by a
Noteholder under
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the Indenture on behalf of a Euroclear Participant only in accordance with the
Terms and Conditions and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Book-Entry Interests among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
CUSIP, ISIN AND COMMON CODE NUMBERS
The Book-Entry Interests [in the New Notes] have been accepted for
clearance through Euroclear and Cedel. The CUSIP numbers, International
Securities Identification Numbers ("ISIN") and the Common Code Numbers ("CCN")
are set forth in the table below.
<TABLE>
<CAPTION>
SUBCLASS CUSIP ISIN CCN
- -------- --------- --------- ---------
<S> <C> <C> <C>
Subclass A-1.........................................
Subclass A-2.........................................
Subclass B-1.........................................
Subclass C-1.........................................
</TABLE>
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TAX CONSIDERATIONS
IRISH TAX CONSIDERATIONS
The following summary is based on an opinion of McCann FitzGerald on
principles of Irish taxation law. These principles depend on interpretation of
laws, regulations, rulings and decisions, Revenue practice and reliance on
Revenue confirmations all of which are currently in effect but are subject to
change. Any such change may be applied retroactively and may adversely affect
the principles of Irish tax on which the opinion is based. This summary does not
address all Irish tax principles that may apply to all categories of potential
investors, some of which may be subject to special rules.
IRISH INCOME AND WITHHOLDING TAXES ON PAYMENTS ON THE NOTES
In the opinion of McCann FitzGerald, there will be no withholding or
deduction on account of Irish taxes with respect to principal and interest paid
by AerCo on the Global Notes or any further onwards payment of the principal and
interest on the Book-Entry Interests. The foregoing opinion, insofar as it
relates to interest, is based on certain assumptions, including that the Notes
(including the Global Notes) are listed on the Luxembourg Stock Exchange or on
another stock exchange which is recognized for relevant purpose of Irish law and
that interest on the Global and Book-Entry Notes is paid by a paying agent
outside of Ireland.
The issuance of Definitive Notes may cause interest payments thereon to be
subject to Irish withholding tax at the standard income tax rate (currently
24%). In the event that any Irish withholding tax is imposed, Noteholders and
holders of Book-Entry Interests should note that AerCo will not be obliged to
make any additional payments in respect of any such withholding tax. In this
regard, Ireland has tax treaties with a number of jurisdictions which, under
certain circumstances, reduce the rate of Irish withholding tax on payments of
interest to persons resident in such jurisdictions. A holder of a Definitive
Note who is entitled to the benefit of Article 11 of the income tax treaty
between the United States and Ireland (the "TREATY") (such a holder a "U.S.
HOLDER") will normally be eligible to recover in full any Irish tax withheld
from payments of interest to which such U.S. Holder is beneficially entitled by
making a claim under the Treaty on the appropriate form. Alternatively, a claim
may be made by a U.S. Holder in advance of a payment of interest. If the claim
is accepted by the Irish Revenue, it will normally authorize subsequent payments
to that U.S. Holder to be made without withholding for Irish tax.
Noteholders who are not ordinarily resident in Ireland will not be subject
to Irish income tax in respect of interest paid by AerCo on the Notes so long as
the interest payments are made by AerCo in the course of carrying on relevant
trading operations under its Shannon certificate ("SHANNON CERTIFIED
OPERATIONS"). As regards Shannon Certified Operations and their termination in
2005 and factors which might lead to their earlier termination see "Irish
Taxation of the AerCo Group" below. After December 2005 or on earlier
termination of AerCo Shannon Certified Operations, the exemption from Irish tax
described above currently enjoyed by Noteholders who are not ordinarily resident
in Ireland will terminate, absent a change in law in the intervening period.
Interest payments made by AerCo have an Irish source and whether or not
paid gross are, under existing Irish tax law, chargeable to Irish income tax by
self-assessment, subject, however, to such relief as may be afforded by the
provisions of any applicable double tax treaty. However, as a matter of
practice, the Irish tax authorities do not pursue collection of any such
liability to Irish tax in respect of persons who are regarded as not being
resident in Ireland except where such persons:
(a) receive payments of interest through a person (including a trustee) or
in the name of an agent or branch in Ireland having the management and
control of the interest; or
(b) seek to claim relief and/or repayment of tax deducted at source in
respect of taxed income from Irish sources; or
(c) are chargeable to Irish corporation tax on the income of an Irish
branch or agency or to income tax on the profits of a trade carried on
in Ireland to which the interest is attributable.
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The termination of the legislative provisions dealing with Shannon
Certified Operations on December 31, 2005 will not affect the aforementioned
exemption from Irish withholding tax described above.
TAXATION OF CAPITAL GAINS
Capital gains tax is chargeable at the rate of 20% on taxable capital gains
with allowance being made for inflation adjusted acquisition costs and
enhancement expenditure. The Notes are chargeable assets for Irish capital gains
tax purposes. However, non-resident holders are only liable for capital gains
tax on the disposal of the Notes where the Notes are unquoted and derive their
value or the greater part of their value from land and buildings or mineral
rights situated in Ireland.
IRISH CAPITAL ACQUISITION TAX
Irish capital acquisitions tax ("CAT") on individuals applies to gifts and
inheritances (i) where the person making the gift or inheritance is domiciled in
Ireland at the date of the gift or inheritance or (ii) to the extent that the
property of which the gift or inheritance consists is situated in Ireland at the
date of the gift or inheritance. The person by whom CAT is primarily payable is
the person who receives the gift or inheritance. Persons who are secondarily
liable include the donor, his personal representative and an agent, trustee or
other person in whose care the property constituting the gift or inheritance or
the income therefrom is placed. All taxable gifts and inheritances received by
an individual since June 2, 1982 are aggregated and only the excess over a
certain tax-free threshold is taxed. The tax-free threshold is dependent on the
relationship between the donor and donee and the aggregation of all previous
gifts and inheritances. The tax-free threshold amounts currently in force are:
(a) IRL12,560 in the case of persons who are not related to one another, (b)
IRL25,120 in the case of gifts and inheritances received from a brother, sister
or from a brother or sister of a parent or from a grandparent, and (c)
IRL188,400 in the case of gifts and inheritances received from a parent. Gifts
and inheritances passing between spouses are exempt from CAT. CAT is charged at
progressive rates ranging in the case of gifts from 15% to 30% and in the case
of inheritances from 20% to 40%. The Notes may constitute property situated in
Ireland for CAT purposes. There is no gift and inheritance tax convention
between the United States and Ireland. Although an estate tax convention between
the two countries was ratified in 1951, estate duty was abolished in Ireland in
1975, and it is not clear whether the estate tax convention is applicable to
Irish gift and inheritance taxes that replaced the former estate duty.
PROBATE TAX
A 2% Irish probate tax is payable on the value of any Notes passing under
the will or intestacy of a deceased individual. No probate tax is payable on
inheritances from spouses. Since probate tax was only introduced in 1993, it is
not clear whether credit relief would be available under the estate tax
convention discussed above.
IRISH STAMP DUTY
No stamp duty, stamp duty reserve tax or issue, documentary, registration
or other similar tax imposed by any government department or other taxing
authority of or in Ireland (collectively "IRISH STAMP DUTY") will be payable by
Noteholders on the creation, initial issue or delivery of Notes.
Any transfer of Notes which is effected by the delivery of such Notes will
not be chargeable with Irish stamp duty, by reason of the Notes being bearer
securities. Any transfer of Notes which is effected by an instrument in writing
will be exempt from Irish Stamp duty under section 106 of the Finance Act, 1993;
if that exemption was not applicable and in the absence of any other applicable
exemption such instrument in writing would be chargeable with Irish stamp duty
if either the instrument was executed in Ireland or, wherever executed, related
to any property situated in Ireland (which would include Notes physically
located in Ireland) or any matter or thing done or to be done in Ireland. Any
Irish stamp duty chargeable on such an instrument would be at the rate of one
per cent on the amount of the consideration for the transfer or, if greater, the
market value of the Notes.
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IRISH TAXATION OF THE AERCO GROUP
The following discussion of the Irish taxation of the AerCo Group is based
on the advice of KPMG, tax advisor to the Company.
AerCo, AerCo Ireland and AerCo Ireland II will be entitled to certain
corporate tax benefits for Shannon, Ireland certified companies including a
preferential corporate taxation rate of 10% through December 2005. If GPA Group
were to be liquidated or were to cease to hold its 5% shareholding in AerCo or
GPA Group or GECAS were to reduce or relocate their respective operations for
any reason such that either party failed to maintain, among other things,
certain employment levels at Shannon, Ireland or GPA Administrative Services
Limited or GPA Cash Manager II Limited were to resign or be terminated as
Administrative Agent or Cash Manager, respectively, of AerCo Group, then AerCo,
AerCo Ireland, and AerCo Ireland II may become subject to Irish corporate
taxation at general Irish statutory rates (currently 32%).
Upon the scheduled termination of the Irish preferential 10% tax rate on
December 31, 2005, AerCo and the other Irish tax-resident members of the AerCo
Group would become subject to Irish corporate tax on their net trading income at
a 12.50% rate as announced by the Minister for Finance of Ireland on December 3,
1997. According to such announcement non-trading income will be taxed at 25%.
There can be no assurance that the announced rates will be adopted as law in
Ireland or that, if adopted, such rates will not thereafter be changed.
A company will not be subject to Irish income tax provided that it is not
Irish tax resident, has no branch or agency in Ireland and has no Irish-source
income. ALPS 94-1 and AerCo USA have adopted certain operational provisions in
their respective organizational documents regarding the management and operation
of their businesses designed to minimize the likelihood of Irish taxation of
their income. In the opinion of KPMG, Irish tax advisor to the Company, neither
ALPS 94-1 nor AerCo USA will be subject to Irish income tax on their non-Irish
source income. However, there can be no assurance that ALPS 94-1 or AerCo USA
will not be subject to Irish tax on some or all of their income.
IRISH VALUE-ADDED TAX
Ireland generally imposes Value Added Tax (VAT) on the supply of goods and
services. Any Irish VAT that may become payable by an AerCo Group company in
connection with any management services performed by Servicer will be eligible
to be reclaimed by that company on the assumption that invoices addressed to any
AerCo Group company relate to costs attributable to a business activity of that
company which is considered to be a supply of goods or services by that company
(regardless of whether such supply of goods or services has an Irish place of
supply for VAT purposes) and that business activity is not one which would be
considered VAT exempt under Irish VAT law.
Some or all of the services provided to AerCo Group by the Cash Manager may
be exempt from Irish VAT. To the extent that any Irish VAT is payable on
services provided to an AerCo Group company by the Cash Manager or by the
Administrative Agent such VAT will be eligible to be reclaimed by that company
on the same assumption as set out in the preceding paragraph.
Payments by the Lessees to AerCo and its Irish-resident subsidiary
companies will not be subject to Irish VAT in any case where the Aircraft are
used or to be used by a transport undertaking operating for reward chiefly on
international routes.
CERTAIN JERSEY TAX CONSIDERATIONS
The following summary is based upon the opinion of Mourant du Feu & Jeune
("JERSEY TAX COUNSEL") as to the tax treatment under Jersey law of AerCo and
ALPS 94-1 and the tax treatment under Jersey law in relation to the purchase,
ownership and disposition of the Notes. The discussion is based on an
interpretation of laws, regulations, rulings and decisions, including certain
letters from the Comptroller of Income Tax in Jersey and the Director of the
Jersey Financial Services Department (the functions of which were taken over by
the Jersey Financial Services Commission with effect from July 1, 1998), all of
which are currently in
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effect and are subject to change. Any such change may be applied retroactively
and may adversely affect the Jersey tax consequences described herein. Unless
otherwise noted, the term "Note" refers to both the actual Global Notes and the
interest in the Global Notes held indirectly through DTC, Cedel or Euroclear.
INCOME TAXES
AerCo will qualify as an "exempt company" under Article 123A of the Income
Tax (Jersey) Law 1961 as amended (the "1961 LAW") as long as it makes the
returns of information and pays the fees (currently L600 per annum) as required
by that Article and, subject to the concession referred to below, as long as no
Jersey resident has a beneficial interest (for purposes of the 1961 Law) in
AerCo. As an exempt company, AerCo will be treated for purposes of the 1961 Law
as not resident in Jersey and will pay no Jersey income tax other than on income
arising in Jersey (but, by long standing concession, excluding bank deposit
interest arising in Jersey) and on profits of its trade (if any) carried on
through an established place of business in Jersey. For purposes of the 1961 Law
the Comptroller of Income Tax in Jersey, among other things, has: (i) granted a
concession to the effect that the holders of AerCo Notes will not be regarded as
having a beneficial interest (for the purposes of Article 123A of the 1961 Law)
in AerCo (ii) confirmed that the holding of the shares in the capital of AerCo
by or on behalf of the Charitable Trust Trustee and GPA Group will not prejudice
the exempt company status of AerCo; (iii) confirmed that the income generated by
the activities undertaken by AerCo as described herein will not be treated as
income arising in Jersey; and (iv) confirmed that the administration in and from
Jersey of the business undertaken by AerCo as described herein will not
constitute the carrying on of a trade through an established place of business
in Jersey. Accordingly, based upon the foregoing, in the opinion of Jersey Tax
Counsel, AerCo will not be subject to Jersey income tax.
WITHHOLDING TAXES
In general, Jersey imposes a withholding tax at the rate of 20% on interest
and other amounts paid to non-residents of Jersey with respect to a debt
obligation of a company resident in Jersey. However, no such withholding tax is
imposed with respect to an exempt company (as defined above). Accordingly, based
upon AerCo's qualification as an exempt company, in the opinion of Jersey Tax
Counsel, no withholding tax will be deducted from interest and other amounts
paid on the Notes on account of Jersey taxes.
In the event that any Jersey withholding tax is imposed, Noteholders should
note that there is no income tax treaty between the United States and Jersey
that would apply to reduce or eliminate such withholding. Noteholders should
note further that AerCo will not be obligated under the terms of the Notes to
make any additional payments in respect of any such withholding tax.
Accordingly, in the event that withholding were to be required on account of
Jersey taxes, distributions to Noteholders may be less than those which would be
made on the Notes in the absence of any such withholding tax.
OTHER TAXES
There is no taxation of capital gains (other than with respect to certain
tax avoidance transactions) in Jersey. As a result, the capital gains of AerCo
on its investments and the capital gains of Noteholders on a sale or transfer of
their Notes will not be subject to taxation in Jersey. There is no value added
tax or other relevant taxation in Jersey. No stamp duty, stamp duty reserve tax
or issue, documentary, registration or other similar tax imposed by any
governmental department or other taxing authority of or in Jersey is payable in
connection with the creation, initial issue, delivery or transfer inter vivos of
the Notes.
In the event that on the death of a sole individual holder of Notes who is
a non-resident of Jersey, such Notes are situated in Jersey (by virtue of their
being held on a register in Jersey or in bearer form and held in Jersey at the
date of death or otherwise deemed to be situated under applicable rules of
private international law), a grant of probate or letters of administration
would have to be obtained in Jersey and a duty of up to 1% of the value of the
assets of the deceased situated in Jersey would be payable.
166
<PAGE> 168
ALPS 94-1
ALPS 94-1 will qualify as an exempt company under the 1961 Law as long as
AerCo also qualifies as an exempt company and as long as ALPS 94-1 makes the
returns of information and pays the fees as required by Article 123A of the 1961
Law (as described above). As an exempt company, ALPS 94-1 will be treated for
the purposes of the 1961 Law in the same way as AerCo. Accordingly, in the
opinion of Jersey Tax Counsel, no withholding tax will be deducted from any
amounts paid by ALPS 94-1 to AerCo as described herein on account of Jersey
taxes.
UNITED STATES TAXATION
In the opinion of Davis, Polk & Wardwell, the following discussion sets
forth the material U.S. federal income tax consequences of the purchase,
ownership and disposition of Notes. This discussion deals only with Notes held
as capital assets by United States Holders (defined below) who purchased Notes
in the Offering at their "issue" price (which will be the price at which a
substantial amount of the Notes is sold to persons other than bond houses,
brokers or similar persons acting in the capacity of underwriters, placement
agents or wholesalers), and not with special classes of holders, including
without limitation, dealers in securities or currencies, banks, tax-exempt
organisations, life insurance companies, financial institutions, broker-dealers,
persons that hold securities that are a hedge or that are hedged against
currency or interest rate risks or that are part of a straddle or conversion
transaction, certain U.S. expatriates, persons that are not United States
Holders or persons whose functional currency for U.S. federal income tax
purposes is not the U.S. dollar. United States Holders who purchased Notes at a
price other than the issue price should consult their tax advisors as to the
possible applicability to them of the amortizable bond premium or market
discount rules. Further, this discussion does not address the effect of any U.S.
state or local tax laws on a United States Holder of Notes. The discussion is
based on the Internal Revenue Code of 1986, as amended (the "CODE"), its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as currently in effect and all subject to
change at any time, possibly with retroactive effect.
Purchasers of the Notes should consult their own tax advisors concerning
the consequences, in their particular circumstances, under the U.S. federal
income tax laws and the laws of any relevant state, local or other foreign
taxing jurisdiction, of ownership of the Notes.
For purposes of this discussion, a "UNITED STATES HOLDER" means a
beneficial owner of Notes that is for U.S. federal income tax purposes a citizen
or resident of the United States, a U.S. Corporation, or an estate or trust the
income of which is subject to U.S. federal income tax regardless of its source.
PAYMENTS OF INTEREST
The gross amount of interest paid on a Note will be includible in the gross
income of a U.S. Holder as ordinary interest income at the time it is received
or accrued, depending on the Holder's method of accounting for U.S. federal
income tax purposes. Interest paid by AerCo on the Notes will be income from
sources outside the United States, and, with certain exceptions, will be treated
separately, together with other items of "passive" income or, in certain cases,
"financial services" income, for purposes of computing the foreign tax credit
allowable under U.S. federal income tax laws.
SALE, RETIREMENT AND OTHER DISPOSITION OF THE NOTES
Except as noted below, upon the sale, exchange or retirement of a Note, a
United States Holder will generally recognise taxable gain or loss equal to the
difference between the amount realised (not including any amounts received that
are attributable to accrued and unpaid interest but not taken into income, which
will be taxable as ordinary interest income in accordance with the United States
Holder's method of accounting as described above) and the United States Holder's
tax basis in the Note. A United States Holder's tax basis in a Note generally
will be its cost. Such gain or loss recognized on the sale or retirement of a
Note will be capital gain or loss. Prospective investors should consult their
tax advisors regarding the treatment of capital gains (which may be taxed at
lower rates than ordinary income for certain taxpayers who are individuals) and
losses (the deductibility of which is subject to limitations).
167
<PAGE> 169
AerCo, in satisfaction of its registration requirements, intends to offer
registered Exchange Notes for Notes. See "Description of the Notes --
Registration Requirements". An exchange of Exchange Notes for Notes will not be
treated as a taxable exchange for U.S. federal income tax purposes. Accordingly,
United States Holders who exchange their Notes for Exchange Notes will not
recognize income, gain or loss for United States federal income tax purposes. A
United States Holder's tax basis in the Exchange Notes will be equal to its
adjusted basis in the Notes and its holding period will include the period
during which it held the Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments of principal and interest on the Notes held by certain
non-corporate holders and the proceeds of a disposition of such Notes may be
subject to U.S. information reporting requirements. Such payments also may be
subject to U.S. backup withholding at a rate of 31% if the holder does not
provide a taxpayer identification number or otherwise establish an exemption.
The holder may credit the amounts withheld against its U.S. federal income tax
liability and claim a refund for amounts withheld in excess of its tax
liability. Recently finalized regulations which are applicable to payments made
after December 31, 1999 will change the requirements for establishing an
exemption from information reporting and backup withholding.
168
<PAGE> 170
ERISA CONSIDERATIONS
Any Plan that proposes to purchase Notes should consult with its counsel
with respect to the potential consequences of such investment under the
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and the Code.
ERISA and the Code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, that are subject to ERISA and/or the Code
(all of which are hereinafter referred to as "PLANS") and or persons who are
fiduciaries with respect to such Plans. A person who exercises discretionary
authority or control with respect to the management or assets of a Plan will be
considered a fiduciary of the Plan under ERISA. In accordance with ERISA's
general fiduciary standards, before investing in a Note, a Plan fiduciary should
determine whether such an investment is permitted under the governing Plan
instruments and is appropriate for the Plan in view of its overall investment
policy and the composition and diversification of its portfolio, taking into
account the limited liquidity of the Notes. Other provisions of ERISA and the
Code prohibit certain transactions involving the assets of a Plan and persons
who have certain specified relationships to the Plan ("PARTIES IN INTEREST"
within the meaning of ERISA or "DISQUALIFIED PERSONS" within the meaning of the
Code). Thus, a Plan fiduciary considering an investment in Notes should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code and whether an administrative
exemption might be applicable to such investment.
Any prohibited transaction could be treated as exempt under ERISA and the
Code if the Notes were acquired pursuant to and in accordance with one or more
"class exemptions" issued by the DOL, such as Prohibited Transaction Class
Exemption ("PTCE") 75-1 (an exemption for certain transactions involving
employee benefit plans and broker dealers (such as an Underwriter), reporting
dealers and banks), PTCE 84-14 (an exemption for certain transactions determined
by an independent qualified professional asset manager), PTCE 91-38 (an
exemption for certain transactions involving bank collective investment funds),
PTCE 90-1 (an exemption for certain transactions involving insurance company
pooled separate accounts), PTCE 95-60 (an exemption for certain transactions
involving insurance company general accounts) or PTCE 96-23 (an exemption for
certain transactions determined by in-house asset managers).
ERISA also prohibits a fiduciary of a Plan from maintaining the indicia of
ownership of any assets of the Plan outside the jurisdiction of the district
courts of the United States except under certain circumstances. Before investing
in a Note, a Plan fiduciary should consider whether its acquisition and holding
of a Note would satisfy such indicia of ownership rules.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT ITS TAX
AND/OR LEGAL ADVISORS REGARDING UNDER WHAT CIRCUMSTANCES THE ASSETS OF THE TRUST
WOULD BE CONSIDERED PLAN ASSETS, THE AVAILABILITY, IF ANY, OF EXEMPTIVE RELIEF
FROM ANY POTENTIAL PROHIBITED TRANSACTION AND OTHER FIDUCIARY ISSUES AND THEIR
POTENTIAL CONSEQUENCES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. AerCo has agreed that, starting on the Expiration Date and
ending on the close of business on the 180th day following the Expiration Date,
it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
AerCo will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of
169
<PAGE> 171
resale, at prices related to such prevailing market prices or negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, AerCo will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. AerCo has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Old Notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the New Notes offered hereby will be
passed upon for the Company by Davis Polk & Wardwell, New York, New York,
special United States counsel for the Company and Mourant du Feu & Jeune,
special Jersey counsel to the Company.
In accordance with the rules of the Luxembourg Stock Exchange, AerCo states
that there has been no material adverse change in the financial position of the
Company since the date of its formation. The Company is not a party to any
material legal proceedings.
EXPERTS
The financial statements of ALPS 94-1 included in this Prospectus as at
June 30, 1997 and 1996 and for each of the years in the three year period ended
June 30, 1997 and the financial statements of the Nine Transferring Aircraft
included in this Prospectus as at June 30, 1997 and for the year ended June 30,
1997 have been audited by Arthur Andersen -- Forum House, Grenville Street, St.
Helier, Jersey, Channel Islands, independent public accountants, as indicated in
their report thereon included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. On September 9,
1998 the Company appointed KPMG, Chartered Accountants, 1 Stokes Place, St.
Stephen's Green, Dublin 2, Ireland, as new independent auditors for the fiscal
year ending June 30, 1998 and subsequent periods.
With respect to certain matters, AerCo and GPA are not represented by
separate counsel and are not expected to be unless it is agreed that separate
representation is required to satisfy the professional responsibilities of
counsel. Also, certain professionals, appraisers and experts who perform
services for AerCo have performed services for Babcock & Brown and GPA and
certain of their respective affiliates in the past and may do so again in the
future.
Valuations of the Aircraft have been made by three expert aircraft
appraisers: Aircraft Information Services, Inc., BK Associates, Inc. and
Airclaims Limited. These valuations are discussed in detail elsewhere in this
Prospectus and are included herein in reliance upon the authority of such firms
as experts in giving such appraisals.
170
<PAGE> 172
AERCO GROUP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A. HISTORICAL FINANCIAL STATEMENTS FOR ALPS 94-1
Independent auditors' report........................... F-2
Consolidated balance sheet............................. F-4
Consolidated statement of operations................... F-5
Consolidated statement of cash flows................... F-6
Statement of changes in shareholders' equity........... F-7
Statement of accounting policies....................... F-8
Notes to the consolidated financial statements......... F-11
Unaudited consolidated interim financial statements.... F-23
B. HISTORICAL FINANCIAL STATEMENTS FOR NINE TRANSFERRING
AIRCRAFT
Independent auditors' report........................... F-30
Statement of net assets................................ F-31
Statement of operations................................ F-32
Statement of cashflows................................. F-33
Statement of changes in net assets..................... F-34
Statement of accounting policies....................... F-35
Notes to the financial statements...................... F-37
Unaudited interim financial statements................. F-44
</TABLE>
COMPANY DEFINITIONS
"AerCo" AerCo Limited, a special purpose limited liability
company incorporated under the laws of Jersey with
its registered office located at 22 Grenville
Street, St. Helier, Jersey, JE4 8PX, Channel
Islands.
"ALPS 94-1" Aircraft Lease Portfolio Securitization 94-1
Limited, a special purpose limited liability
company incorporated under the laws of Jersey in
1994 to purchase 27 aircraft from GPA.
"GPA" GPA Group plc and its subsidiary undertakings.
F-1
<PAGE> 173
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED (ALPS 94-1)
We have audited the consolidated financial statements on pages F-4 to F-22
of this Prospectus which have been prepared under the historical cost convention
and the accounting policies set out on pages F-8 to F-10 of this Prospectus.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are required to prepare consolidated financial statements for
each financial period which give a true and fair view of the state of affairs of
the company and its consolidated subsidiaries and of the income and cash flows
of the company and its consolidated subsidiaries for that period. In preparing
those consolidated financial statements, the directors are required to select
suitable accounting policies and apply them consistently, make judgements and
estimates that are prudent and reasonable and to prepare the consolidated
financial statements on the going concern basis unless it is not appropriate to
assume that the company and group will continue in business. The directors are
responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the company and its consolidated
subsidiaries and which enable them to ensure that the annual statutory financial
statements comply with the Companies (Jersey) Law 1991. They are also
responsible for safeguarding the assets of ALPS 94-1 Limited and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
It is our responsibility to form an independent opinion, based on our
audit, on those financial statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
U.K. Auditing Practices Board which do not differ significantly from U.S.
generally accepted auditing standards.
An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the consolidated financial statements. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the consolidated financial statements and of
whether the accounting policies are appropriate to the circumstances of the
company and its consolidated subsidiaries, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the consolidated financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the consolidated financial
statements.
OPINION
In our opinion the consolidated financial statements give a true and fair
view of the state of affairs of the company and its consolidated subsidiaries as
at June 30, 1996 and 1997 and of the income and cash flows for the period ended
June 30, 1995 and the years ended June 30, 1996 and 1997 of the company and its
consolidated subsidiaries and have been properly prepared in accordance with
U.K. generally accepted accounting principles.
F-2
<PAGE> 174
INDEPENDENT AUDITORS' REPORT -- (CONTINUED)
Generally accepted accounting principles in the United Kingdom ("U.K.
GAAP") vary in certain significant respects from generally accepted accounting
principles in the United States. Application of generally accepted accounting
principles in the United States would have affected the result of operations for
the years ended June 30, 1997 and 1996, and the period ended June 30, 1995 and
the shareholders' equity and aircraft value as of June 30, 1997 and 1996, to the
extent summarized in Notes 20 to 23 of the consolidated financial statements.
ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS
Forum House
Grenville Street
St. Helier
Jersey JE2 4UF
Channel Islands
December 2, 1997
F-3
<PAGE> 175
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
NOTES JUNE 30, 1997 JUNE 30, 1996
----- ------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ 51,474 54,360
Commercial paper............................................ 39,821 35,310
Accounts receivable......................................... 1 3,142 2,958
------- ---------
TOTAL CURRENT ASSETS........................................ 94,437 92,628
FIXED ASSETS
Aircraft.................................................... 2 854,596 927,043
------- ---------
TOTAL ASSETS................................................ 949,033 1,019,671
======= =========
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Accrued expenses and other liabilities...................... 4 16,089 14,721
Indebtedness................................................ 5 871,495 946,729
Provision for maintenance................................... 6 46,247 39,544
Security deposits........................................... 7 15,202 18,677
------- ---------
TOTAL LIABILITIES........................................... 949,033 1,019,671
Share capital............................................... 8 -- --
Accumulated profit.......................................... -- --
------- ---------
Shareholders' equity........................................ -- --
------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. 949,033 1,019,671
======= =========
</TABLE>
The accompanying notes, including the statement of accounting policies on pages
F-8 to F-10, are an integral part of the consolidated financial statements.
F-4
<PAGE> 176
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994
NOTES JUNE 30, 1997 JUNE 30, 1996 TO JUNE 30, 1995
----- ------------- ------------- ----------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C> <C>
REVENUES
Aircraft leasing............................... 9 102,121 102,022 86,803
EXPENSES
Depreciation................................... 2 (38,062) (17,978) (18,158)
Exceptional item -- additional depreciation.... 2 (34,385) -- --
Provision for permanent diminution in value of
aircraft..................................... 2 -- (12,000) --
Net interest expense........................... 10 (71,037) (73,576) (64,206)
Other expenses................................. 11 (5,053) (5,581) (3,702)
-------- -------- --------
(148,537) (109,135) (86,066)
-------- -------- --------
NET (LOSS)/INCOME FROM OPERATIONS.............. (46,416) (7,113) 737
Reduction in indebtedness...................... 5 46,273 6,647 --
-------- -------- --------
NET (LOSS)/INCOME BEFORE PROVISION FOR TAXES... 12 (143) (466) 737
Benefit/(provision) for taxes.................. 13 143 (200) (69)
-------- -------- --------
NET (LOSS)/INCOME FOR THE PERIOD............... -- (666) 668
Dividends...................................... 17 -- -- (2)
-------- -------- --------
(LOSS)/INCOME FOR THE PERIOD................... -- (666) 666
RETAINED INCOME BROUGHT FORWARD................ -- 666 --
-------- -------- --------
RETAINED INCOME CARRIED FORWARD................ -- -- 666
BASIC (LOSS)/INCOME PER ORDINARY SHARE......... 14 -- (66.6) 66.6
-------- -------- --------
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
OUTSTANDING.................................. 14 10 10 10
======== ======== ========
</TABLE>
All recognised gains and losses are included in the consolidated statement of
operations above.
There is no material difference between the net income/(loss) for the period and
prior periods, and the historical cost equivalent.
The results for the period are derived from continuing operations.
The accompanying notes, including the statement of accounting policies on pages
F-8 to F-10, are an integral part of the consolidated financial statements.
F-5
<PAGE> 177
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED JUNE 2, 1994
JUNE 30, 1997 JUNE 30, 1996 TO JUNE 30, 1995
------------- ------------- ----------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/income for the period..................... -- (666) 666
ADJUSTMENTS TO RECONCILE (LOSS)/INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation charge for the period............. 38,062 17,978 18,158
Exceptional item: additional depreciation
charge...................................... 34,385 -- --
Provision for permanent diminution in value of
aircraft.................................... -- 12,000 --
Changes in operating assets and liabilities
Accounts receivable and other assets........ (184) (1,451) (1,507)
Accrued interest on E Note.................. 14,532 12,907 8,998
Accrued expenses and other liabilities...... 1,369 2,383 12,338
Reduction in indebtedness................... (46,273) (6,647) --
Net maintenance received......................... 6,703 9,694 29,405
Net security deposits (paid)/received............ (3,475) (666) 19,788
Rental income and interest payable on
non-delivered aircraft......................... -- -- (21,320)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES........ 45,119 45,532 66,526
-------- -------- --------
INVESTING ACTIVITIES
Purchase of aircraft............................. -- -- (907,992)
Cash in Aircraft Purchase Account................ -- -- (45,867)
-------- -------- --------
MANAGEMENT OF LIQUID RESOURCES
Net purchase of commercial paper................. (4,511) (35,310) --
-------- -------- --------
NET CASH OUTFLOW FROM MANAGEMENT OF LIQUID
RESOURCES...................................... (4,511) (35,310) --
-------- -------- --------
FINANCING ACTIVITIES
Debt issued...................................... -- -- 998,151
Indebtedness repaid.............................. (43,494) (36,025) (30,655)
-------- -------- --------
NET CASH (OUTFLOW)/ INFLOW FROM FINANCING
ACTIVITIES..................................... (43,494) (36,025) 967,496
-------- -------- --------
NET (DECREASE)/ INCREASE IN CASH................. (2,886) (25,803) 80,163
CASH AT BEGINNING OF PERIOD...................... 54,360 80,163 --
-------- -------- --------
CASH AT END OF PERIOD............................ 51,474 54,360 80,163
======== ======== ========
</TABLE>
Supplemental disclosure of cash flow information is set out in Note 18.
The accompanying notes, including the statement of accounting policies on pages
F-8 to F-10, are an integral part of the consolidated financial statements.
F-6
<PAGE> 178
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED
AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ISSUE OF SHARES RETAINED PROFIT TOTAL
--------------- --------------- ---------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C> <C>
Issue of 10 ordinary shares at $1 each....... 10 -- -- --
NET INCOME FOR THE PERIOD.................... -- -- 668 668
Dividends.................................... -- -- (2) (2)
--- ---- ---- ----
Balance at June 30, 1995..................... 10 -- 666 666
NET LOSS FOR THE YEAR........................ -- -- (666) (666)
--- ---- ---- ----
Balance at June 30, 1996..................... 10 -- -- --
NET INCOME FOR THE YEAR...................... -- -- -- --
--- ---- ---- ----
Balance at June 30, 1997..................... 10 -- -- --
=== ==== ==== ====
</TABLE>
The accompanying notes, including the statement of accounting policies on pages
F-8 to F-10, are an integral part of the consolidated financial statements.
F-7
<PAGE> 179
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
STATEMENT OF ACCOUNTING POLICIES
Incorporation
ALPS 94-1 (the 'company') was incorporated in Jersey, Channel Islands on 2
June 1994. The initial accounting period was from 2 June 1994 to June 30, 1995.
Basis of preparation
The accounting policies followed in the preparation of the accompanying
consolidated financial statements conform with generally accepted accounting
principles in the United Kingdom and comply with financial reporting standards
of the Accounting Standards Board in the United Kingdom as promulgated by the
Institute of Chartered Accountants in England and Wales, other than as explained
in 'Indebtedness' below.
The consolidated financial statements are prepared on the going concern
basis and under the historic cost convention and are stated in U.S. dollars,
which is the principal operating currency of the company and of the aviation
industry.
Basis of consolidation
The consolidated financial statements include the results of the company
and all subsidiaries. All intercompany profits, transactions and account
balances have been eliminated.
Revenue recognition
Revenue from aircraft on operating leases is recognised as income as it
accrues over the period of the leases. This includes rental income earned on
aircraft for the period prior to delivery (see Accounting policies -- Aircraft).
When future rental increases are contracted under the terms of the leases, the
company accrues income on the basis of the current rental rate rather than on a
basis that averages the lease rentals over the total lease term, unless receipt
of such future rental increases is reasonably assured.
Interest income
Interest earned during the period has been credited to the statement of
operations.
Provision for maintenance
In most lease contracts the lessee has the obligation for maintenance costs
on airframes and engines which arise during the term of the lease and in many
lease contracts the lessee makes a full or partial prepayment, calculated at an
hourly rate, into a fund held by the company from which maintenance expenditures
for major checks are disbursed. The balance of these funds is included in the
provision for maintenance.
Taxation
The company has been granted exempt company status by the Jersey taxation
authorities. It pays an exempt company fee of L500 per annum. Taxation is
provided on the profits of the subsidiaries at the current rates.
Aircraft
In the period ended June 30, 1995 the company committed to purchase and GPA
Group plc and its subsidiaries ('GPA') committed to sell, subject to certain
conditions, 27 aircraft on operating leases. The company agreed to purchase the
aircraft on August 24, 1994 (the Closing Date) for a price equal to the Initial
F-8
<PAGE> 180
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
STATEMENT OF ACCOUNTING POLICIES -- (CONTINUED)
Appraised Value of the aircraft. It was agreed that the aircraft would be
delivered to the company at agreed dates (the Delivery Dates) at which time the
purchase price was paid.
In the period from the Closing Date to the Delivery Date the company
received full credit for the rental income receivable under each operating lease
and GPA received full credit for the investment earnings on the purchase price
of the aircraft. The amounts were settled through an adjustment in the funds
paid by the company to GPA at the time of aircraft delivery. The net effect is
that at the time the aircraft were delivered both the company and GPA were in
the same financial position as they would have been had the aircraft been
delivered on the Closing Date.
The purchase of the aircraft was deemed to occur at the Closing Date rather
than on the Delivery Date when the change in legal ownership took place
reflecting the commercial substance of this transaction outlined above. Under
U.S. GAAP the purchase of the aircraft is deemed to occur on Delivery Date when
the change in legal ownership takes place (see Notes 20 to 23 for the
reconciliation between U.K. and U.S. GAAP).
Aircraft are stated at cost less accumulated depreciation less permanent
diminutions in value. Cost comprises the net purchase price of the aircraft
acquired by the company.
Under U.S. GAAP, GPA as holder of the Class E Notes is regarded as a
related party and as a result the aircraft is recorded at GPA's amortised cost
at the Delivery Date (Amortised Cost). The difference between purchase cost and
Amortised Cost is treated as a distribution to GPA.
In the year ended June 30, 1997 the company's depreciation rates have been
amended to more accurately reflect the allocation of the cost of the asset
purchases over the estimated useful economic life of these assets. In prior
periods, aircraft were depreciated at rates calculated to write-off the cost of
the assets to the company to a Nil residual value over their estimated economic
useful lives of 25 years from the Closing Date. Depreciation rates for aircraft
of 2% for the first 15 years and 7% thereafter were applied. The revised method
of calculating depreciation is to depreciate aircraft at rates calculated to
write off the cost of the assets to the company to a residual value of 15%, on a
straight line basis, over their estimated economic useful lives of 25 years from
the date of manufacture.
The directors have also made provision for additional depreciation in 1997
in order to reflect the impact of adopting the revised estimates of accumulated
depreciation in respect of prior periods. In the opinion of the directors, the
omission of this exceptional charge would materially distort the future results
of the company.
Prior to fiscal 1997, under U.S. GAAP, the aircraft were depreciated on a
straight-line basis so as to write off the cost of the assets over 25 years from
the date of delivery. In the year ended June 30, 1997, the method of calculating
depreciation has changed and aircraft are depreciated on a straight line basis
so as to write off the cost of the assets to a residual value of approximately
15% over a period of 25 years from the date of manufacture. Under U.S. GAAP, the
impact of the revision of the depreciation method is taken over the remaining
life of the aircraft and therefore there is no provision for additional
depreciation in 1997 (See notes 20 to 23 for the reconciliation between U.K. and
U.S. GAAP).
Where purchase option agreements exist to the benefit of the lessee,
aircraft are depreciated to the purchase option price on a straight-line basis
provided that this would result in a higher depreciation charge than that
arrived at by applying the standard method.
Additional charges are made to reduce the book value of specific assets to
fair market value where a permanent diminution in value is considered to have
occurred. Where fair market value is greater than book value no adjustment is
made.
Fair market value is assessed by the directors and reflects the underlying
economic value of aircraft and engines in normal market conditions (where supply
and demand are in reasonable equilibrium) and assumes
F-9
<PAGE> 181
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
STATEMENT OF ACCOUNTING POLICIES -- (CONTINUED)
adequate time for a sale and a willing buyer and seller. Short-term fluctuations
in the market place are disregarded and it is assumed that there is no necessity
to dispose of a significant number of aircraft simultaneously or to dispose of
aircraft quickly. In forming their assessment of fair market value the directors
have taken into consideration independent valuations of aircraft in the
portfolio, together with the directors' assessment of aircrafts' current
maintenance status and maintenance reserves.
The company adopted FASB Statement No. 121 "Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to be disposed of" as of July 1,
1996. FASB Statement No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors' estimated the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognised. The
application of this statement did not materially change the carrying value of
the company's assets in the current or previous periods.
Indebtedness
Repayment of principal amounts of the Class E Note and accrued interest
thereon are dependent upon funds being available to meet such liabilities as
they fall due. In addition the Class E Note has a premium interest rate attached
to it to capture any potential profits made by the company. Any losses are borne
by the Noteholders and, accordingly an amount equivalent to such losses,
including the diminution in value of aircraft, has been released from the
carrying value of the debt and credited to the statement of operations. Such
amounts are included as contingent liabilities (see Note 27).
Under Jersey company law, the financial statements are required to present
a true and fair view in accordance with generally accepted accounting
principles. The Foreword to accounting standards used by the United Kingdom
Accounting Standards Board states that the requirements of an accounting
standard should be departed from to the extent necessary to give a true and fair
view.
Under Financial Reporting Standard 4 (FRS4), the company would be required
to maintain the liabilities for the principal and interest contingently payable
until such time as the obligation is extinguished. The directors of the company
believe that the adoption of FRS4 would result in the financial statements not
presenting a true and fair view. The capital structure of the company
incorporates various levels of debt with a minimal equity share capital, the
intention being from the outset that the equity shareholders would not bear any
of the losses which the company may suffer on sales of the aircraft and other
assets, these losses being borne by the various debt holders. The financial
effect of this departure is as detailed in Note 5 and Note 27.
Under U.S. GAAP, the liability for principal and interest remains until
such time as the obligation is extinguished. (See Notes 20 to 23 for the
reconciliation between U.K. and U.S. GAAP.)
F-10
<PAGE> 182
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
30 JUNE, 1997 30 JUNE, 1996
------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Trade receivables........................................... 2,405 2,443
Non-trade receivables....................................... 737 515
----- -----
3,142 2,958
===== =====
</TABLE>
Trade receivables comprise amounts in respect of rent and maintenance
payments due from lessees.
Non-trade receivables comprise prepayments.
2 AIRCRAFT
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C>
COST
Beginning of year........................................... 975,179 975,179
-------- --------
End of year................................................. 975,179 975,179
-------- --------
DEPRECIATION
Beginning of year........................................... (36,136) (18,158)
Charge for the year......................................... (38,062) (17,978)
Additional charge in the year............................... (34,385) --
-------- --------
End of year................................................. (108,583) (36,136)
-------- --------
Provision for permanent diminution in value................. (12,000) (12,000)
-------- --------
NET BOOK VALUE
Beginning of year........................................... 927,043 957,021
-------- --------
End of year................................................. 854,596 927,043
-------- --------
Average independent base value at the end of the year....... 849,677 884,430
======== ========
</TABLE>
Cost represents the purchase price of aircraft acquired by the company
which was based on the independent appraisal values of the portfolio of 27
aircraft at August 24, 1994.
The directors of the company decide on an annual basis whether to include a
provision for permanent diminution in value. The provision is based upon base
value appraisals of the individual aircraft prepared by three professional
appraisal firms, together with other factors such as maintenance reserves held
by the company, the creditworthiness of particular lessees, current rental
values compared to open market and the length of remaining lease term.
In the year ended June 30, 1996, the directors made a provision of $12
million to reflect a permanent diminution in value against a particular aircraft
type.
The company's aircraft, along with the company's other assets, have charges
attached to them such that they represent security for the Notes issued (see
Note 5).
3 OPERATING LEASES
All the aircraft are leased on operating leases to 19 lessees as at June
30, 1997. Rentals on certain of the leases are variable in accordance with
prevailing interest rates.
F-11
<PAGE> 183
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3 OPERATING LEASES (CONTINUED)
The following is a schedule of contracted future rentals, by years, on
operating leases as of June 30, 1997. The interest rates prevailing at June 30,
1997 have been applied in determining rentals that are variable in accordance
with prevailing interest rates.
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30 U.S.$'000
------------------- ---------
<S> <C>
1998........................................................ 97,590
1999........................................................ 85,377
2000........................................................ 53,475
2001........................................................ 31,829
2002........................................................ 24,404
Thereafter.................................................. 19,568
-------
312,243
=======
</TABLE>
There are no contingent rentals.
The leases have charges attached to them such that they represent security
for the Notes issued.
Projected revenue for the year ended 30 June 1997 was $94,741,000. Actual
revenue earned was $102,121,000. The principal reason for the surplus was caused
by the re-leasing of aircraft at the expiry of their leases.
4 ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Accrued expenses and other liabilities comprise:
Deferred income............................................. 5,382 5,024
Interest on Notes........................................... 5,574 6,003
Taxation.................................................... (50) 93
Other accruals.............................................. 5,183 3,601
------ ------
16,089 14,721
====== ======
</TABLE>
F-12
<PAGE> 184
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5 INDEBTEDNESS
a) Principal
The purchase of the aircraft was funded by the sale of Trust Notes and the
sale of Subordinated Notes (together the 'Notes'). The Notes are secured by a
first priority security interest in the company's assets, which consist of the
aircraft, the leases and amounts on deposit in certain accounts.
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996 AT ISSUE
------------- ------------- ---------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
TRUST NOTES
Class A-1 Notes..................................... 121,944 142,036 172,000
Class A-2 Notes..................................... 101,372 112,442 139,404
Class A-3 Notes..................................... 156,167 156,167 156,167
Class A-4 Notes..................................... 140,122 140,122 140,122
Class B-1 Notes..................................... 43,770 43,770 44,106
Class B-2 Notes..................................... 43,994 43,994 44,106
Class C Notes....................................... 86,171 86,171 86,610
SUBORDINATED NOTES
Class D Note........................................ 49,988 62,319 71,185
Class E Note and capitalised E note interest........ 180,887 166,355 144,451
Less: restricted by income availability............. (47,662) (6,647) --
Less: extinguished by a permanent loss.............. (5,258) -- --
------- ------- -------
Net Class E Note Principal.......................... 127,967 159,708 144,451
------- ------- -------
871,495 946,729 998,151
======= ======= =======
</TABLE>
Repayments of principal on the Trust Notes and Class D Note principal are
made monthly and commenced in October 1994. The outstanding principal balance on
each Trust Note is due on September 15, 2004 (the Final Maturity Date). However,
as a consequence of the refinancing proposal disclosed below (Note 28) the
directors believe that the Notes will be redeemed in full by June 30, 1998. On
this basis, the Notes have been reclassified as repayable within one year.
The repayment of principal on the Trust Notes and the Class D Note is
dependent upon the cash available at the monthly payment date and is governed by
the Deed of Charge of Assignment and Priorities entered into by ALPS 94-1
Limited on the Closing Date (the 'Deed of Charge').
The repayment of Class E Note principal is not due until the Trust Notes
and Class D Note have been fully repaid.
In addition the Class E Note has a premium interest rate attached to it to
capture any potential profits made by the company. Consequently, the equity
shareholders will not participate in any losses of the company beyond the share
capital, and, accordingly an amount equivalent to such losses, including the
diminution in value of aircraft, has been released from the carrying value of
the debt and credited to the statement of operations. In addition, the provision
for a permanent diminution in value in aircraft values is treated as a permanent
loss under the Deed of Charge and a proportion of the Class E Note principal is
extinguished based upon the terms of the Deed of Charge.
F-13
<PAGE> 185
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5 INDEBTEDNESS (CONTINUED)
b) Interest
Class A-1 Notes bear interest at LIBOR plus 0.48%, payable monthly in
arrears.
Class A-2 Notes bear interest at 7.15%, payable monthly in arrears.
Class A-3 Notes bear interest at LIBOR plus 0.45%, payable monthly in
arrears.
Class A-4 Notes bear interest at 7.80%, payable monthly in arrears.
Class B-1 Notes bear interest at LIBOR plus 1.15%, payable monthly in
arrears.
Class B-2 Notes bear interest at 8.20%, payable monthly in arrears.
Class C Notes bear interest at 9.35%, payable monthly in arrears.
The Class D Note bears interest at LIBOR plus 5.50%. Interest is payable
monthly in arrears and commenced in October 1994, subject to available cash.
Interest accrued but not paid will be added to the principal outstanding and
will accrue interest until paid.
The Class E Note bears interest at 10.00%. The interest accrues monthly in
arrears. With the exception of certain circumstances the Class E permitted
interest amount will not be paid until the payment date following the fourth
anniversary of the Closing Date.
c) Debt maturity
Upon the Final Maturity Date, the cash available will be applied to
principal in the following order:
1. Class A Notes principal
2. Class B Notes principal
3. Class C Notes principal
4. Class D Note principal
5. Class E Note principal
6 PROVISION FOR MAINTENANCE
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Opening balance............................................. 39,544 29,405
Acquired with aircraft...................................... -- 2,742
Receivable during year...................................... 12,558 10,017
Expenditure................................................. (5,855) (2,620)
------ ------
Closing balance............................................. 46,247 39,544
------ ------
Due within one year......................................... 1,604 4,375
Due after one year.......................................... 44,643 35,169
------ ------
46,247 39,544
====== ======
</TABLE>
All of the lessees are responsible under the terms of their respective
leases to maintain the aircraft. As at June 30, 1997, 18 of the lessees provide
security for such maintenance obligations by contribution of funds to
F-14
<PAGE> 186
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6 PROVISION FOR MAINTENANCE (CONTINUED)
the company. The company may incur maintenance costs on the re-leasing of the
aircraft due to the restoration to an acceptable condition prior to leasing.
7 SECURITY DEPOSITS
Security deposits of U.S.$15,202,000 (1996 -- U.S.$18,677,000) are held as
security for obligations in accordance with the terms of certain leases. The
deposits are held as cash and are included within the cash balance.
8 SHARE CAPITAL
Called up share capital comprises:
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
U.S.$ U.S.$
<S> <C> <C>
AUTHORISED
15,000 ordinary shares of U.S.$1 each....................... 15,000 15,000
------ ------
ISSUED AND FULLY PAID
10 ordinary shares of U.S.$1 each........................... 10 10
------ ------
</TABLE>
The company issued 10 ordinary shares at $1 each on June 3, 1994.
9 REVENUES AND CONCENTRATION OF CREDIT RISK
a) Distribution of revenues by geographic area
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994 TO
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
----------------- ----------------- -----------------
U.S.$'000 % U.S.$'000 % U.S.$'000 %
<S> <C> <C> <C> <C> <C> <C>
Europe............................... 44,927 43.9 46,164 45.2 41,268 47.5
North America........................ 3,693 3.6 3,673 3.6 3,189 3.7
South/Central America................ 19,296 18.9 14,324 14.0 11,347 13.1
Asia/Pacific......................... 34,205 33.6 37,861 37.2 30,999 35.7
------- ---- ------- ---- ------- ----
102,121 100 102,022 100 86,803 100
======= ==== ======= ==== ======= ====
</TABLE>
All revenues are derived from aircraft leasing.
b) Concentration of credit risk
Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.
The company manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition the company maintains Political Risk Insurance in
respect of certain lessees.
The company continually evaluates the financial position of lessees and,
based on this evaluation, the amounts outstanding and the available security,
makes an appropriate provision for doubtful debts.
F-15
<PAGE> 187
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9 REVENUES AND CONCENTRATION OF CREDIT RISK (CONTINUED)
As at June 30, 1997, one lessee accounted for 12% of the company's lease
revenues and another accounted for 11% of lease revenues. No other lessee
accounted for greater than 10% of the company's lease revenues for the year
ended June 30, 1997. One lessee accounted for 12% of the company's lease
revenues in both the period and year ended June 30, 1995 and June 30, 1996. No
other lessee accounted for greater than 10% of the company's lease revenues for
the period and year ended 30 June, 1995 and 30 June, 1996.
10 NET INTEREST EXPENSE
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994 TO
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ---------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Interest payable on Notes......................... 73,975 76,587 66,468
Net interest income............................... (2,938) (3,011) (2,262)
------ ------ ------
71,037 73,576 64,206
====== ====== ======
</TABLE>
11 OTHER EXPENSES
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994 TO
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ---------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Servicer's fees................................... 2,899 2,893 1,483
Political Risk Insurance.......................... 737 1,210 527
Administration fees............................... 441 503 331
Legal and professional fees....................... 402 323 411
Directors' and Officers' Insurance................ 350 391 426
Directors' fees and expenses...................... 122 150 141
Cash manager's fees............................... 66 41 201
Audit and tax fees................................ 36 70 182
------ ------ ------
5,053 5,581 3,702
====== ====== ======
</TABLE>
12 NET (LOSS)/INCOME BEFORE PROVISION FOR TAXES
a) Net (loss)/income before provision for taxes is stated after charging:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- -------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Directors' remuneration............................ 100 100 100
--- --- ---
100 100 100
=== === ===
</TABLE>
b) Directors and Officers' Insurance
As approved at an Extraordinary General Meeting of the company, Directors'
and Officers' Insurance has been implemented. Directors also have the protection
of an unsecured indemnity from the company in respect of claims relating to them
in their capacity as directors.
F-16
<PAGE> 188
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13 BENEFIT/(PROVISION) FOR TAXES
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- -------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Corporation tax.................................... 143 (200) (69)
Other taxes........................................ -- -- --
--- ---- ---
143 (200) (69)
=== ==== ===
</TABLE>
Taxation provisions shown relate to the activities of subsidiaries, levied
by local jurisdictions. The current writeback relates to a subsequent approval
of lower prior period tax charges levied by one jurisdiction.
14 BASIC (LOSS)/INCOME PER ORDINARY SHARE
The calculation of basic (loss)/income per ordinary share has been computed
by dividing the profit or loss for the period of U.S.$Nil (1996 -- loss of
U.S.$666,000, 1995 -- income of U.S.$666,000) by the weighted average number of
ordinary shares outstanding during the year -- 10 (1996 -- 10, 1995 -- 10).
15 STAFF COSTS AND NUMBERS
The company has no employees.
16 SUBSIDIARY COMPANIES
The company has the following subsidiary companies:
<TABLE>
<CAPTION>
COUNTRY OF % OF SHARES
NAME INCORPORATION BUSINESS HELD
- ---- ------------- -------- -----------
<S> <C> <C> <C>
Pergola Limited................ Ireland Aircraft leasing and sub-leasing 100%
ALPS 94-1 (Belgium) N.V........ Belgium Aircraft leasing and sub-leasing 100%
ALPS 94-1 (France) S.A.R.L. ... France Dormant 100%
</TABLE>
17 DIVIDENDS
Under the Articles of Association, the shareholders are entitled to receive
a fixed cumulative preferential dividend of U.S.$1,500 per annum out of the
profits of the company. This dividend has not been declared in the current year.
18 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- -------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Cash paid in respect of:
Interest -- Trust Notes............................ 50,574 53,558 44,769
Interest -- Subordinated Notes..................... 9,298 10,444 6,378
Income taxes....................................... -- 174 --
------ ------ ------
59,872 64,176 51,147
====== ====== ======
</TABLE>
F-17
<PAGE> 189
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19 COMMITMENTS
The company has no long-term contracts other than those with its service
providers (see Note 26).
20 SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared in accordance with U.K.
GAAP which differ significantly in certain respects from U.S. GAAP. These
significant differences are described below:
a) Aircraft
The consolidated financial statements are prepared applying Financial
Reporting Standard No. 5 'Reporting the Substance of Transactions'. This
accounting standard defines assets as the right or other access to future
economic benefits controlled by an entity arising as a result of transactions or
events. The company has rights to access future economic benefits arising from
the aircraft at the Closing Date even though it does not become the legal owner
of the aircraft until they are delivered. Therefore the aircraft are included at
their initial valuation or purchase price at the Closing Date and depreciated
from that date. Similarly, rental income has been recognised as receivable from
the Closing Date.
The accounting treatment under U.S. GAAP would be to record the cost of the
aircraft at GPA's Amortised Cost at the Delivery Date and to depreciate the
aircraft and recognize rental income from the Delivery Date. Any writeback of
depreciation would be taken over the useful life of the asset. Effective from 1
July 1996 the method of depreciation is the same for both U.K. and U.S. GAAP.
Prior to that date under U.K. GAAP, depreciation was provided at 2% for the
first 15 years and 7% thereafter whereas under U.S. GAAP prior to 1997, the
aircraft are depreciated on a straight-line basis so as to write-off the cost of
the assets over a period of 25 years. Under U.K. GAAP, a provision for
additional depreciation has been made in 1997 to reflect the impact of adopting
the revised estimates of accumulated depreciation in respect of prior periods.
Under U.S. GAAP, no additional depreciation is made, the impact is spread over
the remaining lives of the assets.
The differences between income recorded under U.K. GAAP and U.S. GAAP
therefore relate to:
1. Depreciation from the Closing Date to Delivery Date.
2. Rental income from the Closing Date to Delivery Date.
3. Investment income earned from the Closing Date to Delivery Date.
4. Difference in depreciation of Amortised Cost of aircraft under U.S. GAAP
and initial appraised value under U.K. GAAP.
5. Difference in writeback of depreciation under U.S. GAAP and U.K. GAAP.
6. Difference in additional depreciation resulting from the change in the
depreciation method.
b) Cash and commercial paper balances
Included in cash and commercial paper balances at June 30, 1997 of
U.S.$91,295,000 (1996: $89,670,000) are security deposits of U.S.$15,202,000
(1996: $18,677,000). Under U.S. GAAP, these security deposits would be
separately identified as restricted cash.
F-18
<PAGE> 190
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20 SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
c) Indebtedness
The principal repayment of the Class E Note and accrued interest thereon is
dependent upon cash available. In addition the Class E Note has a premium
interest rate attached to it to capture any potential profits made by the
company and consequently, the equity shareholders will not participate in any
losses of the company beyond the share capital. Such losses are borne by the
Noteholders and, accordingly an amount equivalent to such losses, including the
diminution in value of aircraft, has been released from the carrying value of
the debt and credited to the statement of operations. Such amounts are included
as contingent liabilities (see Note 27). Under U.S. GAAP the liability for the
principal amount remains until such time as the obligation is extinguished.
d) Shareholders' equity
The differences between shareholders' equity under U.K. GAAP and U.S. GAAP
relate to the recording of the aircraft at Amortised Cost. The difference
between the Initial Appraised Value and the Amortised Cost is deemed a
distribution to GPA on the Closing Date, which results in a negative charge to
shareholders' equity.
21 RECONCILIATION OF INCOME AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
INCOME IN ACCORDANCE WITH U.S. GAAP
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994 TO
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- --------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Retained (loss) / income in accordance with U.K.
GAAP............................................ -- (666) 666
ITEMS HAVING THE EFFECT OF INCREASING REPORTED
INCOME
Depreciation from the Closing Date to the
Delivery Date................................ -- 141 7,276
Investment income earned from the Closing Date
to Delivery Date............................. -- 374 17,017
Exceptional item: additional depreciation
charge....................................... 34,385 -- --
Difference in depreciation of amortised cost of
aircraft..................................... 5,723 (14,501) (5,560)
ITEMS HAVING THE EFFECT OF DECREASING REPORTED
INCOME
Rental from the Closing Date to the Delivery
Date......................................... -- (729) (34,249)
Reduction in indebtedness....................... (41,015) (6,647) --
------- -------- --------
Net loss in accordance with U.S. GAAP............. (907) (22,028) (14,850)
Net loss brought forward.......................... (36,878) (14,850) --
------- -------- --------
Net loss carried forward.......................... (37,785) (36,878) (14,850)
Loss per ordinary share for the year as so
adjusted........................................ (90.7) (2,202.8) (1,485.0)
------- -------- --------
Weighted average number of ordinary shares
outstanding..................................... 10 10 10
------- -------- --------
</TABLE>
F-19
<PAGE> 191
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
22 RECONCILIATION OF SHAREHOLDERS' EQUITY AS STATED IN ACCORDANCE WITH U.K.
GAAP TO SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED 2 JUNE 1994 TO
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- --------------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C>
Shareholders' equity in accordance with U.K.
GAAP............................................ -- -- 666
ITEMS HAVING THE EFFECT OF AMENDING SHAREHOLDERS'
EQUITY
Distribution to GPA at Closing Date............. (147,588) (147,588) (147,588)
Cumulative difference in net income between U.K.
GAAP and U.S. GAAP (see Note 21)............. (37,785) (36,878) (15,516)
-------- -------- --------
Shareholders' equity in accordance with U.S.
GAAP............................................ (185,373) (184,466) (162,438)
-------- -------- --------
</TABLE>
23 RECONCILIATION OF AIRCRAFT STATED IN ACCORDANCE WITH U.K. GAAP TO AIRCRAFT
STATED IN ACCORDANCE WITH U.S. GAAP
<TABLE>
<CAPTION>
U.S. GAAP U.K. GAAP
------------------------------ ------------------------------
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
U.S.$'000 U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C> <C>
COST
Cost.................................. 975,179 975,179 975,179 975,179
Step Up Cost.......................... (147,588) (147,588) -- --
Beginning of period................... 827,591 827,591 975,179 975,179
-------- -------- -------- --------
End of period......................... 827,591 827,591 975,179 975,179
-------- -------- -------- --------
DEPRECIATION
Beginning of period................... (48,780) (16,442) (36,136) (18,158)
Provision in period................... (32,339) (32,338) (38,062) (17,978)
Additional charge in period........... -- -- (34,385) --
-------- -------- -------- --------
End of period......................... (81,119) (48,780) (108,583) (36,136)
-------- -------- -------- --------
Provision for permanent diminution in
value............................... (12,000) (12,000) (12,000) (12,000)
-------- -------- -------- --------
NET BOOK VALUE
Beginning of period................... 766,811 811,149 927,043 957,021
-------- -------- -------- --------
End of period......................... 734,472 766,811 854,596 927,043
-------- -------- -------- --------
</TABLE>
24 FAIR VALUE OF FINANCIAL INSTRUMENTS
The company estimates that the fair value of its cash and cash equivalents
and other receivables and payables at June 30, 1997 approximate to the amounts
at which these items are reflected in the company's balance sheet. This is due
to the relatively short-term nature of the instruments and the frequency at
which they reprice.
25 FOREIGN CURRENCY TRANSACTIONS
The company's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.
F-20
<PAGE> 192
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
26 RELATED PARTY TRANSACTIONS
a) GE Capital Aviation Services Limited (GECAS)
GECAS acts as lease manager to the company. In addition to managing the
company's aircraft GECAS also manages aircraft owned by GE Capital and its
affiliates and other third parties, including GPA from whom the company's
aircraft were purchased. GECAS may from time to time have conflicts of interest
in performing its obligations to the company and other entities to which it
provides management, marketing and other services.
GECAS receives an annual fee as lease manager which amounted to
U.S.$2,899,000 (1996 -- U.S.$2,893,000; 1995 -- U.S.$1,483,000) for the year
ended June 30, 1997. GECAS is an affiliate of GE Capital which holds the Class D
Note and has a right to appoint a representative to the board. GE Capital has
not yet indicated any intention to make such an appointment.
b) Mr. E.J. Hansom (Director)
Mr. E.J. Hansom is the Chief Financial Officer of GPA and is one of the
representatives on the board appointed by GPA, as holder of the Class E Note.
The company purchased its aircraft from GPA.
c) Ms. R. Hynes (Director)
Ms. R. Hynes is the ( ) of GPA and is one of the representatives
on the board appointed by GPA, as holder of the Class E Note. The Company
purchased its aircraft from GPA.
d) Mr. G.A. Robinson (Director)
Mr. G.A. Robinson performs consulting services from time to time for Air
2000, one of the lessees.
27 CONTINGENT LIABILITIES
Principal
As detailed in Note 5, certain principal amounts are restricted by
available cash. At the year end certain amounts were restricted by cash and the
liability has been reduced. The amounts represent contingent liabilities which
will become due dependent upon future cashflows.
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Class E Note................................................ 47,662 6,647
------ ------
</TABLE>
28 SUBSEQUENT EVENTS
The directors have approved in principle to proceed with efforts to
refinance the company. There is an early redemption of the Notes planned prior
to June 30, 1998. A new company, AerCo Limited, will be incorporated which will
issue its shares to AerCo Trust in consideration for all the issued ordinary
shares in ALPS 94-1. The New Notes will be issued by AerCo Limited and the
proceeds loaned to ALPS 94-1 to enable ALPS 94-1 to repay the principal and
interest outstanding on Class A, B, C and D Notes. The Class E Note principal
and interest will be exchanged for a new Class E Note.
F-21
<PAGE> 193
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
28 SUBSEQUENT EVENTS (CONTINUED)
Upon receipt of the proceeds of the New Notes, the mortgages over the
aircraft and the security in respect of the leases and certain other property in
favor of the Security Trustee, will be released and transferred to the Security
Trustee for the benefit of the holders of the New Notes.
No costs have been accrued for in the financial statements in relation to
this refinancing as the directors approval did not occur prior to 30 June 1997.
F-22
<PAGE> 194
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INTERIM BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ 52,500 47,552
Commercial paper............................................ 38,081 39,580
Accounts receivable......................................... 2,501 3,750
------- -------
TOTAL CURRENT ASSETS........................................ 93,082 90,882
FIXED ASSETS
AIRCRAFT.................................................... 818,440 864,089
------- -------
TOTAL ASSETS................................................ 911,522 954,971
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Accrued expenses and other liabilities...................... 21,131 15,048
Indebtedness................................................ 830,321 881,257
Provision for maintenance................................... 46,516 39,714
Security deposits........................................... 13,554 18,952
------- -------
TOTAL LIABILITIES........................................... 911,522 954,971
Share capital............................................... -- --
Accumulated profit.......................................... -- --
------- -------
Shareholders' equity........................................ -- --
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. 911,522 954,971
======= =======
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
interim financial statements.
F-23
<PAGE> 195
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
REVENUES
Aircraft leasing............................................ 76,098 76,263
EXPENSES
Depreciation................................................ (28,569) (28,569)
Exceptional item -- additional depreciation................. -- (34,385)
Provision for permanent diminution in value of aircraft..... (8,720) --
Net interest expense........................................ (52,340) (53,816)
Other expenses.............................................. (4,278) (4,123)
-------- --------
(93,907) (120,893)
-------- --------
NET LOSS FROM OPERATIONS.................................... (17,809) (44,630)
Reduction in indebtedness................................... 17,824 44,630
-------- --------
NET INCOME BEFORE PROVISION FOR TAXES....................... 15 --
Provision for taxes......................................... (15) --
-------- --------
NET INCOME FOR THE PERIOD................................... -- --
RETAINED INCOME BROUGHT FORWARD............................. -- --
-------- --------
RETAINED INCOME CARRIED FORWARD............................. -- --
BASIC INCOME PER ORDINARY SHARE............................. -- --
-------- --------
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING...... 10 10
======== ========
</TABLE>
All recognised gains and losses are included in the unaudited consolidated
interim statement of operations above.
There is no material difference between the net income for the period and prior
periods, and their historical cost equivalent.
The results for the period are derived from continuing operations.
The accompanying notes are an integral part of the unaudited consolidated
interim financial statements.
F-24
<PAGE> 196
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period................................... -- --
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation charge for the period.......................... 28,569 28,569
Exceptional item: additional depreciation charge............ -- 34,385
Provision for permanent diminution in value of aircraft..... 8,720 --
Changes in operating assets and liabilities
Accounts receivable and other assets...................... 651 (791)
Accrued interest on E Note................................ 12,340 11,067
Accrued expenses and other liabilities.................... 5,032 326
Reduction in indebtedness................................. (17,824) (44,630)
Net maintenance received.................................... 269 170
Net security deposits (paid)/received....................... (1,648) 275
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 36,109 29,371
INVESTING ACTIVITIES
Capitalised expenditure on aircraft......................... (1,133) --
------- -------
MANAGEMENT OF LIQUID RESOURCES
Net sale/(purchase) of commercial paper..................... 1,740 (4,270)
------- -------
NET CASH INFLOW/(OUTFLOW) FROM MANAGEMENT OF LIQUID
RESOURCES................................................. 1,740 (4,270)
------- -------
FINANCING ACTIVITIES
Indebtedness repaid......................................... (35,690) (31,909)
------- -------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES.................. (35,690) (31,909)
------- -------
NET INCREASE/(DECREASE) INCREASE IN CASH.................... 1,026 (6,808)
CASH AT BEGINNING OF PERIOD................................. 51,474 54,360
------- -------
CASH AT END OF PERIOD....................................... 52,500 47,552
======= =======
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
interim financial statements.
F-25
<PAGE> 197
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
UNAUDITED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ISSUE OF SHARES RETAINED PROFIT TOTAL
--------------- --------------- ---------
U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C> <C>
Balance at June 30, 1996..................... 10 0 0 0
NET INCOME FOR THE PERIOD.................... 0 0 0 0
-- -- -- --
Balance at March 31, 1997.................... 10 0 0 0
-- -- -- --
Balance at June 30, 1997..................... 10 0 0 0
NET INCOME FOR THE PERIOD.................... 0 0 0 0
-- -- -- --
Balance at March 31, 1998.................... 10 0 0 0
-- -- -- --
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
interim financial statements.
F-26
<PAGE> 198
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
STATEMENT OF ACCOUNTING POLICIES
Basis of preparation
The accounting policies followed in the preparation of the accompanying
unaudited consolidated interim financial statements conform with generally
accepted accounting principles in the United Kingdom and comply with financial
reporting standards of the Accounting Standards Board in the United Kingdom as
promulgated by the Institute of Chartered Accountants in England and Wales,
other than as explained in 'Indebtedness' in the financial statements of the
company for the year ended June 30, 1997.
The unaudited consolidated interim financial statements are prepared on the
going concern basis and under the historic cost convention and are stated in
U.S. dollars, which is the principal operating currency of the Company and of
the aviation industry.
F-27
<PAGE> 199
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 RECONCILIATION OF INCOME AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
INCOME IN ACCORDANCE WITH U.S. GAAP.
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
----------------- -----------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Retained income in accordance with U.K. GAAP............ -- --
ITEMS HAVING THE EFFECT OF INCREASING REPORTED INCOME
Exceptional item: additional depreciation charge...... -- 34,385
Difference in depreciation of amortised cost of
aircraft........................................... 4,315 4,315
Difference in permanent dimunition in value of
aircraft........................................... 8,200 --
ITEMS HAVING THE EFFECT OF DECREASING REPORTED INCOME
Reduction in indebtedness............................. (17,824) (39,372)
------- -------
Net loss in accordance with U.S. GAAP................... (5,309) (672)
Net loss brought forward................................ (37,785) (36,878)
------- -------
Net loss carried forward................................ (43,094) (37,550)
Loss per ordinary share for the period as so adjusted... (530.9) (67.2)
------- -------
Weighted average number of ordinary shares
outstanding........................................... 10 10
------- -------
</TABLE>
2 RECONCILIATION OF SHAREHOLDERS' EQUITY AS STATED IN ACCORDANCE WITH U.K.
GAAP TO SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
----------------- -----------------
U.S.$'000 U.S.$'000
<S> <C> <C>
Shareholders' equity in accordance with U.K. GAAP....... -- --
ITEMS HAVING THE EFFECT OF AMENDING SHAREHOLDERS' EQUITY
Distribution to GPA at Closing Date................... (147,588) (147,588)
Cumulative difference in net income between U.K. GAAP
and U.S. GAAP (see Note 1)......................... (43,094) (37,550)
-------- --------
Shareholders' equity in accordance with U.S. GAAP....... (190,682) (185,138)
-------- --------
</TABLE>
F-28
<PAGE> 200
AIRCRAFT LEASE PORTFOLIO SECURITIZATION 94-1 LIMITED AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
3 RECONCILIATION OF AIRCRAFT STATED IN ACCORDANCE WITH U.K. GAAP TO AIRCRAFT
STATED IN ACCORDANCE WITH U.S. GAAP
<TABLE>
<CAPTION>
U.S. GAAP U.K. GAAP
------------------------------- -------------------------------
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997
-------------- -------------- -------------- --------------
U.S.$'000 U.S.$'000 U.S.$'000 U.S.$'000
<S> <C> <C> <C> <C>
COST
Cost.................................... 975,179 975,179 975,179 975,179
Step Up Cost............................ (147,588) (147,588) -- --
-------- -------- -------- --------
Beginning of period..................... 827,591 827,591 975,179 975,179
Additions............................... 1,133 -- 1,133 --
-------- -------- -------- --------
End of period........................... 828,724 827,591 976,312 975,179
-------- -------- -------- --------
DEPRECIATION
Beginning of period..................... (81,119) (48,780) (108,583) (36,136)
Provision in period..................... (24,254) (24,254) (28,569) (28,569)
Additional charge in period............. -- -- -- (34,385)
-------- -------- -------- --------
End of period........................... (105,373) (73,034) (137,152) (99,090)
-------- -------- -------- --------
PROVISION FOR PERMANENT DIMINUTION IN
VALUE
Beginning of period..................... (12,000) (12,000) (12,000) (12,000)
Provision in period..................... (520) -- (8,720) --
-------- -------- -------- --------
End of period........................... (12,520) (12,000) (20,720) (12,000)
-------- -------- -------- --------
NET BOOK VALUE
Beginning of period..................... 734,472 766,811 854,596 927,043
-------- -------- -------- --------
End of period........................... 710,831 742,557 818,440 864,089
-------- -------- -------- --------
</TABLE>
F-29
<PAGE> 201
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF AERCO LIMITED
We have audited the financial statements on pages F-31 to F-43 of this
Prospectus which have been prepared under the historical cost convention and the
accounting policies set out on pages F-35 to F-36 of this Prospectus.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are required to prepare financial statements for each
financial period which give a true and fair view of the statement of net assets
of the entity and of the income and cash flows of the entity for that period. In
preparing the financial statements, the directors are required to select
suitable accounting policies and apply them consistently, make judgements and
estimates that are prudent and reasonable and to prepare the financial
statements on the going concern basis unless it is not appropriate to assume
that the entity will continue in business.
It is our responsibility to form an independent opinion, based on our
audit, on those financial statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
U.K. Auditing Practices Board which do not differ significantly from U.S.
generally accepted auditing standards.
An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the financial statements and of whether the accounting
policies are appropriate to the circumstances of the entity, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements present fairly the statement of net
assets of the entity as at June 30, 1997 and of the income and cash flows for
the year ended June 30, 1997 of the entity and have been properly prepared in
accordance with U.K. generally accepted accounting principles.
Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have no significant effect on the statement of
operations for the year ended June 30, 1997 and the statement of net assets as
at June 30, 1997.
ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS
Forum House
Grenville Street
St. Helier
Jersey JE2 4UF
Channel Islands
1998
F-30
<PAGE> 202
NINE TRANSFERRING AIRCRAFT
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NOTES JUNE 30, 1997
----- -------------
U.S.$'000
<S> <C> <C>
ASSETS
CURRENT ASSETS
Due from GPA Group plc...................................... 27,294
Accounts receivable......................................... 2 814
-------
TOTAL CURRENT ASSETS........................................ 28,108
FIXED ASSETS
Aircraft.................................................... 3 177,850
-------
TOTAL ASSETS................................................ 205,958
=======
LIABILITIES
Accrued expenses and other liabilities...................... 5 7,037
Indebtedness................................................ 6 115,044
Provision for maintenance................................... 7 12,946
Security deposits........................................... 8 2,930
Deferred income tax......................................... 12 5,654
-------
TOTAL LIABILITIES........................................... 143,611
NET ASSETS.................................................. 62,347
=======
</TABLE>
The accompanying notes, including the statement of accounting policies on pages
F-35 to F-36, are an integral part of the financial statements.
F-31
<PAGE> 203
NINE TRANSFERRING AIRCRAFT
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
NOTES JUNE 30, 1997
----- -------------
U.S.$'000
<S> <C> <C>
REVENUES
Aircraft leasing............................................ 9 22,216
EXPENSES
Depreciation................................................ 3 (9,261)
Provision for permanent diminution in value of aircraft..... 3 (4,000)
Net interest expense........................................ 10 (10,144)
Other expenses.............................................. 11 (9,032)
--------
(32,437)
--------
NET LOSS FROM OPERATIONS BEFORE PROVISION FOR TAXES......... (10,221)
Benefit for taxes........................................... 12 1,176
--------
NET LOSS FOR THE YEAR....................................... (9,045)
========
</TABLE>
All recognised gains and losses are included in the statement of operations
above.
There is no material difference between the net loss for the year, and its
historical cost equivalent.
The results for the year are derived from continuing operations.
The accompanying notes, including the statement of accounting policies on pages
F-35 to F-36, are an integral part of the financial statements.
F-32
<PAGE> 204
NINE TRANSFERRING AIRCRAFT
STATEMENT OF CASHFLOWS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year....................................... (9,045)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation charge for the year............................ 9,261
Provision for permanent diminution in value of aircraft..... 4,000
Amortisation................................................ 603
Deferred income tax......................................... (1,176)
Changes in operating assets and liabilities
Accounts receivable and other assets...................... 2,115
Accrued expenses and other liabilities.................... 5,288
Net maintenance paid...................................... (2,702)
Net security deposits received............................ 1,080
-------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 9,424
-------
INVESTING ACTIVITIES
Capitalised expenditure on aircraft......................... (203)
-------
FINANCING ACTIVITIES
Contributions from GPA...................................... 28,456
Reduction in Indebtedness................................... (37,677)
-------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES.................. (9,221)
-------
NET INCREASE IN CASH........................................ --
CASH AT BEGINNING OF YEAR................................... --
-------
CASH AT END OF YEAR......................................... --
=======
</TABLE>
Supplemental disclosure of cash flow information is set out in Note 14. The
accompanying notes, including the statement of accounting policies on pages F-35
to F-36, are an integral part of the financial statements.
F-33
<PAGE> 205
NINE TRANSFERRING AIRCRAFT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TOTAL
---------
U.S.$'000
<S> <C>
Balance at June 30, 1996.................................... 42,936
Net contributions from GPA.................................. 28,456
NET LOSS FOR THE YEAR....................................... (9,045)
------
Balance at June 30, 1997.................................... 62,347
======
</TABLE>
The accompanying notes, including the statement of accounting policies on pages
F-35 to F-36, are an integral part of the financial statements.
F-34
<PAGE> 206
NINE TRANSFERRING AIRCRAFT
STATEMENT OF ACCOUNTING POLICIES
Securitization transaction and basis of preparation
These financial statements present the statement of operations and the
cashflows for the year ended June 30, 1997 and the statement of net assets at
that date of the Nine Transferring Aircraft to be acquired by AerCo from GPA
pursuant to a securitization and financing transaction.
Under the proposed transaction AerCo will acquire 100% of the capital stock
of ALPS 94-1, a company which owns 25 aircraft and the related leases, and will
also acquire ten aircraft and the related leases from GPA . The further details
of the proposed Transaction and of the basis of preparation of these financial
statements for the Nine Transferring Aircraft are set out in Note 1.
The accounting policies followed in the preparation of the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom and comply with financial reporting standards of the
Accounting Standards Board in the United Kingdom as promulgated by the Institute
of Chartered Accountants in England and Wales.
The financial statements are prepared on the going concern basis and under
the historic cost convention and are stated in US dollars, which is the
principal operating currency of the entity and of the aviation industry.
Revenue recognition
Revenue from aircraft on operating leases is recognised as income as it
accrues over the period of the leases. When future rental increases are
contracted under the terms of the leases, the entity accrues income on the basis
of the current rental rate rather than on a basis which averages the lease
rentals over the total lease term, unless receipt of such future rental
increases is reasonably assured.
Interest income
Interest earned during the period has been credited to the statement of
operations.
Provision for maintenance
In most lease contracts the lessee has the obligation for maintenance costs
on airframes and engines which arise during the term of the lease and in many
lease contracts the lessee makes a full or partial prepayment, calculated at an
hourly rate, into a fund held by the entity from which maintenance expenditures
for major checks are disbursed. The balance of these funds is included in the
provision for maintenance.
Taxation
Corporation tax is provided based on the results for the year. Deferred
income tax assets and liabilities recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
Aircraft
Aircraft are stated at cost less accumulated depreciation less permanent
diminutions in value. Cost comprises the net purchase price of the aircraft when
originally acquired by GPA.
F-35
<PAGE> 207
NINE TRANSFERRING AIRCRAFT
STATEMENT OF ACCOUNTING POLICIES -- (CONTINUED)
Cost comprises the invoiced cost net of manufacturer's discounts.
Depreciation is calculated on a straight line basis. The estimates of useful
lives and residual values are reviewed periodically. The current estimates for
residual values are generally 15% of cost and for useful lives are as follows:
<TABLE>
<CAPTION>
YEARS FROM
----- ----
<S> <C> <C>
Refurbished and upgraded aircraft -- converted to
freighters................................................ 20 Conversion Date
All other aircraft.......................................... 25 Manufacture Date
</TABLE>
Where purchase option agreements exist to the benefit of the lessee,
aircraft are depreciated to the purchase option price on a straight-line basis
provided that this would result in a higher depreciation charge than that
arrived at by applying the standard method.
Additional charges are made to reduce the book value of specific assets to
fair market value where a permanent diminution in value is considered to have
occurred. Where fair market value is greater than book value no adjustment is
made.
Fair market value is assessed by the directors consistent with the going
concern basis of preparation of the financial statements and reflects the
underlying economic value of aircraft and engines in normal market conditions
(where supply and demand are in reasonable equilibrium) and assumes adequate
time for a sale and a willing buyer and seller. Short-term fluctuations in the
market place are disregarded and it is assumed that there is no necessity either
to dispose of a significant number of aircraft simultaneously or to dispose of
aircraft quickly. In forming their assessment of fair market value the directors
have taken into consideration independent valuations of aircraft in the
portfolio, together with the directors' assessment of aircrafts' current
maintenance status and maintenance reserves.
The entity adopted FASB Statement No. 121 "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be disposed of" as of July 1,
1996. FASB Statement No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors' estimated the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized. The
application of this statement did not materially change the carrying value of
the entity's assets in the current or previous periods.
F-36
<PAGE> 208
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS
1 SECURITIZATION TRANSACTION AND BASIS OF PREPARATION
Under a proposed securitization transaction AerCo has agreed to acquire
100% of the capital stock of ALPS 94-1 and thereby will indirectly acquire a
portfolio of 25 aircraft and the related leases and will acquire directly or
indirectly ten aircraft (the Nine Transferring Aircraft and one Transferring
Aircraft that was sold by ALPS 94-1 to GPA on April 28, 1998) and the related
leases from GPA (collectively the "Transferring Aircraft"). The Transaction will
be effected by transferring ALPS 94-1 and subsidiaries and the existing GPA
subsidiaries that own the Transferring Aircraft to AerCo Group.
Simultaneously with such transfers, it is proposed that AerCo will issue
approximately $800 million in aggregate principal amount of Notes in four
subclasses: Subclass A-1, Subclass A-2, Subclass B-1 and Subclass C-1 ("Notes").
It is proposed that AerCo will issue two additional subclasses of notes, the
Subclass D-1 Notes and the Subclass E-1 Notes, which will initially be held by
GPA Group or its subsidiaries. In addition, as part of the Transaction GPA will
surrender its holding of its existing Class E Note in ALPS 94-1, which is
currently held by a subsidiary of GPA Group. AerCo will use the proceeds of the
issuance of the Notes, the Subclass D-1 Notes and Subclass E-1 Notes to finance
the repayment of all of ALPS 94-1's existing financial indebtedness and to
acquire or to finance the acquisition by the Transferring Companies of the
Transferring Aircraft from GPA.
These financial statements reflect, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the Nine
Transferring Aircraft to be transferred to AerCo from GPA.
(i) The financial statements are presented on a historical cost basis as if
the Nine Transferring Aircraft had been organized as single economic entity for
the year ended June 30, 1997.
(ii) The Transaction is approved as planned and is completed such that
AerCo is a going concern with adequate capital and finance in place.
(iii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of GPA to the
Nine Transferring Aircraft has been made. The most significant element of these
costs relate to aircraft management fees, substantially all of which are asset
based fees calculated as an annual percentage of a reference net book value of
aircraft under management. The balance of such costs have been calculated based
on GPA's estimate of the other overhead costs incurred in managing a fleet of
nine aircraft for the year. Management believes that the basis for these
allocations are reasonable.
(iv) During the year two of the nine aircraft were financed by finance
leases to GPA and one aircraft was financed by Notes issued by GPA. For these
aircraft the financial lease obligations, the liabilities under the Notes and
related cash flows and interest costs are reflected in these financial
statements.
In the case of the remaining six aircraft, no separate identifiable
financing was in place. These aircraft are assumed to have been financed by
intercompany indebtedness to GPA at levels based on the ratio of GPA's overall
net debt to aircraft net book value of 74.9% at July 1, 1996 and 51.87% at June
30, 1997 and repayments to GPA are assumed to have been made accordingly during
the year.
(v) The interest charged on the assumed indebtedness to GPA is based on
GPA's average cost of debt of 10.06% for the year ended June 30, 1997.
(vi) Cash generated from or absorbed by the activities of the Nine
Transferring Aircraft during the year is reflected through the intercompany
account as distributions to or transfers from GPA. This includes
F-37
<PAGE> 209
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
1 SECURITIZATION TRANSACTION AND BASIS OF PREPARATION (CONTINUED)
restricted cash held by GPA with respect to the Nine Transferring Aircraft. No
separate cash balances existed for the Nine Transferring Aircraft.
(vii) The tax provisions and deferred income tax assets and liabilities of
the Nine Transferring Aircraft have been determined as if the nine aircraft had
been owned by taxable entities separate from GPA.
2 ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
30 JUNE 1997
------------
U.S.$'000
<S> <C>
Trade receivables........................................... 401
Non-trade receivables....................................... 413
---
814
===
</TABLE>
Trade receivables comprise amounts in respect of rent and maintenance
payments due from lessees.
Non-trade receivables comprise prepayments.
3 AIRCRAFT
<TABLE>
<CAPTION>
30 JUNE 1997
------------
U.S.$'000
<S> <C>
COST
Beginning of year........................................... 271,925
Additions................................................... 203
--------
End of year................................................. 272,128
--------
DEPRECIATION
Beginning of year........................................... (81,017)
Charge for the year......................................... (9,261)
--------
End of year................................................. (90,278)
--------
Provision for permanent diminution in value................. (4,000)
--------
NET BOOK VALUE
Beginning of year........................................... 190,908
--------
End of year................................................. 177,850
--------
Average independent base value at end of year............... 199,960
========
</TABLE>
Cost represents the net purchase price of the aircraft when originally
acquired by GPA.
The directors of the entity decide on an annual basis whether to include a
provision for permanent diminution in value. The provision is based upon base
value appraisals of the individual aircraft prepared by three professional
appraisal firms, together with other factors such as maintenance reserves held
by the entity, the creditworthiness of particular lessees, current rental values
compared to open market and the length of remaining lease term.
In the year ended June 30, 1997, the directors made a provision of $4
million to reflect a permanent diminution in value against a particular aircraft
type.
F-38
<PAGE> 210
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4 OPERATING LEASES
All the aircraft are held for operating lease. Rentals on certain of the
leases are variable in accordance with prevailing interest rates.
The following is a schedule of contracted future rentals, by years, on
operating leases as of June 30, 1997. The interest rates prevailing at June 30,
1997 have been applied in determining rentals that are variable in accordance
with prevailing interest rates.
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30 U.S.$'000
- ------------------- ---------
<S> <C>
1998........................................................ 19,040
1999........................................................ 16,460
2000........................................................ 14,063
2001........................................................ 13,465
2002........................................................ 8,450
Thereafter.................................................. 1,218
------
72,696
======
</TABLE>
5 ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Accrued expenses and other liabilities comprise:
Deferred income............................................. 925
Interest.................................................... 54
Other accruals.............................................. 6,058
-----
7,037
=====
</TABLE>
6 INDEBTEDNESS
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Finance lease obligations(i)................................ 34,822
GPA Notes(i)................................................ 22,577
Due to GPA(ii).............................................. 57,645
-------
115,044
=======
</TABLE>
The basis and assumptions under which indebtedness has been reflected in
these financial statements is set out in Note 1.
(i) The finance lease obligations and the GPA Notes issued comprise the
amounts raised by GPA to finance three of the Nine Transferring
Aircraft. As part of the completion of the proposed Transaction these
amounts will be repaid in full (and accordingly no future maturity
analysis is presented). The GPA Notes are secured on one of the aircraft
which has a net book value of $26.2 million and the Notes carried
interest at a rate of 7.21% during the financial year.
(ii) As explained in Note 1 it has been assumed that the remaining six
aircraft had been financed with indebtedness due to GPA.
F-39
<PAGE> 211
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6 INDEBTEDNESS (CONTINUED)
(iii) Repayments of principal during the year on the finance lease
obligations and the GPA Notes were in accordance with their respective
contractual terms. The repayments of principal on the six aircraft which
were assumed to be financed by GPA were assumed to be made in accordance
with changes in GPA's aircraft net book value to net debt ratio during
the financial year.
7 PROVISION FOR MAINTENANCE
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Opening balance............................................. 15,647
Receivable during year...................................... 3,694
Expenditure................................................. (6,395)
------
Closing Balance............................................. 12,946
======
Due within one year......................................... 6,575
Due after one year.......................................... 6,371
------
12,946
======
</TABLE>
As at June 30, 1997, four of the lessees provide security for maintenance
obligations by contribution of funds to the entity. The entity may incur
maintenance costs on the re-leasing of the aircraft due to the restoration to an
acceptable condition prior to leasing.
8 SECURITY DEPOSITS
Security deposits received from lessees of US$2,930,000 (1996 --
US$1,850,000) are held as security for obligations in accordance with the terms
of certain leases.
9 REVENUES AND CONCENTRATION OF CREDIT RISK
a) Distribution of revenues by geographic area
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
------------------
U.S.$'000 %
--------- -----
<S> <C> <C>
Europe...................................................... 13,845 62.32
North America............................................... 4,449 20.03
South/Central America....................................... 2,042 9.19
Asia/Pacific................................................ 1,880 8.46
------ -----
22,216 100
====== =====
</TABLE>
All revenues are derived from aircraft leasing.
b) Concentration of credit risk
Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.
F-40
<PAGE> 212
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
9 REVENUES AND CONCENTRATION OF CREDIT RISK (CONTINUED)
The entity manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition the entity maintains Political Risk Insurance in respect
of certain lessees.
The entity continually evaluates the financial position of lessees and,
based on this evaluation, the amounts outstanding and the available security,
makes an appropriate provision for doubtful debts.
As at June 30, 1997, four lessees accounted for 16%, 15%, 14% and 11% of
the entity's lease revenues. No other lessee accounted for greater than 10% of
the entity's lease revenues for the year ended June 30, 1997.
10 NET INTEREST EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Interest payable on finance lease obligations............... 2,149
Interest payable on GPA Notes............................... 1,665
Interest payable on indebtedness due to GPA................. 7,461
Net interest income on amounts due from GPA................. (1,131)
------
10,144
======
</TABLE>
11 OTHER EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Servicer's fees............................................. 1,175
Aircraft leasing costs...................................... 6,723
Political risk insurance.................................... 130
Administration fees......................................... 40
Legal and professional fees................................. 100
Deferred expenditure........................................ 604
Cash manager's fees......................................... 210
Audit and tax fees.......................................... 50
-----
9,032
=====
</TABLE>
12 BENEFIT FOR TAXES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Tax benefit of AerCo consists of the following:
Current income tax.......................................... --
Deferred income tax benefit................................. 1,176
-----
1,176
=====
</TABLE>
F-41
<PAGE> 213
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12 BENEFIT FOR TAXES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Deferred tax assets and liabilities of AerCo
Deferred tax assets relating to losses...................... (2,665)
Deferred tax liability relating to aircraft................. 8,319
------
5,654
======
</TABLE>
AerCo's income from approved activities in Ireland is taxable at a rate of
10% until December 31, 2005. US Federal and State tax is provided at a rate of
35%.
Two aircraft owned by AerCo, for tax purposes, are treated as being leased
from third parties under US "safe harbour lease" tax rules. Under existing laws,
certain events could reverse the cumulative effect of this tax treatment, in
which case AerCo would be required to make payments to third parties under the
tax indemnification clauses included in the lease agreements. As of June 30,
1997 the maximum potential exposure under this provision is $1.4 million. AerCo
believes that no events have taken place which would cause such payments to
become due.
13 STAFF COSTS AND NUMBERS
The entity has no employees.
14 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
U.S.$'000
<S> <C>
Cash paid in respect of:
Interest -- Individual financings........................... 7,461
Interest -- GPA Notes....................................... 1,667
Interest -- Indebtedness to GPA............................. 2,310
------
11,438
======
</TABLE>
15 COMMITMENTS
The entity has no long-term contracts other than those with its service
providers (see Note 19).
16 SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The financial statements are prepared in accordance with generally accepted
accounting principles applicable in the United Kingdom ('U.K. GAAP') which
differ significantly in certain respects from those generally accepted in the
United States ('U.S. GAAP'). There were no significant differences arising in
respect of the Nine Transferring Aircraft for the year to June 30, 1997.
17 FAIR VALUE OF FINANCIAL INSTRUMENTS
The entity estimates that the fair value of its cash and cash equivalents
and other receivables and payables at June 30, 1997 approximate to the amounts
at which these items are reflected in the entity's
F-42
<PAGE> 214
NINE TRANSFERRING AIRCRAFT
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
17 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
statement of net assets. This is due to the relatively short-term nature of the
instruments and the frequency at which they reprice.
18 FOREIGN CURRENCY TRANSACTIONS
The entity's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.
19 RELATED PARTY TRANSACTIONS
GE Capital Aviation Services Limited (GECAS)
During the year GECAS acted as lease manager for the Nine Transferring
Aircraft. In addition to managing the entity's aircraft GECAS also manages
aircraft owned by GE Capital and its affiliates and other third parties,
including GPA. GECAS may from time to time have conflicts of interest in
performing its obligations to the entity and other entities to which it provides
management, marketing and other services.
GECAS receives an annual fee from GPA as lease manager of certain of its
aircraft -- US$1,175,000 of this fee is attributed to the Nine Transferring
Aircraft for the year ended June 30, 1997.
F-43
<PAGE> 215
NINE TRANSFERRING AIRCRAFT
UNAUDITED INTERIM STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
ASSETS
CURRENT ASSETS
Due from GPA Group plc...................................... 27,294 28,229
Accounts receivable......................................... 838 710
------- -------
TOTAL CURRENT ASSETS........................................ 28,132 28,939
FIXED ASSETS
Aircraft.................................................... 170,316 179,961
------- -------
TOTAL ASSETS................................................ 198,448 208,900
======= =======
LIABILITIES
ACCRUED EXPENSES AND OTHER LIABILITIES...................... 11,931 2,242
Indebtedness................................................ 107,323 117,935
Provision for maintenance................................... 5,620 14,054
Security deposits........................................... 2,414 2,660
Deferred income tax......................................... 5,094 6,189
------- -------
TOTAL LIABILITIES........................................... 132,382 143,080
NET ASSETS.................................................. 66,066 65,820
======= =======
</TABLE>
The accompanying notes are an integral part of the unaudited interim financial
statements.
F-44
<PAGE> 216
NINE TRANSFERRING AIRCRAFT
UNAUDITED INTERIM STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
REVENUES
Aircraft leasing............................................ 15,499 16,964
EXPENSES
Depreciation................................................ (7,599) (6,945)
Provision for permanent diminution in value of aircraft..... -- (4,000)
Net interest expense........................................ (5,808) (7,587)
Other expenses.............................................. (3,766) (3,180)
------- -------
(17,173) (21,712)
------- -------
NET LOSS FROM OPERATIONS BEFORE PROVISION FOR TAXES......... (1,674) (4,748)
Benefit for taxes........................................... 560 641
------- -------
NET LOSS FOR THE PERIOD..................................... (1,114) (4,107)
RETAINED LOSS BROUGHT FORWARD............................... (9,045) --
------- -------
RETAINED LOSS CARRIED FORWARD............................... (10,159) (4,107)
======= =======
</TABLE>
All recognised gains and losses are included in the unaudited interim statement
of operations above.
There is no material difference between the net loss for the period and prior
periods, and the historical cost equivalent.
The results for the period are derived from continuing operations.
The accompanying notes are an integral part of the unaudited interim financial
statements.
F-45
<PAGE> 217
NINE TRANSFERRING AIRCRAFT
UNAUDITED INTERIM STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
U.S.$'000 U.S.$'000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period..................................... (1,114) (4,107)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation charge for the period.......................... 7,599 6,945
Provision for permanent diminution in value of aircraft..... -- 4,000
Amortisation................................................ -- 603
Deferred income tax......................................... (560) (641)
Changes in operating assets and liabilities
Accounts receivable and other assets...................... (24) 1,284
Accrued expenses and other liabilities.................... 4,894 494
Net maintenance paid...................................... (7,326) (1,593)
Net security deposits (paid)/received..................... (516) 810
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 2,953 7,795
------- -------
INVESTING ACTIVITIES
Capitalised expenditure on aircraft......................... (65) --
------- -------
FINANCING ACTIVITIES
Contributions from GPA...................................... 4,833 26,991
Reduction in indebtedness................................... (7,721) (34,786)
------- -------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES.................. (2,888) (7,795)
------- -------
NET INCREASE IN CASH........................................ -- --
CASH AT BEGINNING OF PERIOD................................. -- --
------- -------
CASH AT END OF PERIOD....................................... -- --
======= =======
</TABLE>
The accompanying notes are an integral part of the unaudited interim financial
statements.
F-46
<PAGE> 218
NINE TRANSFERRING AIRCRAFT
UNAUDITED INTERIM STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TOTAL
-------
U.S.$'000
<S> <C>
Balance at June 30, 1996.................................... 42,936
Contributions from GPA...................................... 26,991
NET LOSS FOR THE PERIOD..................................... (4,107)
-------
Balance at March 31, 1997................................... 65,820
-------
Balance at June 30, 1997.................................... 62,347
Contributions from GPA...................................... 4,833
NET LOSS FOR THE PERIOD..................................... (1,114)
-------
Balance at March 31, 1998................................... 66,066
-------
</TABLE>
The accompanying notes are an integral part of the unaudited interim financial
statements.
F-47
<PAGE> 219
NINE TRANSFERRING AIRCRAFT
STATEMENT OF ACCOUNTING POLICIES
Basis of preparation
The accounting policies followed in the preparation of the accompanying
unaudited interim financial statements conform with generally accepted
accounting principles in the United Kingdom and comply with financial reporting
standards of the Accounting Standards Board in the United Kingdom as promulgated
by the Institute of Chartered Accountants in England and Wales.
The unaudited interim financial statements are prepared on the going
concern basis and under the historic cost convention and are stated in U.S.
dollars, which is the principal operating currency of the entity and of the
aviation industry.
F-48
<PAGE> 220
NINE TRANSFERRING AIRCRAFT
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
1 SECURITIZATION TRANSACTION AND BASIS OF PREPARATION
Under a proposed securitization transaction AerCo has agreed to acquire
100% of the capital stock of ALPS 94-1 and thereby will indirectly acquire a
portfolio of 25 aircraft and the related leases and will acquire directly or
indirectly ten aircraft (the Nine Transferring Aircraft and one Transferring
Aircraft that was sold by ALPS 94-1 to GPA on April 28, 1998) and the related
leases from GPA (collectively the "Transferring Aircraft"). The Transaction will
be effected by transferring ALPS 94-1 and subsidiaries and the existing GPA
subsidiaries that own the Transferring Aircraft to AerCo Group.
Simultaneously with such transfers, it is proposed that AerCo will issue
approximately $800 million in aggregate principal amount of Notes in four
subclasses: Subclass A-1, Subclass A-2, Subclass B-1 and Subclass C-1 ("Notes").
It is proposed that AerCo will issue two additional subclasses of notes, the
Subclass D-1 Notes and the Subclass E-1 Notes, which will initially be held by
GPA Group or its subsidiaries. In addition, as part of the Transaction GPA will
surrender its holding of its existing Class E Note in ALPS 94-1, which is
currently held by a subsidiary of GPA Group. AerCo will use the proceeds of the
issuance of the Notes, the Subclass D-1 Notes and the Subclass E-1 Notes to
finance the repayment of all of ALPS 94-1's existing financial indebtedness and
to acquire or to finance the acquisition by the Transferring Company of the
Transferring Aircraft from GPA.
These financial statements reflect, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the Nine
Transferring Aircraft to be transferred to AerCo from GPA.
(i) The financial statements are presented on a historical cost basis as if
the Nine Transferring Aircraft had been organized as single economic entity for
the period ended March 31, 1998.
(ii) The Transaction is approved as planned and is completed such that
AerCo is a going concern with adequate capital and finance in place.
(iii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of GPA to the
Nine Transferring Aircraft has been made. The most significant element of these
costs relate to aircraft management fees, substantially all of which are asset
based fees calculated as an annual percentage of a reference net book value of
aircraft under management. The balance of such costs have been calculated based
on GPA's estimate of the other overhead costs incurred in managing a fleet of
nine aircraft for the period. Management believes that the basis for these
allocations are reasonable.
(iv) During the interim period two of the nine aircraft were financed by
finance leases to GPA and one aircraft was financed by Notes issued by GPA. For
these aircraft the financial lease obligations, the liabilities under the Notes
and related cash flows and interest costs are reflected in these financial
statements.
In the case of the remaining six aircraft, no separate identifiable
financing was in place. These aircraft are assumed to have been financed by
intercompany indebtedness to GPA at levels based on the ratio of GPA's overall
net debt to aircraft net book value of 51.87% at June 30, 1997 and 49.65% at
March 31, 1998 and repayments to GPA are assumed to have been made accordingly
during the period.
(v) The interest charged on the assumed indebtedness to GPA is based on
GPA's average cost of debt of 9.54% for the nine months ended March 31, 1998 and
10.06% for the nine months ended March 31, 1997.
F-49
<PAGE> 221
NINE TRANSFERRING AIRCRAFT
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
1 SECURITIZATION TRANSACTION AND BASIS OF PREPARATION (CONTINUED)
(vi) Cash generated from or absorbed by the activities of the Nine
Transferring Aircraft during the period is reflected through the intercompany
account as distributions to or transfers from GPA. This includes restricted cash
held by GPA with respect to the Nine Transferring Aircraft. No separate cash
balances existed for the Nine Transferring Aircraft.
(vii) The tax provisions and deferred income tax assets and liabilities of
the Nine Transferring Aircraft have been determined as if the nine aircraft had
been owned by taxable entities separate from GPA.
F-50
<PAGE> 222
APPENDIX 1
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
$.................................. 3
1958 Order......................... 4
1961 Law........................... 171
Accounts........................... 151
Additional Aircraft................ 6
Additional Fee..................... 88
Additional Leases.................. 6
Additional Notes................... 7
Additional Servicer................ 145
Adjusted Base Value................ 127
Adjusted Portfolio Value........... 127
Administrative Agency Agreement.... 23
Administrative Agent............... 23
Administrative Agent's Conflict
Duties........................... 34
Administrative Agent's Services
Standard......................... 34
Administrative Fee................. 88
ADs................................ 39
AerCo.............................. Cover
AerCo Group........................ Cover
AerCo Ireland...................... 6
AerCo Ireland II................... 6
AerCo Notes........................ 7
AerCo USA.......................... 6
Aer Lingus......................... 60
affiliate.......................... 135
Agent's Message.................... 52
Air 2000........................... 60
Aircraft........................... 6
Aircraft Agreement................. 140
Aircraft-Owning Subsidiaries....... 30
Aircraft Purchase Account.......... 20
Air Inter.......................... 60
Air Pacific........................ 60
Airplanes Group.................... 33
Airtours........................... 60
Allowed Restructuring.............. 137
ALPS Aircraft...................... 6
ALPS 94-1.......................... 6
ALPS 94-1 Audited Consolidated
Financial Statements............. 27
ALPS 94-1 Consolidated Financial
Statements....................... 27
ALPS 94-1 Interim Consolidated
Financial Statements............. 27
ALPS 94-1 Selected Consolidated
Financial Data................... 90
ALPS 94-1 Summary Consolidated
Financial Data................... 27
ALPS 96-1.......................... 53
</TABLE>
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
AOG................................ 117
Appraisals......................... 21
Appraisers......................... 21
ARE................................ 117
Asiana............................. 60
Assumed Debt Service Coverage
Ratio............................ 9
Assumed First Year's Net Revenue... 9
Assumed Interest Coverage Ratio.... 9
Assumed Maturity................... 119
Assumed Portfolio Value............ 126
Assumptions........................ 17
ATOP............................... 54
Available Collections.............. 15
Avg................................ 119
Avianca............................ 60
Babcock & Brown.................... Cover
Babcock & Brown Conflicts
Standard......................... 32
Babcock & Brown Group.............. 31
Babcock & Brown Services
Standard......................... 32
Base Value......................... 21
Basic Terms Modification........... 149
BAX Global......................... 60
Board.............................. 79
Book-Entry Confirmation............ 52
Book-Entry Depositary.............. 2
Book-Entry Interests............... 16
Book-Entry Transfer Facility....... 53
British Midland.................... 60
Business Day....................... 14
Calculation Date................... 14
Call Right......................... 7
Canadian........................... 60
Capital Stock...................... 19
Cash Management Agreement.......... 23
Cash Manager....................... 23
CAT................................ 169
CCN................................ 160
CDIs............................... 2
Cedel Bank......................... 3
Cedel Participants................. 158
Charitable Trust................... 20
Charitable Trust Trustee........... 80
Chicago Convention................. 59
China Southwest.................... 60
Class E Note Accrued Interest
Amount........................... 19
Class E Note Primary Interest
Amount........................... 19
Closing Date....................... 14
Code............................... 26
Collection Account................. 22
Collections........................ 152
</TABLE>
A-1
<PAGE> 223
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Commission......................... Cover
Committee.......................... 4
Company............................ Cover
Company Secretary.................. 89
Concentration Default.............. 140
Concentration Limits............... 143
control............................ 136
covenant defeasance................ 131
DCR................................ 15
default............................ 148
defeasance trust................... 131
Definitive Notes................... 111
Deposit Agreement.................. 16
Depositaries....................... 158
Depreciation Factor................ 126
disqualified persons............... 167
DTC................................ 2
DTC Participants................... 157
Eligible Credit Facilities......... 153
Eligible Institutions.............. 53
Encumbrance........................ 135
Engines............................ 139
ERISA.............................. 26
EU................................. 40
Euroclear.......................... 3
Euroclear Participants............. 158
Event of Default................... 147
Excess Amortization Date........... 128
Exchange Act....................... 5
Exchange Offer..................... Cover
Exp................................ 119
Expected Final Payment Date........ 9
Expected Useful Life............... 115
Expense Account.................... 23
Expenses........................... 18
Extension Amount................... 128
FEAT............................... 60
Final Maturity Date................ 9
First Collection Account Top-Up.... 132
First Year's Interest.............. 9
First Year's Interest and Minimum
and Scheduled Principle.......... 9
Foreign Purchasers................. 171
Future AerCo Entities.............. 50
Future Lease Rate.................. 115
Future Leases...................... 6
Future Lessee...................... 32
GE Capital......................... 7
GECAS.............................. 7
General Offer...................... 7
Global Notes....................... 111
GPA................................ Cover
GPA Administrative Services........ 23
GPA Cash Manager II................ 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
GPA Group.......................... Cover
Gross Revenue...................... 116
guarantee.......................... 139
Holders............................ Cover
H.15 (519)......................... 130
incur.............................. 138
Indebtedness....................... 138
Indenture.......................... 14
Independent Directors.............. 50
Indian............................. 60
Indirect Participants.............. 159
Initial Aircraft................... 6
Initial Appraised Value............ 22
Initial Leases..................... 6
Initial Lessees.................... 22
Initial Loan....................... 8
Initial Loan to Assumed First
Year's Net Revenue............... 8
Initial Loan to Value.............. 8
Initial Principal Balance.......... 128
Initial Purchasers................. 168
Intercompany Loan.................. 139
Interest Accrual Period............ 15
investment......................... 136
Irish stamp duty................... 169
ISIN............................... 160
Jersey Tax Counsel................. 170
Lan Chile.......................... 60
Leases............................. 6
legal defeasance................... 131
Lessees............................ 22
Lessor............................. 64
Letter of Transmittal.............. Cover
LIBOR.............................. Cover
Liens.............................. 39
Liquidity Reserve Amount........... 8
Listing Agent...................... 5
Losses............................. 32
Malev.............................. 60
Minimum Class Percentage........... 126
Minimum Liquidity Reserve Amount... 23
Minimum Principal Payment Amount... 126
Minimum Target Principal Balance... 126
Modification Payment............... 141
Monarch............................ 60
Monthly Report..................... 2
Moody's............................ 15
Morgan Guaranty.................... 158
Morgan Stanley..................... 170
MOU................................ 7
MSCI............................... 143
NBB................................ 31
Net Sale Proceeds.................. 140
New GE Option...................... 51
</TABLE>
A-2
<PAGE> 224
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
New Notes.......................... Cover
Nine Transferring Aircraft......... 27
1998 Restructuring................. 7
Nominees........................... 19
Nomura............................. 55
Noteholders........................ 15
Notes.............................. Cover
Note Target Price.................. 140
Notice of Redemption............... 131
Notice of Refinancing.............. 129
NYSE............................... 54
Offering........................... 6
Old Notes.......................... Cover
Omnibus Agreement.................. 7
Original ALPS 94-1 Aircraft........ 27
Aircraft........................... 6
Outstanding Principal Balance...... 18
PAL................................ 22
Participating Broker-Dealer........ 113
parties in interest................ 167
Parts.............................. 139
Payment Date....................... 14
Pegasus............................ 60
Permitted Account Investments...... 88
Permitted Accruals................. 153
Permitted Additional Aircraft
Acquisition...................... 140
Permitted Encumbrance.............. 136
Permitted Tax-Related
Disposition...................... 138
Plans.............................. 167
Portfolio.......................... 6
Portugalia......................... 60
Precedent Lease.................... 145
PRI................................ 146
Primary Eligible Credit Facility... 153
PTCE............................... 167
Purchase Agreement................. 168
Purchase Price..................... 58
QIB................................ 2
qualified institutional buyer...... 2
Quarterly Report................... 2
Rating Agencies.................... 16
recession.......................... 121
Recession Scenarios................ 120
Record Date........................ 14
Redemption Date.................... 129
Redemption Price................... 18
Reference Agent.................... 124
Reference Banks.................... 125
Reference Date..................... 14
Refinancing........................ 128
Refinancing Date................... 128
Refinancing Notes.................. 17
Registration Agreement............. Cover
</TABLE>
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Registration Statement............. 5
Regulation S....................... Cover
Regulation S Global Note........... 111
Related Collateral................. 22
Related Documents.................. 110
Re-Leasing Guidelines.............. 26
Relevant Appraisal................. 127
Remaining Aircraft................. 20
Renewal Lease...................... 145
Rental Payments.................... 123
Required Expense Amount............ 15
restricted securities.............. 2
Retainer Fee....................... 84
RPMs............................... 74
Rule 144A.......................... Cover
Rule 144A Global Note.............. 111
Rules.............................. 159
Scheduled Class Percentage......... 127
Scheduled Principal Payment
Amount........................... 127
Scheduled Target Principal
Balance.......................... 127
Second Collection Account Top-Up... 133
Secondary Eligible Credit
Facility......................... 154
Securities Act..................... Cover
Security Deposits.................. 21
Security Trust Agreement........... 17
Security Trustee................... 16
Servicer........................... Cover
Servicer Managed Portfolio......... 32
Services........................... 6
Servicer's Pro Forma Lease......... 145
Servicing Agreement................ 6
Shannon Certified Operations....... 164
Shareholders Undertaking........... 80
Shelf Registration Statement....... 113
Significant Subsidiary............. 147
Singapore Companies Act............ 169
Spanair............................ 60
Stage 3 aircraft................... 59
Standard & Poor's.................. 15
Step-Up Interest................... 17
Stock.............................. 135
Stock Purchase Agreement........... 6
Stresses........................... 117
Subordinated Swap Payments......... 134
Subordinated Tax-Related
Disposition Payments............. 134
Substitute Aircraft................ 20
Sun Express........................ 60
Supplemental Class Percentage...... 127
Supplemental Principal Payment
Amount........................... 127
Supplemental Target Principal
Balance.......................... 127
Swap Agreements.................... 69
Swap Providers..................... 19
</TABLE>
A-3
<PAGE> 225
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Swaptions.......................... 102
TAM................................ 60
Tax-Related Dispositions........... 25
Terms and Conditions............... 160
Third Party Event.................. 144
THY................................ 60
Tower.............................. 60
Transaction........................ 103
Transferring Aircraft.............. 6
Transferring Companies............. 6
Treasury Yield..................... 130
</TABLE>
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Treaty............................. 49
Trustee............................ 14
U.K. GAAP.......................... 27
Unaudited Pro-Forma Combined
Financial Information............ 103
U.S. GAAP.......................... 27
United States Holder............... 172
Weighted Average Life.............. 118
Year 2000.......................... 36
Yunnan............................. 60
</TABLE>
A-4
<PAGE> 226
APPENDIX 2
AIRCRAFT TYPES DATA(1)
<TABLE>
<CAPTION>
NO. & STAGE 3
NARROW/ MFR. OF NOISE CURRENT ON NO. OF
TYPE & VARIANT WIDEBODY TYPICAL SEATS ENGINES COMPLIANCE PROD. YEARS FLEET ORDER OPERATORS
- -------------- -------- ------------- ------------ ---------- ----------- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Airbus A300-B4................. Wide 250 2 X GE/PW Yes 1975-88 129 0 30
Airbus A320-200................ Narrow 150 2 X CFM/IAE Yes 1988- 553 166 60
Boeing 737-300................. Narrow 130 2 X CFM Yes 1984- 971 54 89
Boeing 737-400................. Narrow 150 2 X CFM Yes 1988- 421 28 53
Boeing 737-500................. Narrow 110 2 X CFM Yes 1990- 330 37 36
Boeing 747-200................. Wide 370 4 X GE/PW/RR Yes 1970-89 397 0 69
Boeing 757-200................. Narrow 180 2 X RR/PW Yes 1982- 758 91 68
Boeing 767-300ER............... Wide 250 2 X GE/PW/RR Yes 1988- 340 61 51
MDC MD83(2).................... Narrow 150 2 X PW Yes 1984- 246 0 31
MDC DC8-70F.................... Narrow -- 4 X CFM Yes Conversions 101 0 12
Fokker 100..................... Narrow 100 2 X RR Yes 1988-96 258 0 26
</TABLE>
- ---------------
(1) Data is at April 30, 1998.
(2) Boeing has announced that production of these aircraft types is expected to
end in 1999.
A-5
<PAGE> 227
APPENDIX 3
MONTHLY GROSS REVENUES BASED ON THE ASSUMPTIONS
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
August 1998.............. 8,266,830
September 1998........... 9,570,151
October 1998............. 10,352,892
November 1998............ 9,571,995
December 1998............ 9,560,995
January 1999............. 10,217,795
February 1999............ 9,452,240
March 1999............... 10,295,540
April 1999............... 10,218,280
May 1999................. 9,484,193
June 1999................ 9,534,193
July 1999................ 10,299,993
August 1999.............. 9,534,068
September 1999........... 9,553,596
October 1999............. 10,319,638
November 1999............ 9,531,369
December 1999............ 9,531,369
January 2000............. 9,788,333
February 2000............ 9,788,333
March 2000............... 9,788,333
April 2000............... 9,788,036
May 2000................. 9,789,642
June 2000................ 9,779,642
July 2000................ 9,779,642
August 2000.............. 9,779,642
September 2000........... 9,779,642
October 2000............. 9,779,642
November 2000............ 9,781,245
December 2000............ 9,781,245
January 2001............. 9,780,252
February 2001............ 9,780,252
March 2001............... 9,780,252
April 2001............... 9,780,252
May 2001................. 9,781,854
June 2001................ 9,767,665
July 2001................ 9,767,665
August 2001.............. 9,767,665
September 2001........... 9,767,665
October 2001............. 9,767,665
November 2001............ 9,769,272
December 2001............ 9,769,272
January 2002............. 9,769,272
February 2002............ 9,769,272
March 2002............... 9,769,272
April 2002............... 9,769,272
May 2002................. 9,770,875
June 2002................ 9,770,875
July 2002................ 9,770,875
August 2002.............. 9,770,875
September 2002........... 9,765,060
October 2002............. 9,765,060
November 2002............ 9,766,662
December 2002............ 9,766,662
January 2003............. 9,766,662
February 2003............ 9,766,662
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
March 2003............... 9,766,662
April 2003............... 9,759,239
May 2003................. 9,759,239
June 2003................ 9,759,239
July 2003................ 9,759,239
August 2003.............. 9,669,650
September 2003........... 9,669,650
October 2003............. 9,669,650
November 2003............ 9,669,650
December 2003............ 9,669,650
January 2004............. 9,669,650
February 2004............ 9,669,650
March 2004............... 9,669,650
April 2004............... 9,553,544
May 2004................. 9,552,272
June 2004................ 9,552,272
July 2004................ 9,552,272
August 2004.............. 9,551,836
September 2004........... 9,551,836
October 2004............. 9,551,836
November 2004............ 9,550,505
December 2004............ 9,550,505
January 2005............. 9,550,505
February 2005............ 9,550,505
March 2005............... 9,550,505
April 2005............... 9,548,787
May 2005................. 9,548,787
June 2005................ 9,548,787
July 2005................ 9,548,787
August 2005.............. 9,548,787
September 2005........... 9,548,787
October 2005............. 9,548,787
November 2005............ 9,548,787
December 2005............ 9,548,787
January 2006............. 9,536,623
February 2006............ 9,536,623
March 2006............... 9,534,823
April 2006............... 9,527,527
May 2006................. 9,489,093
June 2006................ 9,448,220
July 2006................ 9,448,220
August 2006.............. 9,448,220
September 2006........... 9,448,220
October 2006............. 9,448,220
November 2006............ 9,448,220
December 2006............ 9,448,220
January 2007............. 9,448,220
February 2007............ 9,448,220
March 2007............... 9,448,220
April 2007............... 9,448,220
May 2007................. 9,448,220
June 2007................ 9,440,120
July 2007................ 9,438,444
August 2007.............. 9,438,444
September 2007........... 9,435,575
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
October 2007............. 9,435,575
November 2007............ 9,364,232
December 2007............ 9,347,271
January 2008............. 9,334,624
February 2008............ 9,334,624
March 2008............... 9,334,624
April 2008............... 9,329,576
May 2008................. 9,329,576
June 2008................ 9,308,134
July 2008................ 9,308,134
August 2008.............. 9,022,681
September 2008........... 8,996,014
October 2008............. 8,980,884
November 2008............ 8,980,884
December 2008............ 8,980,884
January 2009............. 8,953,777
February 2009............ 8,950,139
March 2009............... 8,950,139
April 2009............... 8,646,352
May 2009................. 8,589,123
June 2009................ 8,589,123
July 2009................ 8,549,622
August 2009.............. 8,471,080
September 2009........... 8,391,928
October 2009............. 8,391,928
November 2009............ 8,259,471
December 2009............ 8,259,471
January 2010............. 8,219,213
February 2010............ 8,219,213
March 2010............... 8,219,213
April 2010............... 7,912,796
May 2010................. 7,873,573
June 2010................ 7,873,573
July 2010................ 7,873,573
August 2010.............. 7,873,573
September 2010........... 7,873,573
October 2010............. 7,873,573
November 2010............ 7,873,573
December 2010............ 7,873,573
January 2011............. 7,818,835
February 2011............ 7,818,835
March 2011............... 7,737,835
April 2011............... 7,550,213
May 2011................. 7,468,824
June 2011................ 7,398,886
July 2011................ 7,398,886
August 2011.............. 7,398,886
September 2011........... 7,398,886
October 2011............. 7,398,886
November 2011............ 7,398,886
December 2011............ 7,398,886
January 2012............. 7,398,886
February 2012............ 7,398,886
March 2012............... 7,398,886
April 2012............... 7,398,886
</TABLE>
A-6
<PAGE> 228
MONTHLY GROSS REVENUES BASED ON THE ASSUMPTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
May 2012................. 7,398,886
June 2012................ 7,346,814
July 2012................ 7,271,394
August 2012.............. 7,271,394
September 2012........... 7,142,264
October 2012............. 7,142,264
November 2012............ 7,055,496
December 2012............ 6,972,980
January 2013............. 6,891,680
February 2013............ 6,891,680
March 2013............... 6,891,680
April 2013............... 6,761,879
May 2013................. 6,761,879
June 2013................ 6,704,272
July 2013................ 6,704,272
August 2013.............. 6,704,272
September 2013........... 6,584,272
October 2013............. 6,504,172
November 2013............ 6,504,172
December 2013............ 6,504,172
January 2014............. 6,439,972
February 2014............ 6,346,426
March 2014............... 6,346,426
April 2014............... 6,181,480
May 2014................. 6,049,220
June 2014................ 6,049,220
July 2014................ 5,951,818
August 2014.............. 5,768,990
September 2014........... 5,591,769
October 2014............. 5,591,769
November 2014............ 5,373,241
December 2014............ 5,373,241
January 2015............. 5,296,152
February 2015............ 5,296,152
March 2015............... 5,296,152
April 2015............... 4,838,833
May 2015................. 4,752,733
June 2015................ 4,752,733
July 2015................ 4,752,733
August 2015.............. 4,752,733
September 2015........... 4,752,733
October 2015............. 4,752,733
November 2015............ 4,752,733
December 2015............ 4,752,733
January 2016............. 4,637,175
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
February 2016............ 4,637,175
March 2016............... 4,449,975
April 2016............... 4,019,487
May 2016................. 3,868,014
June 2016................ 3,868,014
July 2016................ 3,868,014
August 2016.............. 3,868,014
September 2016........... 3,868,014
October 2016............. 3,868,014
November 2016............ 3,868,014
December 2016............ 3,868,014
January 2017............. 3,868,014
February 2017............ 3,868,014
March 2017............... 3,868,014
April 2017............... 3,868,014
May 2017................. 3,868,014
June 2017................ 3,754,612
July 2017................ 3,580,308
August 2017.............. 3,580,308
September 2017........... 3,281,874
October 2017............. 3,281,874
November 2017............ 3,150,758
December 2017............ 2,975,183
January 2018............. 2,798,130
February 2018............ 2,798,130
March 2018............... 2,798,130
April 2018............... 2,500,307
May 2018................. 2,500,307
June 2018................ 2,387,333
July 2018................ 2,387,333
August 2018.............. 2,387,333
September 2018........... 2,134,000
October 2018............. 1,962,230
November 2018............ 1,962,230
December 2018............ 1,962,230
January 2019............. 1,839,537
February 2019............ 1,624,901
March 2019............... 1,624,901
April 2019............... 1,358,922
May 2019................. 1,358,922
June 2019................ 1,358,922
July 2019................ 1,171,153
August 2019.............. 1,171,153
September 2019........... 836,791
October 2019............. 836,791
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
- ------------------------- ----------
($)
<S> <C>
November 2019............ 722,349
December 2019............ 722,349
January 2020............. 582,732
February 2020............ 582,732
March 2020............... 582,732
April 2020............... 161,677
May 2020................. 0
June 2020................ 0
July 2020................ 0
August 2020.............. 0
September 2020........... 0
October 2020............. 0
November 2020............ 0
December 2020............ 0
January 2021............. 0
February 2021............ 0
March 2021............... 0
April 2021............... 0
May 2021................. 0
June 2021................ 0
July 2021................ 0
August 2021.............. 0
September 2021........... 0
October 2021............. 0
November 2021............ 0
December 2021............ 0
January 2022............. 0
February 2022............ 0
March 2022............... 0
April 2022............... 0
May 2022................. 0
June 2022................ 0
July 2022................ 0
August 2022.............. 0
September 2022........... 0
October 2022............. 0
November 2022............ 0
December 2022............ 0
January 2023............. 0
February 2023............ 0
March 2023............... 0
April 2023............... 0
May 2023................. 0
June 2023................ 0
July 2023................ 0
</TABLE>
A-7
<PAGE> 229
APPENDIX 4
ASSUMED PORTFOLIO VALUES FOR THE INITIAL PORTFOLIO
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
Closing............... 951.97
August 1998........... 949.16
September 1998........ 945.90
October 1998.......... 942.63
November 1998......... 939.35
December 1998......... 936.05
January 1999.......... 932.74
February 1999......... 929.41
March 1999............ 926.07
April 1999............ 922.72
May 1999.............. 919.35
June 1999............. 915.97
July 1999............. 912.58
August 1999........... 909.17
September 1999........ 905.75
October 1999.......... 902.32
November 1999......... 898.87
December 1999......... 895.41
January 2000.......... 891.93
February 2000......... 888.44
March 2000............ 884.94
April 2000............ 881.42
May 2000.............. 877.89
June 2000............. 874.34
July 2000............. 870.78
August 2000........... 867.21
September 2000........ 863.62
October 2000.......... 860.02
November 2000......... 856.40
December 2000......... 852.77
January 2001.......... 849.13
February 2001......... 845.47
March 2001............ 841.79
April 2001............ 838.10
May 2001.............. 834.40
June 2001............. 830.68
July 2001............. 826.95
August 2001........... 823.20
September 2001........ 819.44
October 2001.......... 815.67
November 2001......... 811.87
December 2001......... 808.07
January 2002.......... 804.25
February 2002......... 800.41
March 2002............ 796.56
April 2002............ 792.70
May 2002.............. 788.82
June 2002............. 784.92
July 2002............. 781.01
August 2002........... 777.09
September 2002........ 773.15
October 2002.......... 769.19
November 2002......... 765.22
December 2002......... 761.24
January 2003.......... 757.24
</TABLE>
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
February 2003......... 753.22
March 2003............ 749.19
April 2003............ 745.14
May 2003.............. 741.08
June 2003............. 737.00
July 2003............. 732.91
August 2003........... 728.80
September 2003........ 724.68
October 2003.......... 720.54
November 2003......... 716.38
December 2003......... 712.21
January 2004.......... 708.02
February 2004......... 703.82
March 2004............ 699.60
April 2004............ 695.37
May 2004.............. 691.12
June 2004............. 686.85
July 2004............. 682.57
August 2004........... 678.27
September 2004........ 673.96
October 2004.......... 669.63
November 2004......... 665.28
December 2004......... 660.92
January 2005.......... 656.54
February 2005......... 652.14
March 2005............ 647.73
April 2005............ 643.30
May 2005.............. 638.86
June 2005............. 634.40
July 2005............. 629.92
August 2005........... 625.43
September 2005........ 620.92
October 2005.......... 616.39
November 2005......... 611.85
December 2005......... 607.29
January 2006.......... 602.71
February 2006......... 598.12
March 2006............ 593.57
April 2006............ 589.15
May 2006.............. 584.71
June 2006............. 580.25
July 2006............. 575.78
August 2006........... 571.29
September 2006........ 566.79
October 2006.......... 562.39
November 2006......... 558.23
December 2006......... 554.05
January 2007.......... 549.85
February 2007......... 545.64
March 2007............ 541.42
April 2007............ 537.18
May 2007.............. 532.92
June 2007............. 528.65
July 2007............. 524.36
August 2007........... 520.06
</TABLE>
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
September 2007........ 515.74
October 2007.......... 511.41
November 2007......... 507.06
December 2007......... 502.69
January 2008.......... 498.31
February 2008......... 493.92
March 2008............ 489.50
April 2008............ 485.13
May 2008.............. 480.90
June 2008............. 476.74
July 2008............. 472.57
August 2008........... 468.39
September 2008........ 464.19
October 2008.......... 459.97
November 2008......... 455.74
December 2008......... 451.49
January 2009.......... 447.23
February 2009......... 442.96
March 2009............ 438.66
April 2009............ 434.36
May 2009.............. 430.03
June 2009............. 425.69
July 2009............. 421.34
August 2009........... 416.97
September 2009........ 412.59
October 2009.......... 408.19
November 2009......... 403.77
December 2009......... 399.34
January 2010.......... 394.89
February 2010......... 390.43
March 2010............ 385.95
April 2010............ 381.45
May 2010.............. 376.94
June 2010............. 372.41
July 2010............. 367.87
August 2010........... 363.31
September 2010........ 358.74
October 2010.......... 354.15
November 2010......... 349.54
December 2010......... 344.92
January 2011.......... 340.28
February 2011......... 335.62
March 2011............ 330.95
April 2011............ 326.26
May 2011.............. 321.55
June 2011............. 316.83
July 2011............. 312.10
August 2011........... 307.34
September 2011........ 302.57
October 2011.......... 297.78
November 2011......... 292.98
December 2011......... 288.16
January 2012.......... 283.32
February 2012......... 278.47
March 2012............ 273.59
</TABLE>
A-8
<PAGE> 230
ASSUMED PORTFOLIO VALUES FOR THE INITIAL PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
April 2012............ 268.71
May 2012.............. 263.80
June 2012............. 258.88
July 2012............. 253.94
August 2012........... 248.99
September 2012........ 244.01
October 2012.......... 239.02
November 2012......... 234.02
December 2012......... 228.99
January 2013.......... 223.95
February 2013......... 218.89
March 2013............ 213.81
April 2013............ 208.72
May 2013.............. 203.61
June 2013............. 198.48
July 2013............. 193.34
August 2013........... 188.17
September 2013........ 182.99
October 2013.......... 177.85
November 2013......... 172.82
December 2013......... 167.76
January 2014.......... 162.75
February 2014......... 157.84
March 2014............ 152.92
April 2014............ 148.03
May 2014.............. 143.23
June 2014............. 138.41
July 2014............. 133.58
August 2014........... 128.78
September 2014........ 124.07
October 2014.......... 119.39
November 2014......... 114.79
December 2014......... 110.22
January 2015.......... 105.69
February 2015......... 101.21
March 2015............ 96.90
April 2015............ 92.67
May 2015.............. 88.48
June 2015............. 84.40
July 2015............. 80.31
August 2015........... 76.20
September 2015........ 72.08
October 2015.......... 67.94
November 2015......... 63.80
December 2015......... 59.63
January 2016.......... 55.46
</TABLE>
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
February 2016......... 51.47
March 2016............ 48.06
April 2016............ 45.08
May 2016.............. 42.21
June 2016............. 39.32
July 2016............. 36.42
August 2016........... 33.59
September 2016........ 30.92
October 2016.......... 28.32
November 2016......... 25.71
December 2016......... 23.14
January 2017.......... 20.66
February 2017......... 18.17
March 2017............ 15.68
April 2017............ 13.28
May 2017.............. 11.08
June 2017............. 9.03
July 2017............. 7.41
August 2017........... 6.21
September 2017........ 5.35
October 2017.......... 4.50
November 2017......... 3.70
December 2017......... 3.04
January 2018.......... 2.38
February 2018......... 1.87
March 2018............ 1.68
April 2018............ 1.49
May 2018.............. 1.30
June 2018............. 1.10
July 2018............. 0.91
August 2018........... 0.72
September 2018........ 0.52
October 2018.......... 0.33
November 2018......... 0.13
December 2018......... 0.00
January 2019.......... 0.00
February 2019......... 0.00
March 2019............ 0.00
April 2019............ 0.00
May 2019.............. 0.00
June 2019............. 0.00
July 2019............. 0.00
August 2019........... 0.00
September 2019........ 0.00
October 2019.......... 0.00
</TABLE>
<TABLE>
<CAPTION>
EXPECTED
MONTH PORTFOLIO VALUE
- ---------------------- ---------------
($ MILLIONS)
<S> <C>
November 2019......... 0.00
December 2019......... 0.00
January 2020.......... 0.00
February 2020......... 0.00
March 2020............ 0.00
April 2020............ 0.00
May 2020.............. 0.00
June 2020............. 0.00
July 2020............. 0.00
August 2020........... 0.00
September 2020........ 0.00
October 2020.......... 0.00
November 2020......... 0.00
December 2020......... 0.00
January 2021.......... 0.00
February 2021......... 0.00
March 2021............ 0.00
April 2021............ 0.00
May 2021.............. 0.00
June 2021............. 0.00
July 2021............. 0.00
August 2021........... 0.00
September 2021........ 0.00
October 2021.......... 0.00
November 2021......... 0.00
December 2021......... 0.00
January 2022.......... 0.00
February 2022......... 0.00
March 2022............ 0.00
April 2022............ 0.00
May 2022.............. 0.00
June 2022............. 0.00
July 2022............. 0.00
August 2022........... 0.00
September 2022........ 0.00
October 2022.......... 0.00
November 2022......... 0.00
December 2022......... 0.00
January 2023.......... 0.00
February 2023......... 0.00
March 2023............ 0.00
April 2023............ 0.00
May 2023.............. 0.00
June 2023............. 0.00
July 2023............. 0.00
</TABLE>
A-9
<PAGE> 231
APPENDIX 5
CLASS A CLASS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
Closing.............. 66.31% 66.31% 66.31%
August 1998.......... 66.31% 66.31% 65.69%
September 1998....... 66.31% 66.31% 65.64%
October 1998......... 66.31% 66.31% 65.50%
November 1998........ 66.31% 66.31% 65.45%
December 1998........ 66.31% 66.31% 65.39%
January 1999......... 66.31% 66.31% 65.27%
February 1999........ 66.31% 66.31% 65.22%
March 1999........... 66.30% 66.30% 65.05%
April 1999........... 66.30% 66.30% 64.93%
May 1999............. 66.30% 66.30% 64.96%
June 1999............ 66.30% 66.30% 64.90%
July 1999............ 66.30% 66.29% 64.76%
August 1999.......... 66.29% 66.29% 64.70%
September 1999....... 66.29% 66.29% 64.64%
October 1999......... 66.28% 66.28% 64.49%
November 1999........ 66.28% 66.28% 64.44%
December 1999........ 66.27% 66.27% 64.36%
January 2000......... 66.27% 66.27% 64.28%
February 2000........ 66.26% 66.26% 64.19%
March 2000........... 66.26% 66.25% 64.07%
April 2000........... 66.25% 66.24% 63.99%
May 2000............. 66.24% 66.23% 64.01%
June 2000............ 66.23% 66.22% 63.92%
July 2000............ 66.22% 66.21% 63.82%
August 2000.......... 66.21% 66.20% 63.72%
September 2000....... 66.20% 66.19% 63.63%
October 2000......... 66.19% 66.18% 63.53%
November 2000........ 66.18% 66.16% 63.44%
December 2000........ 66.16% 66.15% 63.33%
January 2001......... 66.15% 66.13% 63.23%
February 2001........ 66.13% 66.11% 63.14%
March 2001........... 66.12% 66.09% 63.00%
April 2001........... 66.10% 66.07% 62.90%
May 2001............. 66.08% 66.05% 62.92%
June 2001............ 66.06% 66.03% 62.82%
July 2001............ 66.04% 66.01% 62.72%
August 2001.......... 66.02% 65.99% 62.62%
September 2001....... 66.00% 65.96% 62.52%
October 2001......... 65.98% 65.93% 62.40%
November 2001........ 65.95% 65.90% 62.30%
December 2001........ 65.93% 65.88% 62.18%
January 2002......... 65.90% 65.84% 62.08%
February 2002........ 65.87% 65.81% 61.97%
March 2002........... 65.85% 65.78% 61.82%
April 2002........... 65.82% 65.74% 61.70%
May 2002............. 65.78% 65.71% 61.71%
June 2002............ 65.75% 65.67% 61.60%
July 2002............ 65.72% 65.63% 61.46%
August 2002.......... 65.68% 65.59% 61.35%
September 2002....... 65.65% 65.55% 61.23%
October 2002......... 65.61% 65.50% 61.10%
November 2002........ 65.57% 65.46% 60.98%
December 2002........ 65.53% 65.41% 60.84%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
January 2003......... 65.49% 65.36% 60.72%
February 2003........ 65.45% 65.31% 60.59%
March 2003........... 65.41% 65.26% 60.42%
April 2003........... 65.36% 65.20% 60.30%
May 2003............. 65.31% 65.15% 60.30%
June 2003............ 65.27% 65.09% 60.17%
July 2003............ 65.22% 65.03% 60.03%
August 2003.......... 65.16% 64.97% 59.90%
September 2003....... 65.11% 64.90% 59.78%
October 2003......... 65.06% 64.84% 59.64%
November 2003........ 65.00% 64.77% 59.50%
December 2003........ 64.94% 64.70% 59.36%
January 2004......... 64.89% 64.63% 59.23%
February 2004........ 64.82% 64.56% 59.09%
March 2004........... 64.76% 64.48% 58.92%
April 2004........... 64.70% 64.40% 58.79%
May 2004............. 64.63% 64.32% 58.80%
June 2004............ 64.57% 64.24% 58.67%
July 2004............ 64.50% 64.16% 58.52%
August 2004.......... 64.43% 64.07% 58.38%
September 2004....... 64.35% 63.98% 58.25%
October 2004......... 64.28% 63.89% 58.09%
November 2004........ 64.20% 63.80% 57.94%
December 2004........ 64.13% 63.70% 57.79%
January 2005......... 64.05% 63.61% 57.64%
February 2005........ 63.97% 63.51% 57.49%
March 2005........... 63.88% 63.41% 57.30%
April 2005........... 63.80% 63.30% 57.14%
May 2005............. 63.71% 63.19% 57.12%
June 2005............ 63.62% 63.08% 56.96%
July 2005............ 63.53% 62.97% 56.78%
August 2005.......... 63.44% 62.86% 56.61%
September 2005....... 63.35% 62.74% 56.44%
October 2005......... 63.25% 62.62% 56.24%
November 2005........ 63.15% 62.50% 56.05%
December 2005........ 63.05% 62.38% 55.84%
January 2006......... 62.95% 62.25% 55.65%
February 2006........ 62.84% 62.12% 55.45%
March 2006........... 62.74% 61.99% 55.21%
April 2006........... 62.63% 61.85% 54.98%
May 2006............. 62.52% 61.71% 54.91%
June 2006............ 62.40% 61.57% 54.69%
July 2006............ 62.29% 61.43% 54.45%
August 2006.......... 62.17% 61.28% 54.21%
September 2006....... 62.05% 61.13% 53.97%
October 2006......... 61.93% 60.98% 53.70%
November 2006........ 61.81% 60.83% 53.40%
December 2006........ 61.68% 60.67% 50.87%
January 2007......... 61.55% 60.51% 50.55%
February 2007........ 61.42% 60.35% 50.22%
March 2007........... 61.29% 60.18% 49.89%
April 2007........... 61.16% 60.01% 49.56%
May 2007............. 61.02% 59.84% 49.22%
June 2007............ 60.88% 59.66% 48.88%
</TABLE>
A-10
<PAGE> 232
CLASS A CLASS PERCENTAGES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
July 2007............ 60.74% 59.48% 48.54%
August 2007.......... 60.59% 59.30% 48.19%
September 2007....... 60.45% 59.12% 47.83%
October 2007......... 60.30% 58.93% 47.48%
November 2007........ 60.15% 58.74% 47.12%
December 2007........ 59.99% 58.55% 46.75%
January 2008......... 59.84% 58.35% 46.39%
February 2008........ 59.68% 58.15% 46.02%
March 2008........... 59.52% 57.94% 45.64%
April 2008........... 59.36% 57.74% 45.26%
May 2008............. 59.19% 57.53% 44.88%
June 2008............ 59.02% 57.31% 44.49%
July 2008............ 58.85% 57.10% 44.10%
August 2008.......... 58.68% 56.88% 43.71%
September 2008....... 58.50% 56.65% 43.31%
October 2008......... 58.32% 56.43% 42.91%
November 2008........ 58.14% 56.20% 42.50%
December 2008........ 57.96% 55.96% 42.09%
January 2009......... 57.77% 55.72% 41.68%
February 2009........ 57.58% 55.48% 41.26%
March 2009........... 57.39% 55.24% 40.84%
April 2009........... 57.19% 54.99% 40.41%
May 2009............. 57.00% 54.74% 39.98%
June 2009............ 56.80% 54.48% 39.55%
July 2009............ 56.60% 54.22% 39.11%
August 2009.......... 56.39% 53.96% 38.67%
September 2009....... 56.18% 53.70% 38.23%
October 2009......... 55.97% 53.43% 37.78%
November 2009........ 55.76% 53.15% 37.32%
December 2009........ 55.54% 52.88% 36.87%
January 2010......... 55.32% 52.59% 36.41%
February 2010........ 55.10% 52.31% 35.94%
March 2010........... 54.88% 52.02% 35.48%
April 2010........... 54.65% 51.73% 35.00%
May 2010............. 54.42% 51.43% 34.53%
June 2010............ 54.18% 51.13% 34.05%
July 2010............ 53.95% 50.83% 33.56%
August 2010.......... 53.71% 50.52% 33.07%
September 2010....... 53.47% 50.21% 32.58%
October 2010......... 53.22% 49.89% 32.09%
November 2010........ 52.97% 49.57% 31.59%
December 2010........ 52.72% 49.25% 31.08%
January 2011......... 52.47% 48.92% 30.57%
February 2011........ 52.21% 48.59% 30.06%
March 2011........... 51.95% 48.25% 29.55%
April 2011........... 51.69% 47.91% 29.03%
May 2011............. 51.42% 47.57% 28.50%
June 2011............ 51.15% 47.22% 27.97%
July 2011............ 50.88% 46.86% 27.44%
August 2011.......... 50.60% 46.51% 26.91%
September 2011....... 50.32% 46.15% 26.37%
October 2011......... 50.04% 45.78% 25.82%
November 2011........ 49.76% 45.41% 25.27%
December 2011........ 49.47% 45.04% 24.72%
January 2012......... 49.18% 44.66% 24.17%
February 2012........ 48.88% 44.27% 23.61%
March 2012........... 48.58% 43.89% 23.04%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
April 2012........... 48.28% 43.50% 22.47%
May 2012............. 47.98% 43.10% 21.90%
June 2012............ 47.67% 42.70% 21.32%
July 2012............ 47.36% 42.30% 20.74%
August 2012.......... 47.04% 41.89% 20.16%
September 2012....... 46.73% 41.47% 19.57%
October 2012......... 46.41% 41.05% 18.98%
November 2012........ 46.08% 40.63% 18.38%
December 2012........ 45.75% 40.20% 17.78%
January 2013......... 45.42% 39.77% 17.18%
February 2013........ 45.09% 39.33% 16.57%
March 2013........... 44.75% 38.89% 15.95%
April 2013........... 44.41% 38.45% 15.34%
May 2013............. 44.07% 38.00% 14.71%
June 2013............ 43.72% 37.54% 14.09%
July 2013............ 43.37% 37.08% 13.46%
August 2013.......... 43.01% 36.62% 12.83%
September 2013....... 42.65% 36.15% 12.19%
October 2013......... 42.29% 35.67% 11.25%
November 2013........ 41.93% 35.19% 9.85%
December 2013........ 41.56% 34.71% 8.37%
January 2014......... 41.18% 34.22% 6.81%
February 2014........ 40.81% 33.73% 5.18%
March 2014........... 40.43% 33.23% 3.43%
April 2014........... 40.05% 32.73% 1.65%
May 2014............. 39.66% 32.22% 0.00%
June 2014............ 39.27% 31.70% 0.00%
July 2014............ 38.87% 31.19% 0.00%
August 2014.......... 38.48% 30.66% 0.00%
September 2014....... 38.07% 30.13% 0.00%
October 2014......... 37.67% 29.60% 0.00%
November 2014........ 37.26% 29.06% 0.00%
December 2014........ 36.85% 28.52% 0.00%
January 2015......... 36.43% 27.97% 0.00%
February 2015........ 36.01% 27.41% 0.00%
March 2015........... 35.59% 26.86% 0.00%
April 2015........... 35.16% 26.29% 0.00%
May 2015............. 34.73% 25.72% 0.00%
June 2015............ 34.29% 25.15% 0.00%
July 2015............ 33.85% 24.57% 0.00%
August 2015.......... 33.41% 23.98% 0.00%
September 2015....... 32.97% 23.39% 0.00%
October 2015......... 32.51% 22.79% 0.00%
November 2015........ 32.06% 22.19% 0.00%
December 2015........ 31.60% 21.59% 0.00%
January 2016......... 31.14% 20.97% 0.00%
February 2016........ 30.67% 20.36% 0.00%
March 2016........... 30.20% 19.73% 0.00%
April 2016........... 29.73% 19.11% 0.00%
May 2016............. 29.25% 18.47% 0.00%
June 2016............ 28.77% 17.83% 0.00%
July 2016............ 28.28% 17.19% 0.00%
August 2016.......... 27.79% 16.54% 0.00%
September 2016....... 27.30% 15.88% 0.00%
October 2016......... 26.80% 15.22% 0.00%
November 2016........ 26.30% 14.55% 0.00%
December 2016........ 25.80% 13.88% 0.00%
</TABLE>
A-11
<PAGE> 233
CLASS A CLASS PERCENTAGES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
January 2017......... 25.29% 13.20% 0.00%
February 2017........ 24.77% 12.52% 0.00%
March 2017........... 24.25% 11.83% 0.00%
April 2017........... 23.73% 11.13% 0.00%
May 2017............. 23.20% 10.43% 0.00%
June 2017............ 22.67% 9.72% 0.00%
July 2017............ 22.14% 9.01% 0.00%
August 2017.......... 21.60% 8.29% 0.00%
September 2017....... 21.06% 7.57% 0.00%
October 2017......... 20.51% 6.84% 0.00%
November 2017........ 19.96% 6.10% 0.00%
December 2017........ 19.40% 5.36% 0.00%
January 2018......... 18.84% 4.61% 0.00%
February 2018........ 18.28% 3.86% 0.00%
March 2018........... 17.71% 3.10% 0.00%
April 2018........... 17.14% 2.33% 0.00%
May 2018............. 16.56% 1.56% 0.00%
June 2018............ 15.98% 0.78% 0.00%
July 2018............ 15.39% 0.00% 0.00%
August 2018.......... 14.80% 0.00% 0.00%
September 2018....... 14.21% 0.00% 0.00%
October 2018......... 13.61% 0.00% 0.00%
November 2018........ 13.01% 0.00% 0.00%
December 2018........ 12.40% 0.00% 0.00%
January 2019......... 11.79% 0.00% 0.00%
February 2019........ 11.17% 0.00% 0.00%
March 2019........... 10.55% 0.00% 0.00%
April 2019........... 9.92% 0.00% 0.00%
May 2019............. 9.29% 0.00% 0.00%
June 2019............ 8.66% 0.00% 0.00%
July 2019............ 8.02% 0.00% 0.00%
August 2019.......... 7.38% 0.00% 0.00%
September 2019....... 6.73% 0.00% 0.00%
October 2019......... 6.08% 0.00% 0.00%
November 2019........ 5.42% 0.00% 0.00%
December 2019........ 4.76% 0.00% 0.00%
January 2020......... 4.09% 0.00% 0.00%
February 2020........ 3.42% 0.00% 0.00%
March 2020........... 2.75% 0.00% 0.00%
April 2020........... 2.07% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
May 2020............. 1.38% 0.00% 0.00%
June 2020............ 0.69% 0.00% 0.00%
July 2020............ 0.00% 0.00% 0.00%
August 2020.......... 0.00% 0.00% 0.00%
September 2020....... 0.00% 0.00% 0.00%
October 2020......... 0.00% 0.00% 0.00%
November 2020........ 0.00% 0.00% 0.00%
December 2020........ 0.00% 0.00% 0.00%
January 2021......... 0.00% 0.00% 0.00%
February 2021........ 0.00% 0.00% 0.00%
March 2021........... 0.00% 0.00% 0.00%
April 2021........... 0.00% 0.00% 0.00%
May 2021............. 0.00% 0.00% 0.00%
June 2021............ 0.00% 0.00% 0.00%
July 2021............ 0.00% 0.00% 0.00%
August 2021.......... 0.00% 0.00% 0.00%
September 2021....... 0.00% 0.00% 0.00%
October 2021......... 0.00% 0.00% 0.00%
November 2021........ 0.00% 0.00% 0.00%
December 2021........ 0.00% 0.00% 0.00%
January 2022......... 0.00% 0.00% 0.00%
February 2022........ 0.00% 0.00% 0.00%
March 2022........... 0.00% 0.00% 0.00%
April 2022........... 0.00% 0.00% 0.00%
May 2022............. 0.00% 0.00% 0.00%
June 2022............ 0.00% 0.00% 0.00%
July 2022............ 0.00% 0.00% 0.00%
August 2022.......... 0.00% 0.00% 0.00%
September 2022....... 0.00% 0.00% 0.00%
October 2022......... 0.00% 0.00% 0.00%
November 2022........ 0.00% 0.00% 0.00%
December 2022........ 0.00% 0.00% 0.00%
January 2023......... 0.00% 0.00% 0.00%
February 2023........ 0.00% 0.00% 0.00%
March 2023........... 0.00% 0.00% 0.00%
April 2023........... 0.00% 0.00% 0.00%
May 2023............. 0.00% 0.00% 0.00%
June 2023............ 0.00% 0.00% 0.00%
July 2023............ 0.00% 0.00% 0.00%
</TABLE>
A-12
<PAGE> 234
APPENDIX 6
CLASS B CLASS PERCENTAGES
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
Closing.............. 8.95% 8.95% 8.95%
August 1998.......... 8.95% 8.95% 8.95%
September 1998....... 8.95% 8.95% 8.95%
October 1998......... 8.95% 8.95% 8.94%
November 1998........ 8.95% 8.95% 8.94%
December 1998........ 8.95% 8.94% 8.94%
January 1999......... 8.95% 8.94% 8.94%
February 1999........ 8.95% 8.94% 8.94%
March 1999........... 8.95% 8.94% 8.93%
April 1999........... 8.95% 8.94% 8.93%
May 1999............. 8.95% 8.94% 8.92%
June 1999............ 8.95% 8.94% 8.92%
July 1999............ 8.95% 8.93% 8.91%
August 1999.......... 8.95% 8.93% 8.91%
September 1999....... 8.95% 8.93% 8.90%
October 1999......... 8.95% 8.93% 8.89%
November 1999........ 8.95% 8.92% 8.88%
December 1999........ 8.95% 8.92% 8.87%
January 2000......... 8.94% 8.91% 8.86%
February 2000........ 8.94% 8.91% 8.85%
March 2000........... 8.94% 8.91% 8.84%
April 2000........... 8.94% 8.90% 8.83%
May 2000............. 8.94% 8.89% 8.82%
June 2000............ 8.94% 8.89% 8.80%
July 2000............ 8.94% 8.88% 8.79%
August 2000.......... 8.94% 8.88% 8.78%
September 2000....... 8.94% 8.87% 8.76%
October 2000......... 8.94% 8.86% 8.74%
November 2000........ 8.94% 8.85% 8.73%
December 2000........ 8.94% 8.84% 8.71%
January 2001......... 8.94% 8.84% 8.69%
February 2001........ 8.94% 8.83% 8.67%
March 2001........... 8.94% 8.82% 8.65%
April 2001........... 8.93% 8.81% 8.63%
May 2001............. 8.93% 8.80% 8.60%
June 2001............ 8.93% 8.79% 8.58%
July 2001............ 8.93% 8.77% 8.56%
August 2001.......... 8.93% 8.76% 8.53%
September 2001....... 8.93% 8.75% 8.51%
October 2001......... 8.93% 8.74% 8.48%
November 2001........ 8.92% 8.72% 8.45%
December 2001........ 8.92% 8.71% 8.42%
January 2002......... 8.92% 8.69% 8.39%
February 2002........ 8.92% 8.68% 8.36%
March 2002........... 8.91% 8.66% 8.33%
April 2002........... 8.91% 8.65% 8.30%
May 2002............. 8.91% 8.63% 8.27%
June 2002............ 8.91% 8.61% 8.23%
July 2002............ 8.90% 8.60% 8.20%
August 2002.......... 8.90% 8.58% 8.16%
September 2002....... 8.90% 8.56% 8.13%
October 2002......... 8.89% 8.54% 8.09%
November 2002........ 8.89% 8.52% 8.05%
December 2002........ 8.89% 8.50% 8.01%
January 2003......... 8.88% 8.48% 7.97%
February 2003........ 8.88% 8.46% 7.93%
March 2003........... 8.87% 8.44% 7.89%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
April 2003........... 8.87% 8.41% 7.84%
May 2003............. 8.86% 8.39% 7.80%
June 2003............ 8.86% 8.37% 7.76%
July 2003............ 8.85% 8.34% 7.71%
August 2003.......... 8.85% 8.32% 7.66%
September 2003....... 8.84% 8.29% 7.61%
October 2003......... 8.84% 8.26% 7.56%
November 2003........ 8.83% 8.24% 7.51%
December 2003........ 8.82% 8.21% 7.46%
January 2004......... 8.82% 8.18% 7.41%
February 2004........ 8.81% 8.15% 7.36%
March 2004........... 8.80% 8.12% 7.30%
April 2004........... 8.79% 8.09% 7.25%
May 2004............. 8.79% 8.06% 7.19%
June 2004............ 8.78% 8.03% 7.14%
July 2004............ 8.77% 8.00% 7.08%
August 2004.......... 8.76% 7.97% 7.02%
September 2004....... 8.75% 7.93% 6.96%
October 2004......... 8.74% 7.90% 6.90%
November 2004........ 8.73% 7.87% 6.84%
December 2004........ 8.72% 7.83% 6.77%
January 2005......... 8.71% 7.80% 6.71%
February 2005........ 8.70% 7.76% 6.64%
March 2005........... 8.69% 7.72% 6.58%
April 2005........... 8.68% 7.68% 6.51%
May 2005............. 8.67% 7.65% 6.44%
June 2005............ 8.66% 7.61% 6.37%
July 2005............ 8.65% 7.57% 6.30%
August 2005.......... 8.63% 7.53% 6.23%
September 2005....... 8.62% 7.48% 6.16%
October 2005......... 8.61% 7.44% 6.08%
November 2005........ 8.59% 7.40% 6.01%
December 2005........ 8.58% 7.36% 5.93%
January 2006......... 8.56% 7.31% 5.85%
February 2006........ 8.55% 7.27% 5.78%
March 2006........... 8.53% 7.22% 5.70%
April 2006........... 8.52% 7.17% 5.62%
May 2006............. 8.50% 7.13% 5.53%
June 2006............ 8.48% 7.08% 5.45%
July 2006............ 8.47% 7.03% 5.37%
August 2006.......... 8.45% 6.98% 5.28%
September 2006....... 8.43% 6.93% 5.20%
October 2006......... 8.41% 6.88% 5.11%
November 2006........ 8.39% 6.83% 5.02%
December 2006........ 8.37% 6.78% 4.93%
January 2007......... 8.35% 6.72% 4.84%
February 2007........ 8.33% 6.67% 4.75%
March 2007........... 8.31% 6.62% 4.66%
April 2007........... 8.29% 6.56% 4.56%
May 2007............. 8.27% 6.50% 4.47%
June 2007............ 8.25% 6.45% 4.37%
July 2007............ 8.22% 6.39% 4.28%
August 2007.......... 8.20% 6.33% 4.18%
September 2007....... 8.18% 6.27% 4.08%
October 2007......... 8.15% 6.21% 3.98%
November 2007........ 8.13% 6.15% 3.88%
December 2007........ 8.10% 6.09% 3.77%
</TABLE>
A-13
<PAGE> 235
CLASS B CLASS PERCENTAGES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
January 2008......... 8.07% 6.03% 3.67%
February 2008........ 8.05% 5.96% 3.56%
March 2008........... 8.02% 5.90% 3.46%
April 2008........... 7.99% 5.84% 3.35%
May 2008............. 7.96% 5.77% 3.24%
June 2008............ 7.93% 5.70% 3.13%
July 2008............ 7.90% 5.64% 3.02%
August 2008.......... 7.87% 5.57% 2.91%
September 2008....... 7.84% 5.50% 2.80%
October 2008......... 7.81% 5.43% 2.68%
November 2008........ 7.77% 5.36% 2.57%
December 2008........ 7.74% 5.29% 2.45%
January 2009......... 7.71% 5.22% 2.33%
February 2009........ 7.67% 5.14% 2.21%
March 2009........... 7.64% 5.07% 2.09%
April 2009........... 7.60% 4.99% 1.97%
May 2009............. 7.56% 4.92% 1.85%
June 2009............ 7.53% 4.84% 1.72%
July 2009............ 7.49% 4.76% 1.60%
August 2009.......... 7.45% 4.69% 1.47%
September 2009....... 7.41% 4.61% 1.34%
October 2009......... 7.37% 4.53% 1.21%
November 2009........ 7.33% 4.45% 1.08%
December 2009........ 7.29% 4.37% 0.95%
January 2010......... 7.24% 4.28% 0.82%
February 2010........ 7.20% 4.20% 0.69%
March 2010........... 7.16% 4.12% 0.55%
April 2010........... 7.11% 4.03% 0.42%
May 2010............. 7.07% 3.94% 0.28%
June 2010............ 7.02% 3.86% 0.14%
July 2010............ 6.97% 3.77% 0.00%
August 2010.......... 6.92% 3.68% 0.00%
September 2010....... 6.87% 3.59% 0.00%
October 2010......... 6.82% 3.50% 0.00%
November 2010........ 6.77% 3.41% 0.00%
December 2010........ 6.72% 3.32% 0.00%
January 2011......... 6.67% 3.23% 0.00%
February 2011........ 6.62% 3.13% 0.00%
March 2011........... 6.56% 3.04% 0.00%
April 2011........... 6.51% 2.94% 0.00%
May 2011............. 6.45% 2.84% 0.00%
June 2011............ 6.39% 2.75% 0.00%
July 2011............ 6.34% 2.65% 0.00%
August 2011.......... 6.28% 2.55% 0.00%
September 2011....... 6.22% 2.45% 0.00%
October 2011......... 6.16% 2.35% 0.00%
November 2011........ 6.09% 2.24% 0.00%
December 2011........ 6.03% 2.14% 0.00%
January 2012......... 5.97% 2.04% 0.00%
February 2012........ 5.90% 1.93% 0.00%
March 2012........... 5.84% 1.83% 0.00%
April 2012........... 5.77% 1.72% 0.00%
May 2012............. 5.70% 1.61% 0.00%
June 2012............ 5.63% 1.50% 0.00%
July 2012............ 5.56% 1.39% 0.00%
August 2012.......... 5.49% 1.28% 0.00%
September 2012....... 5.42% 1.17% 0.00%
October 2012......... 5.35% 1.06% 0.00%
November 2012........ 5.28% 0.94% 0.00%
December 2012........ 5.20% 0.83% 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
January 2013......... 5.12% 0.71% 0.00%
February 2013........ 5.05% 0.60% 0.00%
March 2013........... 4.97% 0.48% 0.00%
April 2013........... 4.89% 0.36% 0.00%
May 2013............. 4.81% 0.24% 0.00%
June 2013............ 4.73% 0.12% 0.00%
July 2013............ 4.64% 0.00% 0.00%
August 2013.......... 4.56% 0.00% 0.00%
September 2013....... 4.47% 0.00% 0.00%
October 2013......... 4.39% 0.00% 0.00%
November 2013........ 4.30% 0.00% 0.00%
December 2013........ 4.21% 0.00% 0.00%
January 2014......... 4.12% 0.00% 0.00%
February 2014........ 4.03% 0.00% 0.00%
March 2014........... 3.94% 0.00% 0.00%
April 2014........... 3.85% 0.00% 0.00%
May 2014............. 3.75% 0.00% 0.00%
June 2014............ 3.65% 0.00% 0.00%
July 2014............ 3.56% 0.00% 0.00%
August 2014.......... 3.46% 0.00% 0.00%
September 2014....... 3.36% 0.00% 0.00%
October 2014......... 3.26% 0.00% 0.00%
November 2014........ 3.15% 0.00% 0.00%
December 2014........ 3.05% 0.00% 0.00%
January 2015......... 2.95% 0.00% 0.00%
February 2015........ 2.84% 0.00% 0.00%
March 2015........... 2.73% 0.00% 0.00%
April 2015........... 2.62% 0.00% 0.00%
May 2015............. 2.51% 0.00% 0.00%
June 2015............ 2.40% 0.00% 0.00%
July 2015............ 2.29% 0.00% 0.00%
August 2015.......... 2.17% 0.00% 0.00%
September 2015....... 2.06% 0.00% 0.00%
October 2015......... 1.94% 0.00% 0.00%
November 2015........ 1.82% 0.00% 0.00%
December 2015........ 1.70% 0.00% 0.00%
January 2016......... 1.58% 0.00% 0.00%
February 2016........ 1.45% 0.00% 0.00%
March 2016........... 1.33% 0.00% 0.00%
April 2016........... 1.20% 0.00% 0.00%
May 2016............. 1.08% 0.00% 0.00%
June 2016............ 0.95% 0.00% 0.00%
July 2016............ 0.82% 0.00% 0.00%
August 2016.......... 0.68% 0.00% 0.00%
September 2016....... 0.55% 0.00% 0.00%
October 2016......... 0.41% 0.00% 0.00%
November 2016........ 0.28% 0.00% 0.00%
December 2016........ 0.14% 0.00% 0.00%
January 2017......... 0.00% 0.00% 0.00%
February 2017........ 0.00% 0.00% 0.00%
March 2017........... 0.00% 0.00% 0.00%
April 2017........... 0.00% 0.00% 0.00%
May 2017............. 0.00% 0.00% 0.00%
June 2017............ 0.00% 0.00% 0.00%
July 2017............ 0.00% 0.00% 0.00%
August 2017.......... 0.00% 0.00% 0.00%
September 2017....... 0.00% 0.00% 0.00%
October 2017......... 0.00% 0.00% 0.00%
November 2017........ 0.00% 0.00% 0.00%
December 2017........ 0.00% 0.00% 0.00%
</TABLE>
A-14
<PAGE> 236
CLASS B CLASS PERCENTAGES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
January 2018......... 0.00% 0.00% 0.00%
February 2018........ 0.00% 0.00% 0.00%
March 2018........... 0.00% 0.00% 0.00%
April 2018........... 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS B
MINIMUM SCHEDULED SUPPLEMENTAL
PAYMENT DATE CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE
------------ ---------- ---------- ------------
<S> <C> <C> <C>
May 2018............. 0.00% 0.00% 0.00%
June 2018............ 0.00% 0.00% 0.00%
July 2018............ 0.00% 0.00% 0.00%
</TABLE>
A-15
<PAGE> 237
APPENDIX 7
CLASS C TARGET PRINCIPAL BALANCES
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
Closing.......................... 85,000,000 85,000,000
August 1998...................... 84,999,964 84,999,416
September 1998................... 84,999,771 84,997,144
October 1998..................... 84,999,323 84,992,775
November 1998.................... 84,998,536 84,986,041
December 1998.................... 84,997,339 84,976,736
January 1999..................... 84,995,662 84,964,685
February 1999.................... 84,993,444 84,949,741
March 1999....................... 84,990,625 84,931,771
April 1999....................... 84,987,146 84,910,655
May 1999......................... 84,982,954 84,886,285
June 1999........................ 84,977,996 84,858,559
July 1999........................ 84,972,219 84,827,383
August 1999...................... 84,965,574 84,792,671
September 1999................... 84,958,013 84,754,338
October 1999..................... 84,949,488 84,712,306
November 1999.................... 84,939,954 84,666,501
December 1999.................... 84,929,364 84,616,851
January 2000..................... 84,917,675 84,563,288
February 2000.................... 84,904,843 84,505,748
March 2000....................... 84,890,826 84,444,168
April 2000....................... 84,875,580 84,378,486
May 2000......................... 84,859,065 84,308,645
June 2000........................ 84,841,240 84,234,589
July 2000........................ 84,822,065 84,156,262
August 2000...................... 84,801,501 84,073,613
September 2000................... 84,779,508 83,986,589
October 2000..................... 84,756,047 83,895,140
November 2000.................... 84,731,081 83,799,219
December 2000.................... 84,704,572 83,698,778
January 2001..................... 84,676,483 83,593,770
February 2001.................... 84,646,776 83,484,152
March 2001....................... 84,615,416 83,369,877
April 2001....................... 84,582,367 83,250,905
May 2001......................... 84,547,592 83,127,193
June 2001........................ 84,511,057 82,998,699
July 2001........................ 84,472,726 82,865,384
August 2001...................... 84,432,564 82,727,207
September 2001................... 84,390,539 82,584,131
October 2001..................... 84,346,614 82,436,118
November 2001.................... 84,300,757 82,283,129
December 2001.................... 84,252,934 82,125,129
January 2002..................... 84,203,111 81,962,082
February 2002.................... 84,151,257 81,793,952
March 2002....................... 84,097,337 81,620,705
April 2002....................... 84,041,319 81,442,306
May 2002......................... 83,983,172 81,258,722
June 2002........................ 83,922,863 81,069,920
July 2002........................ 83,860,361 80,875,867
August 2002...................... 83,795,633 80,676,532
September 2002................... 83,728,649 80,471,882
October 2002..................... 83,659,377 80,261,886
November 2002.................... 83,587,786 80,046,514
December 2002.................... 83,513,846 79,825,736
January 2003..................... 83,437,525 79,599,522
February 2003.................... 83,358,794 79,367,841
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
March 2003....................... 83,277,622 79,130,666
April 2003....................... 83,193,980 78,887,966
May 2003......................... 83,107,836 78,639,715
June 2003........................ 83,019,163 78,385,884
July 2003........................ 82,927,929 78,126,445
August 2003...................... 82,834,106 77,861,372
September 2003................... 82,737,664 77,590,636
October 2003..................... 82,638,575 77,314,211
November 2003.................... 82,536,809 77,032,072
December 2003.................... 82,432,338 76,744,191
January 2004..................... 82,325,133 76,450,543
February 2004.................... 82,215,165 76,151,103
March 2004....................... 82,102,407 75,845,845
April 2004....................... 81,986,829 75,534,744
May 2004......................... 81,868,404 75,217,776
June 2004........................ 81,747,104 74,894,916
July 2004........................ 81,622,901 74,566,140
August 2004...................... 81,495,768 74,231,423
September 2004................... 81,365,676 73,890,743
October 2004..................... 81,232,598 73,544,076
November 2004.................... 81,096,508 73,191,397
December 2004.................... 80,957,377 72,832,685
January 2005..................... 80,815,178 72,467,917
February 2005.................... 80,669,886 72,097,069
March 2005....................... 80,521,472 71,720,119
April 2005....................... 80,369,909 71,337,046
May 2005......................... 80,215,173 70,947,826
June 2005........................ 80,057,234 70,552,439
July 2005........................ 79,896,069 70,150,862
August 2005...................... 79,731,649 69,743,075
September 2005................... 79,563,948 69,329,055
October 2005..................... 79,392,941 68,908,782
November 2005.................... 79,218,601 68,482,234
December 2005.................... 79,040,903 68,049,391
January 2006..................... 78,859,821 67,610,233
February 2006.................... 78,675,328 67,164,738
March 2006....................... 78,487,399 66,712,887
April 2006....................... 78,296,008 66,254,660
May 2006......................... 78,101,131 65,790,036
June 2006........................ 77,902,741 65,318,996
July 2006........................ 77,700,813 64,841,519
August 2006...................... 77,495,323 64,357,587
September 2006................... 77,286,244 63,867,181
October 2006..................... 77,073,552 63,370,280
November 2006.................... 76,857,221 62,866,866
December 2006.................... 76,637,227 62,356,919
January 2007..................... 76,413,546 61,840,422
February 2007.................... 76,186,151 61,317,355
March 2007....................... 75,955,019 60,787,699
April 2007....................... 75,720,125 60,251,437
May 2007......................... 75,481,444 59,708,550
June 2007........................ 75,238,952 59,159,020
July 2007........................ 74,992,625 58,602,829
August 2007...................... 74,742,437 58,039,958
September 2007................... 74,488,366 57,470,390
October 2007..................... 74,230,387 56,894,107
</TABLE>
A-16
<PAGE> 238
CLASS C TARGET PRINCIPAL BALANCES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
November 2007.................... 73,968,475 56,311,092
December 2007.................... 73,702,607 55,721,328
January 2008..................... 73,432,759 55,124,795
February 2008.................... 73,158,907 54,521,479
March 2008....................... 72,881,027 53,911,361
April 2008....................... 72,599,095 53,294,424
May 2008......................... 72,313,087 52,670,651
June 2008........................ 72,022,981 52,040,026
July 2008........................ 71,728,752 51,402,532
August 2008...................... 71,430,377 50,758,152
September 2008................... 71,127,832 50,106,869
October 2008..................... 70,821,094 49,448,668
November 2008.................... 70,510,141 48,783,531
December 2008.................... 70,194,947 48,111,443
January 2009..................... 69,875,491 47,432,387
February 2009.................... 69,551,750 46,746,347
March 2009....................... 69,223,699 46,053,307
April 2009....................... 68,891,317 45,353,252
May 2009......................... 68,554,580 44,646,166
June 2009........................ 68,213,465 43,932,032
July 2009........................ 67,867,949 43,210,836
August 2009...................... 67,518,010 42,482,561
September 2009................... 67,163,626 41,747,192
October 2009..................... 66,804,772 41,004,714
November 2009.................... 66,441,427 40,255,112
December 2009.................... 66,073,568 39,498,370
January 2010..................... 65,701,172 38,734,473
February 2010.................... 65,324,218 37,963,406
March 2010....................... 64,942,682 37,185,154
April 2010....................... 64,556,543 36,399,702
May 2010......................... 64,165,777 35,607,036
June 2010........................ 63,770,364 34,807,140
July 2010........................ 63,370,280 34,000,000
August 2010...................... 62,965,503 33,185,601
September 2010................... 62,556,011 32,363,929
October 2010..................... 62,141,783 31,534,970
November 2010.................... 61,722,796 30,698,708
December 2010.................... 61,299,028 29,855,129
January 2011..................... 60,870,458 29,004,220
February 2011.................... 60,437,063 28,145,966
March 2011....................... 59,998,821 27,280,353
April 2011....................... 59,555,712 26,407,366
May 2011......................... 59,107,712 25,526,993
June 2011........................ 58,654,801 24,639,218
July 2011........................ 58,196,957 23,744,029
August 2011...................... 57,734,158 22,841,410
September 2011................... 57,266,383 21,931,349
October 2011..................... 56,793,609 21,013,832
November 2011.................... 56,315,817 20,088,846
December 2011.................... 55,832,984 19,156,376
January 2012..................... 55,345,088 18,216,409
February 2012.................... 54,852,110 17,268,931
March 2012....................... 54,354,026 16,313,931
April 2012....................... 53,850,817 15,351,393
May 2012......................... 53,342,460 14,381,305
June 2012........................ 52,828,936 13,403,653
July 2012........................ 52,310,221 12,418,425
August 2012...................... 51,786,296 11,425,607
September 2012................... 51,257,140 10,425,186
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
October 2012..................... 50,722,731 9,417,150
November 2012.................... 50,183,048 8,401,485
December 2012.................... 49,638,071 7,378,179
January 2013..................... 49,087,778 6,347,218
February 2013.................... 48,532,150 5,308,590
March 2013....................... 47,971,164 4,262,282
April 2013....................... 47,404,800 3,208,282
May 2013......................... 46,833,038 2,146,576
June 2013........................ 46,255,857 1,077,153
July 2013........................ 45,673,236 0
August 2013...................... 45,085,154 0
September 2013................... 44,491,591 0
October 2013..................... 43,892,527 0
November 2013.................... 43,287,940 0
December 2013.................... 42,677,811 0
January 2014..................... 42,062,119 0
February 2014.................... 41,440,843 0
March 2014....................... 40,813,963 0
April 2014....................... 40,181,459 0
May 2014......................... 39,543,311 0
June 2014........................ 38,899,498 0
July 2014........................ 38,250,000 0
August 2014...................... 37,594,797 0
September 2014................... 36,933,868 0
October 2014..................... 36,267,194 0
November 2014.................... 35,594,755 0
December 2014.................... 34,916,529 0
January 2015..................... 34,232,499 0
February 2015.................... 33,542,642 0
March 2015....................... 32,846,940 0
April 2015....................... 32,145,372 0
May 2015......................... 31,437,919 0
June 2015........................ 30,724,560 0
July 2015........................ 30,005,277 0
August 2015...................... 29,280,048 0
September 2015................... 28,548,854 0
October 2015..................... 27,811,676 0
November 2015.................... 27,068,494 0
December 2015.................... 26,319,288 0
January 2016..................... 25,564,038 0
February 2016.................... 24,802,726 0
March 2016....................... 24,035,330 0
April 2016....................... 23,261,832 0
May 2016......................... 22,482,212 0
June 2016........................ 21,696,451 0
July 2016........................ 20,904,529 0
August 2016...................... 20,106,427 0
September 2016................... 19,302,124 0
October 2016..................... 18,491,603 0
November 2016.................... 17,674,843 0
December 2016.................... 16,851,826 0
January 2017..................... 16,022,531 0
February 2017.................... 15,186,940 0
March 2017....................... 14,345,034 0
April 2017....................... 13,496,792 0
May 2017......................... 12,642,197 0
June 2017........................ 11,781,228 0
July 2017........................ 10,913,867 0
August 2017...................... 10,040,094 0
</TABLE>
A-17
<PAGE> 239
CLASS C TARGET PRINCIPAL BALANCES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
September 2017................... 9,159,891 0
October 2017..................... 8,273,238 0
November 2017.................... 7,380,117 0
December 2017.................... 6,480,508 0
January 2018..................... 5,574,392 0
February 2018.................... 4,661,751 0
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS C
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
March 2018....................... 3,742,566 0
April 2018....................... 2,816,816 0
May 2018......................... 1,884,485 0
June 2018........................ 945,552 0
July 2018........................ 0 0
</TABLE>
A-18
<PAGE> 240
APPENDIX 8
CLASS D TARGET PRINCIPAL BALANCES
<TABLE>
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
$ $
<S> <C> <C>
Closing.......................... 80,000,000 80,000,000
August 1998...................... 80,000,000 80,000,000
September 1998................... 80,000,000 80,000,000
October 1998..................... 80,000,000 80,000,000
November 1998.................... 80,000,000 80,000,000
December 1998.................... 80,000,000 80,000,000
January 1999..................... 80,000,000 80,000,000
February 1999.................... 80,000,000 80,000,000
March 1999....................... 80,000,000 80,000,000
April 1999....................... 80,000,000 80,000,000
May 1999......................... 80,000,000 80,000,000
June 1999........................ 80,000,000 80,000,000
July 1999........................ 80,000,000 80,000,000
August 1999...................... 80,000,000 80,000,000
September 1999................... 80,000,000 80,000,000
October 1999..................... 80,000,000 80,000,000
November 1999.................... 80,000,000 80,000,000
December 1999.................... 80,000,000 80,000,000
January 2000..................... 80,000,000 80,000,000
February 2000.................... 80,000,000 80,000,000
March 2000....................... 80,000,000 80,000,000
April 2000....................... 80,000,000 80,000,000
May 2000......................... 80,000,000 80,000,000
June 2000........................ 80,000,000 80,000,000
July 2000........................ 80,000,000 80,000,000
August 2000...................... 80,000,000 80,000,000
September 2000................... 80,000,000 80,000,000
October 2000..................... 80,000,000 80,000,000
November 2000.................... 80,000,000 80,000,000
December 2000.................... 80,000,000 80,000,000
January 2001..................... 80,000,000 80,000,000
February 2001.................... 80,000,000 80,000,000
March 2001....................... 80,000,000 80,000,000
April 2001....................... 80,000,000 80,000,000
May 2001......................... 80,000,000 80,000,000
June 2001........................ 80,000,000 80,000,000
July 2001........................ 80,000,000 80,000,000
August 2001...................... 80,000,000 80,000,000
September 2001................... 80,000,000 80,000,000
October 2001..................... 80,000,000 80,000,000
November 2001.................... 80,000,000 80,000,000
December 2001.................... 80,000,000 80,000,000
January 2002..................... 80,000,000 80,000,000
February 2002.................... 80,000,000 80,000,000
March 2002....................... 80,000,000 80,000,000
April 2002....................... 80,000,000 80,000,000
May 2002......................... 80,000,000 80,000,000
June 2002........................ 80,000,000 80,000,000
July 2002........................ 80,000,000 80,000,000
August 2002...................... 80,000,000 80,000,000
September 2002................... 80,000,000 80,000,000
October 2002..................... 80,000,000 80,000,000
November 2002.................... 80,000,000 80,000,000
December 2002.................... 80,000,000 80,000,000
January 2003..................... 80,000,000 80,000,000
</TABLE>
<TABLE>
<CAPTION>
$ $
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
February 2003.................... 80,000,000 80,000,000
March 2003....................... 80,000,000 80,000,000
April 2003....................... 80,000,000 80,000,000
May 2003......................... 80,000,000 80,000,000
June 2003........................ 80,000,000 80,000,000
July 2003........................ 80,000,000 80,000,000
August 2003...................... 80,000,000 80,000,000
September 2003................... 80,000,000 80,000,000
October 2003..................... 80,000,000 80,000,000
November 2003.................... 80,000,000 80,000,000
December 2003.................... 80,000,000 80,000,000
January 2004..................... 80,000,000 80,000,000
February 2004.................... 80,000,000 80,000,000
March 2004....................... 80,000,000 80,000,000
April 2004....................... 80,000,000 80,000,000
May 2004......................... 80,000,000 80,000,000
June 2004........................ 80,000,000 80,000,000
July 2004........................ 80,000,000 80,000,000
August 2004...................... 80,000,000 80,000,000
September 2004................... 80,000,000 80,000,000
October 2004..................... 80,000,000 80,000,000
November 2004.................... 80,000,000 80,000,000
December 2004.................... 80,000,000 80,000,000
January 2005..................... 80,000,000 80,000,000
February 2005.................... 80,000,000 80,000,000
March 2005....................... 80,000,000 80,000,000
April 2005....................... 80,000,000 80,000,000
May 2005......................... 80,000,000 80,000,000
June 2005........................ 80,000,000 80,000,000
July 2005........................ 80,000,000 80,000,000
August 2005...................... 80,000,000 80,000,000
September 2005................... 80,000,000 80,000,000
October 2005..................... 80,000,000 80,000,000
November 2005.................... 80,000,000 80,000,000
December 2005.................... 80,000,000 80,000,000
January 2006..................... 80,000,000 80,000,000
February 2006.................... 80,000,000 80,000,000
March 2006....................... 80,000,000 80,000,000
April 2006....................... 80,000,000 80,000,000
May 2006......................... 80,000,000 80,000,000
June 2006........................ 80,000,000 80,000,000
July 2006........................ 80,000,000 80,000,000
August 2006...................... 80,000,000 80,000,000
September 2006................... 80,000,000 80,000,000
October 2006..................... 80,000,000 80,000,000
November 2006.................... 80,000,000 80,000,000
December 2006.................... 80,000,000 80,000,000
January 2007..................... 80,000,000 79,774,880
February 2007.................... 80,000,000 79,328,760
March 2007....................... 80,000,000 78,873,970
April 2007....................... 80,000,000 78,410,461
May 2007......................... 80,000,000 77,938,186
June 2007........................ 80,000,000 77,457,096
July 2007........................ 80,000,000 76,967,146
August 2007...................... 80,000,000 76,468,290
</TABLE>
A-19
<PAGE> 241
CLASS D TARGET PRINCIPAL BALANCES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
$ $
<S> <C> <C>
September 2007................... 80,000,000 75,960,480
October 2007..................... 80,000,000 75,443,671
November 2007.................... 80,000,000 74,917,819
December 2007.................... 80,000,000 74,382,876
January 2008..................... 80,000,000 73,838,800
February 2008.................... 80,000,000 73,285,546
March 2008....................... 80,000,000 72,723,068
April 2008....................... 80,000,000 72,151,325
May 2008......................... 80,000,000 71,570,271
June 2008........................ 80,000,000 70,979,864
July 2008........................ 80,000,000 70,380,061
August 2008...................... 80,000,000 69,770,819
September 2008................... 80,000,000 69,152,097
October 2008..................... 80,000,000 68,523,851
November 2008.................... 80,000,000 67,886,040
December 2008.................... 80,000,000 67,238,622
January 2009..................... 80,000,000 66,581,557
February 2009.................... 80,000,000 65,914,803
March 2009....................... 80,000,000 65,238,319
April 2009....................... 80,000,000 64,552,065
May 2009......................... 80,000,000 63,856,000
June 2009........................ 80,000,000 63,150,085
July 2009........................ 80,000,000 62,434,280
August 2009...................... 80,000,000 61,708,545
September 2009................... 80,000,000 60,972,841
October 2009..................... 80,000,000 60,227,129
November 2009.................... 80,000,000 59,471,369
December 2009.................... 80,000,000 58,705,524
January 2010..................... 80,000,000 57,929,554
February 2010.................... 80,000,000 57,143,422
March 2010....................... 80,000,000 56,347,089
April 2010....................... 80,000,000 55,540,518
May 2010......................... 80,000,000 54,723,670
June 2010........................ 80,000,000 53,896,510
July 2010........................ 80,000,000 53,058,998
August 2010...................... 80,000,000 52,211,100
September 2010................... 80,000,000 51,352,776
October 2010..................... 80,000,000 50,483,992
November 2010.................... 80,000,000 49,604,710
December 2010.................... 80,000,000 48,714,894
January 2011..................... 80,000,000 47,814,508
February 2011.................... 80,000,000 46,903,516
March 2011....................... 80,000,000 45,981,883
April 2011....................... 80,000,000 45,049,573
May 2011......................... 80,000,000 44,106,550
June 2011........................ 79,765,353 43,152,779
July 2011........................ 79,419,181 42,188,226
August 2011...................... 79,067,271 41,212,855
September 2011................... 78,709,580 40,226,632
October 2011..................... 78,346,069 39,229,522
November 2011.................... 77,976,695 38,221,491
December 2011.................... 77,601,419 37,202,504
January 2012..................... 77,220,200 36,172,528
February 2012.................... 76,832,996 35,131,528
March 2012....................... 76,439,767 34,079,471
April 2012....................... 76,040,472 33,016,323
May 2012......................... 75,635,072 31,942,051
June 2012........................ 75,223,524 30,856,621
</TABLE>
<TABLE>
<CAPTION>
$ $
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
<S> <C> <C>
July 2012........................ 74,805,790 29,760,000
August 2012...................... 74,381,829 28,652,155
September 2012................... 73,951,600 27,533,054
October 2012..................... 73,515,063 26,402,663
November 2012.................... 73,072,179 25,260,950
December 2012.................... 72,622,907 24,107,883
January 2013..................... 72,167,207 22,943,429
February 2013.................... 71,705,040 21,767,555
March 2013....................... 71,236,366 20,580,230
April 2013....................... 70,761,145 19,381,423
May 2013......................... 70,279,337 18,171,100
June 2013........................ 69,790,903 16,949,231
July 2013........................ 69,295,804 15,715,783
August 2013...................... 68,793,999 14,470,726
September 2013................... 68,285,450 13,214,028
October 2013..................... 67,770,118 11,945,658
November 2013.................... 67,247,962 10,000,000
December 2013.................... 66,718,944 8,000,000
January 2014..................... 66,183,025 6,000,000
February 2014.................... 65,640,166 4,000,000
March 2014....................... 65,090,327 2,000,000
April 2014....................... 64,533,470 0
May 2014......................... 63,969,557 0
June 2014........................ 63,398,547 0
July 2014........................ 62,820,403 0
August 2014...................... 62,235,085 0
September 2014................... 61,642,556 0
October 2014..................... 61,042,777 0
November 2014.................... 60,435,708 0
December 2014.................... 59,821,312 0
January 2015..................... 59,199,551 0
February 2015.................... 58,570,385 0
March 2015....................... 57,933,778 0
April 2015....................... 57,289,689 0
May 2015......................... 56,638,083 0
June 2015........................ 55,978,919 0
July 2015........................ 55,312,161 0
August 2015...................... 54,637,770 0
September 2015................... 53,955,709 0
October 2015..................... 53,265,939 0
November 2015.................... 52,568,422 0
December 2015.................... 51,863,122 0
January 2016..................... 51,150,000 0
February 2016.................... 50,429,018 0
March 2016....................... 49,700,140 0
April 2016....................... 48,963,327 0
May 2016......................... 48,218,541 0
June 2016........................ 47,465,747 0
July 2016........................ 46,704,905 0
August 2016...................... 45,935,979 0
September 2016................... 45,158,931 0
October 2016..................... 44,373,724 0
November 2016.................... 43,580,322 0
December 2016.................... 42,778,686 0
January 2017..................... 41,968,780 0
February 2017.................... 41,150,566 0
March 2017....................... 40,324,009 0
April 2017....................... 39,489,069 0
</TABLE>
A-20
<PAGE> 242
CLASS D TARGET PRINCIPAL BALANCES -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
$ $
<S> <C> <C>
May 2017......................... 38,645,712 0
June 2017........................ 37,793,899 0
July 2017........................ 36,933,595 0
August 2017...................... 36,064,762 0
September 2017................... 35,187,363 0
October 2017..................... 34,301,362 0
November 2017.................... 33,406,723 0
December 2017.................... 32,503,408 0
January 2018..................... 31,591,381 0
February 2018.................... 30,670,606 0
March 2018....................... 29,741,046 0
April 2018....................... 28,802,664 0
May 2018......................... 27,855,425 0
June 2018........................ 26,899,292 0
July 2018........................ 25,934,229 0
August 2018...................... 24,960,199 0
September 2018................... 23,977,166 0
October 2018..................... 22,985,094 0
November 2018.................... 21,983,948 0
December 2018.................... 20,973,690 0
January 2019..................... 19,954,285 0
February 2019.................... 18,925,698 0
March 2019....................... 17,887,891 0
April 2019....................... 16,840,829 0
May 2019......................... 15,784,476 0
June 2019........................ 14,718,796 0
July 2019........................ 13,643,754 0
August 2019...................... 12,559,314 0
September 2019................... 11,465,440 0
October 2019..................... 10,362,096 0
November 2019.................... 9,249,247 0
December 2019.................... 8,126,857 0
January 2020..................... 6,994,890 0
February 2020.................... 5,853,312 0
March 2020....................... 4,702,086 0
April 2020....................... 3,541,177 0
May 2020......................... 2,370,550 0
June 2020........................ 1,190,170 0
</TABLE>
<TABLE>
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
TARGET TARGET
PAYMENT DATE PRINCIPAL PRINCIPAL
OCCURRING IN BALANCE BALANCE
------------ ---------- ----------
$ $
<S> <C> <C>
July 2020........................ 0 0
August 2020...................... 0 0
September 2020................... 0 0
October 2020..................... 0 0
November 2020.................... 0 0
December 2020.................... 0 0
January 2021..................... 0 0
February 2021.................... 0 0
March 2021....................... 0 0
April 2021....................... 0 0
May 2021......................... 0 0
June 2021........................ 0 0
July 2021........................ 0 0
August 2021...................... 0 0
September 2021................... 0 0
October 2021..................... 0 0
November 2021.................... 0 0
December 2021.................... 0 0
January 2022..................... 0 0
February 2022.................... 0 0
March 2022....................... 0 0
April 2022....................... 0 0
May 2022......................... 0 0
June 2022........................ 0 0
July 2022........................ 0 0
August 2022...................... 0 0
September 2022................... 0 0
October 2022..................... 0 0
November 2022.................... 0 0
December 2022.................... 0 0
January 2023..................... 0 0
February 2023.................... 0 0
March 2023....................... 0 0
April 2023....................... 0 0
May 2023......................... 0 0
June 2023........................ 0 0
July 2023........................ 0 0
</TABLE>
A-21
<PAGE> 243
APPENDIX 9
POOL FACTORS
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Closing.............. 100.00% 100.00% 100.00% 100.00% 100.00%
August 1998.......... 100.00% 99.21% 99.94% 100.00% 100.00%
September 1998....... 100.00% 98.10% 99.60% 100.00% 100.00%
October 1998......... 100.00% 96.70% 99.25% 99.99% 100.00%
November 1998........ 100.00% 95.58% 98.91% 99.98% 100.00%
December 1998........ 100.00% 94.44% 98.45% 99.97% 100.00%
January 1999......... 100.00% 93.11% 98.10% 99.96% 100.00%
February 1999........ 100.00% 92.00% 97.75% 99.94% 100.00%
March 1999........... 100.00% 90.50% 97.40% 99.92% 100.00%
April 1999........... 100.00% 89.35% 97.05% 99.89% 100.00%
May 1999............. 100.00% 88.69% 96.69% 99.87% 100.00%
June 1999............ 100.00% 87.75% 96.34% 99.83% 100.00%
July 1999............ 100.00% 86.55% 95.87% 99.80% 100.00%
August 1999.......... 100.00% 85.60% 95.52% 99.76% 100.00%
September 1999....... 100.00% 84.65% 95.16% 99.71% 100.00%
October 1999......... 100.00% 83.42% 94.80% 99.66% 100.00%
November 1999........ 100.00% 82.49% 94.33% 99.61% 100.00%
December 1999........ 100.00% 81.48% 93.97% 99.55% 100.00%
January 2000......... 100.00% 80.46% 93.50% 99.49% 100.00%
February 2000........ 100.00% 79.41% 93.13% 99.42% 100.00%
March 2000........... 100.00% 78.27% 92.76% 99.35% 100.00%
April 2000........... 100.00% 77.25% 92.29% 99.27% 100.00%
May 2000............. 100.00% 76.53% 91.82% 99.19% 100.00%
June 2000............ 100.00% 75.48% 91.45% 99.10% 100.00%
July 2000............ 100.00% 74.39% 90.97% 99.01% 100.00%
August 2000.......... 100.00% 73.31% 90.60% 98.91% 100.00%
September 2000....... 100.00% 72.25% 90.12% 98.81% 100.00%
October 2000......... 100.00% 71.16% 89.64% 98.70% 100.00%
November 2000........ 100.00% 70.10% 89.17% 98.59% 100.00%
December 2000........ 100.00% 68.99% 88.69% 98.47% 100.00%
January 2001......... 100.00% 67.90% 88.31% 98.35% 100.00%
February 2001........ 100.00% 66.84% 87.83% 98.22% 100.00%
March 2001........... 100.00% 65.63% 87.35% 98.08% 100.00%
April 2001........... 100.00% 64.54% 86.87% 97.94% 100.00%
May 2001............. 100.00% 63.79% 86.38% 97.80% 100.00%
June 2001............ 100.00% 62.70% 85.90% 97.65% 100.00%
July 2001............ 100.00% 61.61% 85.32% 97.49% 100.00%
August 2001.......... 100.00% 60.51% 84.84% 97.33% 100.00%
September 2001....... 100.00% 59.42% 84.35% 97.16% 100.00%
October 2001......... 100.00% 58.27% 83.87% 96.98% 100.00%
November 2001........ 100.00% 57.17% 83.29% 96.80% 100.00%
December 2001........ 100.00% 56.02% 82.80% 96.62% 100.00%
January 2002......... 100.00% 54.92% 82.22% 96.43% 100.00%
February 2002........ 100.00% 53.80% 81.74% 96.23% 100.00%
March 2002........... 100.00% 52.56% 81.16% 96.02% 100.00%
April 2002........... 100.00% 51.41% 80.67% 95.81% 100.00%
May 2002............. 100.00% 50.61% 80.09% 95.60% 100.00%
June 2002............ 100.00% 49.49% 79.51% 95.38% 100.00%
July 2002............ 100.00% 48.28% 79.02% 95.15% 100.00%
August 2002.......... 100.00% 47.15% 78.44% 94.91% 100.00%
September 2002....... 100.00% 46.00% 77.86% 94.67% 100.00%
October 2002......... 100.00% 44.82% 77.28% 94.43% 100.00%
November 2002........ 100.00% 43.67% 76.70% 94.17% 100.00%
December 2002........ 100.00% 42.46% 76.12% 93.91% 100.00%
January 2003......... 100.00% 41.31% 75.55% 93.65% 100.00%
February 2003........ 100.00% 40.13% 74.97% 93.37% 100.00%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
March 2003........... 100.00% 38.85% 74.39% 93.09% 100.00%
April 2003........... 100.00% 37.70% 73.73% 92.81% 100.00%
May 2003............. 100.00% 36.85% 73.15% 92.52% 100.00%
June 2003............ 100.00% 35.67% 72.57% 92.22% 100.00%
July 2003............ 100.00% 34.47% 71.91% 91.91% 100.00%
August 2003.......... 100.00% 33.29% 71.34% 91.60% 100.00%
September 2003....... 100.00% 32.14% 70.68% 91.28% 100.00%
October 2003......... 100.00% 30.94% 70.02% 90.96% 100.00%
November 2003........ 100.00% 29.74% 69.45% 90.63% 100.00%
December 2003........ 100.00% 28.54% 68.79% 90.29% 100.00%
January 2004......... 100.00% 27.37% 68.14% 89.94% 100.00%
February 2004........ 100.00% 26.17% 67.48% 89.59% 100.00%
March 2004........... 100.00% 24.90% 66.83% 89.23% 100.00%
April 2004........... 100.00% 23.73% 66.18% 88.86% 100.00%
May 2004............. 100.00% 22.89% 65.53% 88.49% 100.00%
June 2004............ 100.00% 21.72% 64.89% 88.11% 100.00%
July 2004............ 100.00% 20.50% 64.24% 87.72% 100.00%
August 2004.......... 100.00% 19.30% 63.60% 87.33% 100.00%
September 2004....... 100.00% 18.13% 62.88% 86.93% 100.00%
October 2004......... 100.00% 16.89% 62.24% 86.52% 100.00%
November 2004........ 100.00% 15.68% 61.60% 86.11% 100.00%
December 2004........ 100.00% 14.46% 60.88% 85.69% 100.00%
January 2005......... 100.00% 13.25% 60.25% 85.26% 100.00%
February 2005........ 100.00% 12.04% 59.54% 84.82% 100.00%
March 2005........... 100.00% 10.74% 58.83% 84.38% 100.00%
April 2005........... 100.00% 9.51% 58.12% 83.93% 100.00%
May 2005............. 100.00% 8.59% 57.50% 83.47% 100.00%
June 2005............ 100.00% 7.36% 56.80% 83.00% 100.00%
July 2005............ 100.00% 6.09% 56.10% 82.53% 100.00%
August 2005.......... 100.00% 4.85% 55.41% 82.05% 100.00%
September 2005....... 100.00% 3.60% 54.64% 81.56% 100.00%
October 2005......... 100.00% 2.30% 53.95% 81.07% 100.00%
November 2005........ 100.00% 1.01% 53.27% 80.57% 100.00%
December 2005........ 99.74% 0.00% 52.58% 80.06% 100.00%
January 2006......... 98.65% 0.00% 51.83% 79.54% 100.00%
February 2006........ 97.55% 0.00% 51.16% 79.02% 100.00%
March 2006........... 96.39% 0.00% 50.42% 78.49% 100.00%
April 2006........... 95.27% 0.00% 49.70% 77.95% 100.00%
May 2006............. 94.43% 0.00% 49.05% 77.40% 100.00%
June 2006............ 93.34% 0.00% 48.33% 76.85% 100.00%
July 2006............ 92.21% 0.00% 47.62% 76.28% 100.00%
August 2006.......... 91.09% 0.00% 46.91% 75.71% 100.00%
September 2006....... 89.97% 0.00% 46.21% 75.14% 100.00%
October 2006......... 88.82% 0.00% 45.52% 74.55% 100.00%
November 2006........ 87.67% 0.00% 44.86% 73.96% 100.00%
December 2006........ 86.32% 0.00% 44.19% 73.36% 100.00%
January 2007......... 85.07% 0.00% 43.47% 72.75% 99.72%
February 2007........ 83.85% 0.00% 42.82% 72.14% 99.16%
March 2007........... 82.57% 0.00% 42.17% 71.51% 98.59%
April 2007........... 81.36% 0.00% 41.46% 70.88% 98.01%
May 2007............. 80.43% 0.00% 40.75% 70.25% 97.42%
June 2007............ 79.20% 0.00% 40.12% 69.60% 96.82%
July 2007............ 77.95% 0.00% 39.42% 68.94% 96.21%
August 2007.......... 76.72% 0.00% 38.73% 68.28% 95.59%
September 2007....... 75.48% 0.00% 38.04% 67.61% 94.95%
October 2007......... 74.22% 0.00% 37.36% 66.93% 94.30%
</TABLE>
A-22
<PAGE> 244
POOL FACTORS -- (CONTINUED)
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
November 2007........ 72.99% 0.00% 36.69% 66.25% 93.65%
December 2007........ 71.74% 0.00% 36.02% 65.55% 92.98%
January 2008......... 70.50% 0.00% 35.35% 64.85% 92.30%
February 2008........ 69.27% 0.00% 34.63% 64.14% 91.61%
March 2008........... 67.99% 0.00% 33.98% 63.43% 90.90%
April 2008........... 66.73% 0.00% 33.33% 62.70% 90.19%
May 2008............. 65.77% 0.00% 32.64% 61.97% 89.46%
June 2008............ 64.52% 0.00% 31.97% 61.22% 88.72%
July 2008............ 63.23% 0.00% 31.36% 60.47% 87.98%
August 2008.......... 62.04% 0.00% 30.69% 59.72% 87.21%
September 2008....... 60.85% 0.00% 30.04% 58.95% 86.44%
October 2008......... 59.64% 0.00% 29.38% 58.17% 85.65%
November 2008........ 58.44% 0.00% 28.74% 57.39% 84.86%
December 2008........ 57.22% 0.00% 28.10% 56.60% 84.05%
January 2009......... 56.01% 0.00% 27.47% 55.80% 83.23%
February 2009........ 54.82% 0.00% 26.79% 55.00% 82.39%
March 2009........... 53.56% 0.00% 26.16% 54.18% 81.55%
April 2009........... 52.43% 0.00% 25.50% 53.36% 80.69%
May 2009............. 51.57% 0.00% 24.89% 52.52% 79.82%
June 2009............ 50.44% 0.00% 24.24% 51.68% 78.94%
July 2009............ 49.30% 0.00% 23.60% 50.84% 78.04%
August 2009.......... 48.18% 0.00% 23.01% 49.98% 77.14%
September 2009....... 47.08% 0.00% 22.38% 49.11% 76.22%
October 2009......... 45.97% 0.00% 21.75% 48.24% 75.28%
November 2009........ 44.89% 0.00% 21.14% 47.36% 74.34%
December 2009........ 43.80% 0.00% 20.53% 46.47% 73.38%
January 2010......... 42.73% 0.00% 19.88% 45.57% 72.41%
February 2010........ 41.65% 0.00% 19.29% 44.66% 71.43%
March 2010........... 40.53% 0.00% 18.71% 43.75% 70.43%
April 2010........... 39.52% 0.00% 18.09% 42.82% 69.43%
May 2010............. 38.78% 0.00% 17.47% 41.89% 68.40%
June 2010............ 37.76% 0.00% 16.91% 40.95% 67.37%
July 2010............ 36.74% 0.00% 16.32% 40.00% 66.32%
August 2010.......... 35.72% 0.00% 15.73% 39.04% 65.26%
September 2010....... 34.69% 0.00% 15.15% 38.08% 64.19%
October 2010......... 33.65% 0.00% 14.58% 37.10% 63.10%
November 2010........ 32.61% 0.00% 14.02% 36.12% 62.01%
December 2010........ 31.56% 0.00% 13.47% 35.12% 60.89%
January 2011......... 30.59% 0.00% 12.93% 34.12% 59.77%
February 2011........ 29.67% 0.00% 12.36% 33.11% 58.63%
March 2011........... 28.76% 0.00% 11.84% 32.09% 57.48%
April 2011........... 27.86% 0.00% 11.28% 31.07% 56.31%
May 2011............. 27.14% 0.00% 10.74% 30.03% 55.13%
June 2011............ 26.18% 0.00% 10.25% 28.99% 53.94%
July 2011............ 25.22% 0.00% 9.73% 27.93% 52.74%
August 2011.......... 24.33% 0.00% 9.22% 26.87% 51.52%
September 2011....... 23.47% 0.00% 8.72% 25.80% 50.28%
October 2011......... 22.61% 0.00% 8.23% 24.72% 49.04%
November 2011........ 21.78% 0.00% 7.72% 23.63% 47.78%
December 2011........ 20.95% 0.00% 7.25% 22.54% 46.50%
January 2012......... 20.14% 0.00% 6.80% 21.43% 45.22%
February 2012........ 19.34% 0.00% 6.32% 20.32% 43.91%
March 2012........... 18.54% 0.00% 5.89% 19.19% 42.60%
April 2012........... 17.76% 0.00% 5.44% 18.06% 41.27%
May 2012............. 16.99% 0.00% 5.00% 16.92% 39.93%
June 2012............ 16.23% 0.00% 4.57% 15.77% 38.57%
July 2012............ 15.49% 0.00% 4.15% 14.61% 37.20%
August 2012.......... 14.76% 0.00% 3.75% 13.44% 35.82%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
September 2012....... 14.05% 0.00% 3.36% 12.26% 34.42%
October 2012......... 13.34% 0.00% 2.98% 11.08% 33.00%
November 2012........ 12.65% 0.00% 2.59% 9.88% 31.58%
December 2012........ 11.97% 0.00% 2.24% 8.68% 30.13%
January 2013......... 11.32% 0.00% 1.87% 7.47% 28.68%
February 2013........ 10.67% 0.00% 1.55% 6.25% 27.21%
March 2013........... 10.03% 0.00% 1.21% 5.01% 25.73%
April 2013........... 9.42% 0.00% 0.88% 3.77% 24.23%
May 2013............. 8.81% 0.00% 0.57% 2.53% 22.71%
June 2013............ 8.23% 0.00% 0.28% 1.27% 21.19%
July 2013............ 7.65% 0.00% 0.00% 0.00% 19.64%
August 2013.......... 6.76% 0.00% 0.00% 0.00% 18.09%
September 2013....... 5.90% 0.00% 0.00% 0.00% 16.52%
October 2013......... 5.05% 0.00% 0.00% 0.00% 14.93%
November 2013........ 4.39% 0.00% 0.00% 0.00% 12.50%
December 2013........ 3.74% 0.00% 0.00% 0.00% 10.00%
January 2014......... 3.11% 0.00% 0.00% 0.00% 7.50%
February 2014........ 2.40% 0.00% 0.00% 0.00% 5.00%
March 2014........... 1.54% 0.00% 0.00% 0.00% 2.50%
April 2014........... 0.72% 0.00% 0.00% 0.00% 0.00%
May 2014............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2014............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2014............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2014.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2014....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2014......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2014........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2014........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2015......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2015........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2015........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2015........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2015............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2015............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2015............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2015.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2015....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2015......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2015........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2015........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2016......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2016........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2016........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2016........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2016............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2016............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2016............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2016.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2016....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2016......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2016........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2016........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2017......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2017........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2017........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2017........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2017............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2017............ 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
A-23
<PAGE> 245
POOL FACTORS -- (CONTINUED)
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
July 2017............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2017.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2017....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2017......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2017........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2017........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2018......... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
February 2018........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2018........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2018........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2018............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2018............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2018............ 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
A-24
<PAGE> 246
APPENDIX 10
EXTENDED POOL FACTORS
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Closing.............. 100.00% 100.43% 100.00% 100.00% 100.00%
August 1998.......... 100.00% 99.79% 100.00% 100.00% 100.00%
September 1998....... 100.00% 99.04% 100.00% 100.00% 100.00%
October 1998......... 100.00% 98.30% 100.00% 100.00% 100.00%
November 1998........ 100.00% 97.54% 100.00% 100.00% 100.00%
December 1998........ 100.00% 96.79% 100.00% 100.00% 100.00%
January 1999......... 100.00% 96.03% 100.00% 100.00% 100.00%
February 1999........ 100.00% 95.27% 100.00% 100.00% 100.00%
March 1999........... 100.00% 94.48% 100.00% 100.00% 100.00%
April 1999........... 100.00% 93.71% 100.00% 100.00% 100.00%
May 1999............. 100.00% 92.94% 100.00% 100.00% 100.00%
June 1999............ 100.00% 92.17% 100.00% 100.00% 100.00%
July 1999............ 100.00% 91.39% 100.00% 100.00% 100.00%
August 1999.......... 100.00% 90.58% 99.94% 100.00% 100.00%
September 1999....... 100.00% 89.80% 99.60% 100.00% 100.00%
October 1999......... 100.00% 88.99% 99.25% 100.00% 100.00%
November 1999........ 100.00% 88.20% 98.91% 100.00% 100.00%
December 1999........ 100.00% 87.38% 98.45% 100.00% 100.00%
January 2000......... 100.00% 86.58% 98.10% 100.00% 100.00%
February 2000........ 100.00% 85.75% 97.75% 100.00% 100.00%
March 2000........... 100.00% 84.95% 97.40% 100.00% 100.00%
April 2000........... 100.00% 84.12% 97.05% 100.00% 100.00%
May 2000............. 100.00% 83.28% 96.69% 100.00% 100.00%
June 2000............ 100.00% 82.44% 96.34% 100.00% 100.00%
July 2000............ 100.00% 81.60% 95.87% 100.00% 100.00%
August 2000.......... 100.00% 80.75% 95.52% 100.00% 100.00%
September 2000....... 100.00% 79.90% 95.16% 100.00% 100.00%
October 2000......... 100.00% 79.05% 94.80% 99.99% 100.00%
November 2000........ 100.00% 78.20% 94.33% 99.98% 100.00%
December 2000........ 100.00% 77.31% 93.97% 99.97% 100.00%
January 2001......... 100.00% 76.45% 93.50% 99.96% 100.00%
February 2001........ 100.00% 75.55% 93.13% 99.94% 100.00%
March 2001........... 100.00% 74.69% 92.76% 99.92% 100.00%
April 2001........... 100.00% 73.79% 92.29% 99.89% 100.00%
May 2001............. 100.00% 72.89% 91.82% 99.87% 100.00%
June 2001............ 100.00% 71.98% 91.45% 99.83% 100.00%
July 2001............ 100.00% 71.07% 90.97% 99.80% 100.00%
August 2001.......... 100.00% 70.16% 90.60% 99.76% 100.00%
September 2001....... 100.00% 69.25% 90.12% 99.71% 100.00%
October 2001......... 100.00% 68.34% 89.64% 99.66% 100.00%
November 2001........ 100.00% 67.39% 89.17% 99.61% 100.00%
December 2001........ 100.00% 66.47% 88.69% 99.55% 100.00%
January 2002......... 100.00% 65.52% 88.31% 99.49% 100.00%
February 2002........ 100.00% 64.56% 87.83% 99.42% 100.00%
March 2002........... 100.00% 63.63% 87.35% 99.35% 100.00%
April 2002........... 100.00% 62.67% 86.87% 99.27% 100.00%
May 2002............. 100.00% 61.68% 86.38% 99.19% 100.00%
June 2002............ 100.00% 60.72% 85.90% 99.10% 100.00%
July 2002............ 100.00% 59.75% 85.32% 99.01% 100.00%
August 2002.......... 100.00% 58.76% 84.84% 98.91% 100.00%
September 2002....... 100.00% 57.78% 84.35% 98.81% 100.00%
October 2002......... 100.00% 56.78% 83.87% 98.70% 100.00%
November 2002........ 100.00% 55.78% 83.29% 98.59% 100.00%
December 2002........ 100.00% 54.77% 82.80% 98.47% 100.00%
January 2003......... 100.00% 53.76% 82.22% 98.35% 100.00%
February 2003........ 100.00% 52.75% 81.74% 98.22% 100.00%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
March 2003........... 100.00% 51.74% 81.16% 98.08% 100.00%
April 2003........... 100.00% 50.70% 80.67% 97.94% 100.00%
May 2003............. 100.00% 49.65% 80.09% 97.80% 100.00%
June 2003............ 100.00% 48.63% 79.51% 97.65% 100.00%
July 2003............ 100.00% 47.59% 79.02% 97.49% 100.00%
August 2003.......... 100.00% 46.51% 78.44% 97.33% 100.00%
September 2003....... 100.00% 45.46% 77.86% 97.16% 100.00%
October 2003......... 100.00% 44.41% 77.28% 96.98% 100.00%
November 2003........ 100.00% 43.33% 76.70% 96.80% 100.00%
December 2003........ 100.00% 42.24% 76.12% 96.62% 100.00%
January 2004......... 100.00% 41.18% 75.55% 96.43% 100.00%
February 2004........ 100.00% 40.07% 74.97% 96.23% 100.00%
March 2004........... 100.00% 38.99% 74.39% 96.02% 100.00%
April 2004........... 100.00% 37.90% 73.73% 95.81% 100.00%
May 2004............. 100.00% 36.78% 73.15% 95.60% 100.00%
June 2004............ 100.00% 35.69% 72.57% 95.38% 100.00%
July 2004............ 100.00% 34.57% 71.91% 95.15% 100.00%
August 2004.......... 100.00% 33.45% 71.34% 94.91% 100.00%
September 2004....... 100.00% 32.31% 70.68% 94.67% 100.00%
October 2004......... 100.00% 31.18% 70.02% 94.43% 100.00%
November 2004........ 100.00% 30.04% 69.45% 94.17% 100.00%
December 2004........ 100.00% 28.91% 68.79% 93.91% 100.00%
January 2005......... 100.00% 27.76% 68.14% 93.65% 100.00%
February 2005........ 100.00% 26.61% 67.48% 93.37% 100.00%
March 2005........... 100.00% 25.44% 66.83% 93.09% 100.00%
April 2005........... 100.00% 24.29% 66.18% 92.81% 100.00%
May 2005............. 100.00% 23.11% 65.53% 92.52% 100.00%
June 2005............ 100.00% 21.93% 64.89% 92.22% 100.00%
July 2005............ 100.00% 20.75% 64.24% 91.91% 100.00%
August 2005.......... 100.00% 19.58% 63.60% 91.60% 100.00%
September 2005....... 100.00% 18.40% 62.88% 91.28% 100.00%
October 2005......... 100.00% 17.20% 62.24% 90.96% 100.00%
November 2005........ 100.00% 15.99% 61.60% 90.63% 100.00%
December 2005........ 100.00% 14.79% 60.88% 90.29% 100.00%
January 2006......... 100.00% 13.59% 60.25% 89.94% 100.00%
February 2006........ 100.00% 12.36% 59.54% 89.59% 100.00%
March 2006........... 100.00% 11.18% 58.83% 89.23% 100.00%
April 2006........... 100.00% 9.99% 58.12% 88.86% 100.00%
May 2006............. 100.00% 8.81% 57.50% 88.49% 100.00%
June 2006............ 100.00% 7.61% 56.80% 88.11% 100.00%
July 2006............ 100.00% 6.43% 56.10% 87.72% 100.00%
August 2006.......... 100.00% 5.23% 55.41% 87.33% 100.00%
September 2006....... 100.00% 4.03% 54.64% 86.93% 100.00%
October 2006......... 100.00% 2.86% 53.95% 86.52% 100.00%
November 2006........ 100.00% 1.74% 53.27% 86.11% 100.00%
December 2006........ 100.00% 0.60% 52.58% 85.69% 100.00%
January 2007......... 99.54% 0.00% 51.83% 85.26% 100.00%
February 2007........ 98.57% 0.00% 51.16% 84.82% 100.00%
March 2007........... 97.60% 0.00% 50.42% 84.38% 100.00%
April 2007........... 96.63% 0.00% 49.70% 83.93% 100.00%
May 2007............. 95.64% 0.00% 49.05% 83.47% 100.00%
June 2007............ 94.66% 0.00% 48.33% 83.00% 100.00%
July 2007............ 93.68% 0.00% 47.62% 82.53% 100.00%
August 2007.......... 92.68% 0.00% 46.91% 82.05% 100.00%
September 2007....... 91.70% 0.00% 46.21% 81.56% 100.00%
October 2007......... 90.70% 0.00% 45.52% 81.07% 100.00%
</TABLE>
A-25
<PAGE> 247
EXTENDED POOL FACTORS -- (CONTINUED)
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
November 2007........ 89.70% 0.00% 44.86% 80.57% 100.00%
December 2007........ 88.70% 0.00% 44.19% 80.06% 100.00%
January 2008......... 87.70% 0.00% 43.47% 79.54% 100.00%
February 2008........ 86.70% 0.00% 42.82% 79.02% 100.00%
March 2008........... 85.69% 0.00% 42.17% 78.49% 100.00%
April 2008........... 84.70% 0.00% 41.46% 77.95% 100.00%
May 2008............. 83.72% 0.00% 40.75% 77.40% 100.00%
June 2008............ 82.76% 0.00% 40.12% 76.85% 100.00%
July 2008............ 81.80% 0.00% 39.42% 76.28% 100.00%
August 2008.......... 80.84% 0.00% 38.73% 75.71% 100.00%
September 2008....... 79.87% 0.00% 38.04% 75.14% 100.00%
October 2008......... 78.90% 0.00% 37.36% 74.55% 100.00%
November 2008........ 77.93% 0.00% 36.69% 73.96% 100.00%
December 2008........ 76.97% 0.00% 36.02% 73.36% 100.00%
January 2009......... 75.99% 0.00% 35.35% 72.75% 99.72%
February 2009........ 75.02% 0.00% 34.63% 72.14% 99.16%
March 2009........... 74.04% 0.00% 33.98% 71.51% 98.59%
April 2009........... 73.06% 0.00% 33.33% 70.88% 98.01%
May 2009............. 72.09% 0.00% 32.64% 70.25% 97.42%
June 2009............ 71.12% 0.00% 31.97% 69.60% 96.82%
July 2009............ 70.14% 0.00% 31.36% 68.94% 96.21%
August 2009.......... 69.16% 0.00% 30.69% 68.28% 95.59%
September 2009....... 68.17% 0.00% 30.04% 67.61% 94.95%
October 2009......... 67.19% 0.00% 29.38% 66.93% 94.30%
November 2009........ 66.22% 0.00% 28.74% 66.25% 93.65%
December 2009........ 65.23% 0.00% 28.10% 65.55% 92.98%
January 2010......... 64.25% 0.00% 27.47% 64.85% 92.30%
February 2010........ 63.27% 0.00% 26.79% 64.14% 91.61%
March 2010........... 62.30% 0.00% 26.16% 63.43% 90.90%
April 2010........... 61.31% 0.00% 25.50% 62.70% 90.19%
May 2010............. 60.33% 0.00% 24.89% 61.97% 89.46%
June 2010............ 59.35% 0.00% 24.24% 61.22% 88.72%
July 2010............ 58.37% 0.00% 23.60% 60.47% 87.98%
August 2010.......... 57.39% 0.00% 23.01% 59.72% 87.21%
September 2010....... 56.42% 0.00% 22.38% 58.95% 86.44%
October 2010......... 55.43% 0.00% 21.75% 58.17% 85.65%
November 2010........ 54.46% 0.00% 21.14% 57.39% 84.86%
December 2010........ 53.48% 0.00% 20.53% 56.60% 84.05%
January 2011......... 52.51% 0.00% 19.88% 55.80% 83.23%
February 2011........ 51.54% 0.00% 19.29% 55.00% 82.39%
March 2011........... 50.57% 0.00% 18.71% 54.18% 81.55%
April 2011........... 49.60% 0.00% 18.09% 53.36% 80.69%
May 2011............. 48.63% 0.00% 17.47% 52.52% 79.82%
June 2011............ 47.66% 0.00% 16.91% 51.68% 78.94%
July 2011............ 46.70% 0.00% 16.32% 50.84% 78.04%
August 2011.......... 45.74% 0.00% 15.73% 49.98% 77.14%
September 2011....... 44.78% 0.00% 15.15% 49.11% 76.22%
October 2011......... 43.83% 0.00% 14.58% 48.24% 75.28%
November 2011........ 42.88% 0.00% 14.02% 47.36% 74.34%
December 2011........ 41.93% 0.00% 13.47% 46.47% 73.38%
January 2012......... 40.98% 0.00% 12.93% 45.57% 72.41%
February 2012........ 40.03% 0.00% 12.36% 44.66% 71.43%
March 2012........... 39.09% 0.00% 11.84% 43.75% 70.43%
April 2012........... 38.16% 0.00% 11.28% 42.82% 69.43%
May 2012............. 37.23% 0.00% 10.74% 41.89% 68.40%
June 2012............ 36.30% 0.00% 10.25% 40.95% 67.37%
July 2012............ 35.37% 0.00% 9.73% 40.00% 66.32%
August 2012.......... 34.45% 0.00% 9.22% 39.04% 65.26%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
September 2012....... 33.54% 0.00% 8.72% 38.08% 64.19%
October 2012......... 32.63% 0.00% 8.23% 37.10% 63.10%
November 2012........ 31.72% 0.00% 7.72% 36.12% 62.01%
December 2012........ 30.81% 0.00% 7.25% 35.12% 60.89%
January 2013......... 29.92% 0.00% 6.80% 34.12% 59.77%
February 2013........ 29.03% 0.00% 6.32% 33.11% 58.63%
March 2013........... 28.14% 0.00% 5.89% 32.09% 57.48%
April 2013........... 27.26% 0.00% 5.44% 31.07% 56.31%
May 2013............. 26.39% 0.00% 5.00% 30.03% 55.13%
June 2013............ 25.52% 0.00% 4.57% 28.99% 53.94%
July 2013............ 24.66% 0.00% 4.15% 27.93% 52.74%
August 2013.......... 23.80% 0.00% 3.75% 26.87% 51.52%
September 2013....... 22.95% 0.00% 3.36% 25.80% 50.28%
October 2013......... 22.12% 0.00% 2.98% 24.72% 49.04%
November 2013........ 21.31% 0.00% 2.59% 23.63% 47.78%
December 2013........ 20.51% 0.00% 2.24% 22.54% 46.50%
January 2014......... 19.71% 0.00% 1.87% 21.43% 45.22%
February 2014........ 18.95% 0.00% 1.55% 20.32% 43.91%
March 2014........... 18.18% 0.00% 1.21% 19.19% 42.60%
April 2014........... 17.44% 0.00% 0.88% 18.06% 41.27%
May 2014............. 16.71% 0.00% 0.57% 16.92% 39.93%
June 2014............ 15.99% 0.00% 0.28% 15.77% 38.57%
July 2014............ 15.27% 0.00% 0.00% 14.61% 37.20%
August 2014.......... 14.57% 0.00% 0.00% 13.44% 35.82%
September 2014....... 13.89% 0.00% 0.00% 12.26% 34.42%
October 2014......... 13.23% 0.00% 0.00% 11.08% 33.00%
November 2014........ 12.58% 0.00% 0.00% 9.88% 31.58%
December 2014........ 11.95% 0.00% 0.00% 8.68% 30.13%
January 2015......... 11.32% 0.00% 0.00% 7.47% 28.68%
February 2015........ 10.72% 0.00% 0.00% 6.25% 27.21%
March 2015........... 10.14% 0.00% 0.00% 5.01% 25.73%
April 2015........... 9.58% 0.00% 0.00% 3.77% 24.23%
May 2015............. 9.04% 0.00% 0.00% 2.53% 22.71%
June 2015............ 8.51% 0.00% 0.00% 1.27% 21.19%
July 2015............ 8.00% 0.00% 0.00% 0.00% 19.64%
August 2015.......... 7.49% 0.00% 0.00% 0.00% 18.09%
September 2015....... 6.99% 0.00% 0.00% 0.00% 16.52%
October 2015......... 6.50% 0.00% 0.00% 0.00% 14.93%
November 2015........ 6.02% 0.00% 0.00% 0.00% 12.50%
December 2015........ 5.54% 0.00% 0.00% 0.00% 10.00%
January 2016......... 5.08% 0.00% 0.00% 0.00% 7.50%
February 2016........ 4.64% 0.00% 0.00% 0.00% 5.00%
March 2016........... 4.27% 0.00% 0.00% 0.00% 2.50%
April 2016........... 3.94% 0.00% 0.00% 0.00% 0.00%
May 2016............. 3.63% 0.00% 0.00% 0.00% 0.00%
June 2016............ 3.33% 0.00% 0.00% 0.00% 0.00%
July 2016............ 3.03% 0.00% 0.00% 0.00% 0.00%
August 2016.......... 2.75% 0.00% 0.00% 0.00% 0.00%
September 2016....... 2.48% 0.00% 0.00% 0.00% 0.00%
October 2016......... 2.23% 0.00% 0.00% 0.00% 0.00%
November 2016........ 1.99% 0.00% 0.00% 0.00% 0.00%
December 2016........ 1.76% 0.00% 0.00% 0.00% 0.00%
January 2017......... 1.54% 0.00% 0.00% 0.00% 0.00%
February 2017........ 1.32% 0.00% 0.00% 0.00% 0.00%
March 2017........... 1.12% 0.00% 0.00% 0.00% 0.00%
April 2017........... 0.93% 0.00% 0.00% 0.00% 0.00%
May 2017............. 0.76% 0.00% 0.00% 0.00% 0.00%
June 2017............ 0.60% 0.00% 0.00% 0.00% 0.00%
</TABLE>
A-26
<PAGE> 248
EXTENDED POOL FACTORS -- (CONTINUED)
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
July 2017............ 0.48% 0.00% 0.00% 0.00% 0.00%
August 2017.......... 0.39% 0.00% 0.00% 0.00% 0.00%
September 2017....... 0.33% 0.00% 0.00% 0.00% 0.00%
October 2017......... 0.27% 0.00% 0.00% 0.00% 0.00%
November 2017........ 0.22% 0.00% 0.00% 0.00% 0.00%
December 2017........ 0.17% 0.00% 0.00% 0.00% 0.00%
January 2018......... 0.13% 0.00% 0.00% 0.00% 0.00%
February 2018........ 0.10% 0.00% 0.00% 0.00% 0.00%
March 2018........... 0.09% 0.00% 0.00% 0.00% 0.00%
April 2018........... 0.07% 0.00% 0.00% 0.00% 0.00%
May 2018............. 0.06% 0.00% 0.00% 0.00% 0.00%
June 2018............ 0.05% 0.00% 0.00% 0.00% 0.00%
July 2018............ 0.04% 0.00% 0.00% 0.00% 0.00%
August 2018.......... 0.03% 0.00% 0.00% 0.00% 0.00%
September 2018....... 0.02% 0.00% 0.00% 0.00% 0.00%
October 2018......... 0.01% 0.00% 0.00% 0.00% 0.00%
November 2018........ 0.01% 0.00% 0.00% 0.00% 0.00%
December 2018........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2019......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2019........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2019........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2019........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2019............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2019............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2019............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2019.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2019....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2019......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2019........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2019........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2020......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2020........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2020........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2020........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2020............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2020............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2020............ 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
OCCURRING IN A-1 A-2 B-1 C-1 D-1
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
August 2020.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2020....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2020......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2020........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2020........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2021......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2021........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2021........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2021........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2021............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2021............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2021............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2021.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2021....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2021......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2021........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2021........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2022......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2022........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2022........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2022........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2022............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2022............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2022............ 0.00% 0.00% 0.00% 0.00% 0.00%
August 2022.......... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2022....... 0.00% 0.00% 0.00% 0.00% 0.00%
October 2022......... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2022........ 0.00% 0.00% 0.00% 0.00% 0.00%
December 2022........ 0.00% 0.00% 0.00% 0.00% 0.00%
January 2023......... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2023........ 0.00% 0.00% 0.00% 0.00% 0.00%
March 2023........... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2023........... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2023............. 0.00% 0.00% 0.00% 0.00% 0.00%
June 2023............ 0.00% 0.00% 0.00% 0.00% 0.00%
July 2023............ 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
A-27
<PAGE> 249
AERCO LIMITED
c/o GPA Administrative
Services Limited
GPA House
Shannon
Ireland
and
22 Grenville Street
St. Helier
Jersey JE4 8PX
Channel Islands
<TABLE>
<S> <C>
BOOK-ENTRY DEPOSITARY,
TRUSTEE, SECURITY TRUSTEE, PAYING AGENT
CASH MANAGER REFERENCE AND EXCHANGE AGENT AND REGISTRAR
BANKERS TRUST COMPANY BANKERS TRUST COMPANY
Four Albany Street Four Albany Street
Mail Stop 5091 Mail Stop 5091
New York, New York 10006 New York, New York 10006
USA USA
ADMINISTRATIVE AGENT SERVICER
GPA ADMINISTRATIVE BABCOCK & BROWN LIMITED
SERVICES LIMITED Oracle House
GPA House Herbert Street
Shannon Dublin 2
Ireland Ireland
</TABLE>
LUXEMBOURG PAYING AGENT
AND CO-REGISTRAR
BANQUE INTERNATIONALE A LUXEMBOURG S.A.
69, route d'Esch
L-1470 Luxembourg
LEGAL ADVISORS
<TABLE>
<S> <C>
To AerCo Group as to To AerCo Group as to
United States law Jersey law
DAVIS POLK & WARDWELL MOURANT DU FEU & JEUNE
1 Frederick's Place 22 Grenville Street
London EC2R 8AB St. Helier
England Jersey JE4 8PX
Channel Islands
To AerCo Group as to
Irish law
MCCANN FITZGERALD
2 Harbourmaster Place
Custom House Dock
Dublin 1
Ireland
</TABLE>
LISTING AGENT
BANQUE INTERNATIONALE A LUXEMBOURG S.A.
69, route d'Esch
L-1470 Luxembourg
<PAGE> 250
(LOGO) Printed in London X38927
<PAGE> 251
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as hereinafter set forth, there is no provision of AerCo Limited's
Memorandum and Articles of Association, or of any contract, arrangement or
statute under which any director, trustee or officer of AerCo Limited is insured
or indemnified in any manner against any liability that he may incur in his
capacity as such.
AerCo Limited's Articles of Association provide that AerCo Limited shall
indemnify every present and former director of AerCo Limited against any loss or
liability incurred by reason of being or having been a director of AerCo Limited
to the fullest extent permitted by Jersey law. Article 77 of the Companies
(Jersey) Law 1991 ("Article 77") permits a Jersey company to indemnify each
director of that company against, among others, any liabilities incurred in
defending any proceedings (whether civil or criminal) (i) in which judgment is
given in his favor or he is acquitted, or (ii) which are discontinued otherwise
than for some benefit conferred by him (or on his behalf) or for some detriment
suffered by him, or (iii) which are settled on terms which include such benefit
or detriment and, in the opinion of a majority of the directors of the company
(excluding any director who conferred such benefit or on whose behalf such
benefit was conferred or who suffered such detriment), the director was
substantially successful on the merits in this resistance to the proceedings.
AerCo Limited may purchase and maintain, in the name of and at the expense
of AerCo Limited, insurance for the benefit of any person who is or was a
director or officer of AerCo Limited or is or was serving at the request of
AerCo Limited as a director or officer in another corporation, partnership,
joint venture, trust or other enterprise against any liability incurred by him
or her in any such capacity, or arising out of such person's status as such,
whether or not AerCo Limited would have the power to indemnify him or her
against such liability under Article 77.
ITEM 21. EXHIBITS
(a) Exhibits
The following is a list of exhibits to this Registration Statement:
<TABLE>
<C> <S>
3.1 Memorandum and Articles of Association of AerCo
4.1 Indenture dated as of July 15, 1998 by and among AerCo and
Bankers Trust Company, as Trustee with respect to the Notes
4.2 Form of Global Note (included in Exhibit 4.1)
4.3 Registration Rights Agreement dated July 15, 1998 by and
between AerCo and Morgan Stanley & Co. International Limited
5.1 Opinion of Davis Polk & Wardwell as to the legality of the
securities being registered hereby*
8.1 Opinion of Davis Polk & Wardwell as to certain U.S. Federal
income tax matters (included in Exhibit 5.1)*
8.2 Opinion of KPMG as to certain Irish tax matters*
8.3 Opinion of McCann FitzGerald as to certain Irish tax
matters*
8.4 Opinion of Mourant du Feu & Jeune as to certain Jersey tax
matters*
9.1 AerCo Charitable Trust Instrument
9.2 Shareholders Undertaking between Mourant & Co. Trustees
Limited as trustee of AerCo Holding Trusts the Nominees, GPA
Group, AerCo and the Trustee
10.1 Administrative Agency Agreement dated as of July 15, 1998
among AerCo, GPA Administrative Services Limited, as
Administrative Agent, Bankers Trust Company, as Security
Trustee and each subsidiary of AerCo
</TABLE>
II-1
<PAGE> 252
<TABLE>
<C> <S>
10.2 Cash Management Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Security Trustee, GPA Cash
Manager II Limited, as Cash Manager and each subsidiary of
AerCo
10.3 Security Trust Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Security Trustee and as
Trustee, GPA Cash Manager II Limited, as Cash Manager, GPA
Administrative Services Limited, as Administrative Agent and
each subsidiary of AerCo
10.4 Reference Agency Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Reference Agent and as
Trustee and GPA Administrative Services Limited, as
Administrative Agent
10.5 Servicing Agreement dated as of July 15, 1998 among AerCo,
Babcock & Brown Limited as Administrative Agent and each
subsidiary of AerCo
10.6 Share Purchase Agreement dated July 15, 1998 between AerCo,
GPA and Skyscape Limited
10.7 Deposit Agreement dated as of July 15, 1998 between AerCo
and Bankers Trust Company, as book-entry depositary
21.1 Subsidiaries of AerCo
23.1 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.2 Consent of Aircraft Information Services, Inc.
23.3 Consent of BK Associates, Inc.
23.4 Consent of Airclaims Limited
23.5 Consent of Arthur Andersen, Chartered Accountants
23.6 Consent of KPMG (included in Exhibit 8.5)*
23.7 Consent of McCann FitzGerald (included in Exhibit 8.3)*
23.8 Consent of Mourant du Feu & Jeune (included in Exhibit 8.4)*
24.1 Directors' Power of Attorney (included in signature pages)
25.1 Statement of Eligibility of Bankers Trust Company, as
Trustee, under the Indenture to be qualified under the Trust
Indenture Act of 1939**
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letters to DTC Participants
99.4 Form of Letter to Clients and Form of Instruction to
Book-Entry Transfer Participant
99.5 Appraisal of Aircraft Information Services, Inc. relating to
the Aircraft
99.6 Appraisal of BK Associates, Inc. relating to the Aircraft
99.7 Appraisal of Airclaims Limited relating to the Aircraft
</TABLE>
* To be filed by amendment.
** To be filed separately.
(b) Financial Statement Schedules
Independent Auditors' Report on Schedule
Schedule II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 253
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each of the registrant's
annual reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 254
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant, AerCo
Limited, has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Dublin, Ireland, on November
9, 1998.
AERCO LIMITED
By: /s/ FREDERICK W. BRADLEY, JR.
------------------------------------
Independent Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frederick W. Bradley, Jr., Kenneth N. Peters, G.
Adrian Robinson, Edward Hansom and Rose Hynes his/her true and lawful
attorneys-in-fact and agent, each acting alone, with full powers of substitution
and resubstitution, for him/her and in his/her name, place and stead, in any and
all capacities, to sign any and all amendments to this Registration Statement,
including post-effective amendments, as well as any related registration
statement (or amendment thereto) and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
his/her said attorneys-in-fact and agents or any of them or his/her substitute
or substitutes may lawfully do or cause to be done by virtue thereof.
The Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the following
capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ FREDERICK W. BRADLEY, JR. Independent Director November 9, 1998
- ----------------------------------------------------- (principal executive
Frederick W. Bradley, Jr. officer)
/s/ KENNETH N. PETERS Independent Director November 9, 1998
- ----------------------------------------------------- (principal accounting
Kenneth N. Peters officer)
/s/ G. ADRIAN ROBINSON Independent Director November 9, 1998
- ----------------------------------------------------- (principal financial
G. Adrian Robinson officer)
/s/ EDWARD HANSOM Director November 9, 1998
- -----------------------------------------------------
Edward Hansom
/s/ ROSE HYNES Director November 9, 1998
- -----------------------------------------------------
Rose Hynes
Authorized Representative in the United States
/s/ FREDERICK W. BRADLEY, JR.
- -----------------------------------------------------
Name: Frederick W. Bradley, Jr.
</TABLE>
II-4
<PAGE> 255
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
TO THE BOARD OF DIRECTORS
OF AERCO LIMITED (THE "COMPANY")
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Aircraft Lease Portfolio Securitization
94-1 Limited (ALPS 94-1) and the financial statements appearing under the
heading "Nine Transferring Aircraft" included in this registration statement and
have issued our reports thereon dated December 2, 1997. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole.
The schedule included within the registration statement on S-2 is the
responsibility of the company's management and is presented for the purposes of
complying with the Securities and Exchange Commissions rules and are not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN
Chartered Accountants
St Helier, Jersey
/s/ ARTHUR ANDERSEN
November 9, 1998
S-1
<PAGE> 256
ALPS 94-1 LIMITED/NINE TRANSFERRING AIRCRAFT
VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE
SCHEDULE II
ALPS 94-1 LIMITED
<TABLE>
<CAPTION>
BALANCE AT CHARGED/(RELEASED) DEDUCTIONS BALANCE AT
BEGINNING TO COSTS AND (WRITE-OFFS/ END
OF YEAR/PERIOD EXPENSES TRANSFERS) OF YEAR/PERIOD
-------------- ------------------ ------------ --------------
($'000)
<S> <C> <C> <C> <C>
Year ended June 30,
1995........................ 0 0 0 0
1996........................ 0 0 0 0
1997........................ 0 0 0 0
</TABLE>
NINE TRANSFERRING AIRCRAFT
<TABLE>
<CAPTION>
BALANCE AT CHARGED/(RELEASED) DEDUCTIONS BALANCE AT
BEGINNING TO COSTS AND (WRITE-OFFS/ END
OF YEAR/PERIOD EXPENSES TRANSFERS) OF YEAR/PERIOD
-------------- ------------------ ------------ --------------
($'000)
<S> <C> <C> <C> <C>
Year ended June 30,
1997........................ 0 212 0 212
</TABLE>
S-2
<PAGE> 257
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
3.1 Memorandum and Articles of Association of AerCo
4.1 Indenture dated as of July 15, 1998 by and among AerCo and
Bankers Trust Company, as Trustee with respect to the Notes
4.2 Form of Global Note (included in Exhibit 4.1)
4.3 Registration Rights Agreement dated July 15, 1998 by and
between AerCo and Morgan Stanley & Co. International Limited
5.1 Opinion of Davis Polk & Wardwell as to the legality of the
securities being registered hereby*
8.1 Opinion of Davis Polk & Wardwell as to certain U.S. Federal
income tax matters (included in Exhibit 5.1)*
8.2 Opinion of KPMG as to certain Irish tax matters*
8.3 Opinion of McCann FitzGerald as to certain Irish tax
matters*
8.4 Opinion of Mourant du Feu & Jeune as to certain Jersey tax
matters*
9.1 AerCo Charitable Trust Instrument
9.2 Shareholders Undertaking between Mourant & Co. Trustees
Limited as trustee of AerCo Holding Trusts the Nominees, GPA
Group, AerCo and the Trustee
10.1 Administrative Agency Agreement dated as of July 15, 1998
among AerCo, GPA Administrative Services Limited, as
Administrative Agent, Bankers Trust Company, as Security
Trustee and each subsidiary of AerCo
10.2 Cash Management Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Security Trustee, GPA Cash
Manager II Limited, as Cash Manager and each subsidiary of
AerCo
10.3 Security Trust Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Security Trustee and as
Trustee, GPA Cash Manager II Limited, as Cash Manager, GPA
Administrative Services Limited, as Administrative Agent and
each subsidiary of AerCo
10.4 Reference Agency Agreement dated as of July 15, 1998 among
AerCo, Bankers Trust Company, as Reference Agent and as
Trustee and GPA Administrative Services Limited, as
Administrative Agent
10.5 Servicing Agreement dated as of July 15, 1998 among AerCo,
Babcock & Brown Limited as Administrative Agent and each
subsidiary of AerCo
10.6 Share Purchase Agreement dated July 15, 1998 between AerCo,
GPA and Skyscape Limited
10.7 Deposit Agreement dated as of July 15, 1998 between AerCo
and Bankers Trust Company, as book-entry depositary
21.1 Subsidiaries of AerCo
23.1 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.2 Consent of Aircraft Information Services, Inc.
23.3 Consent of BK Associates, Inc.
23.4 Consent of Airclaims Limited
23.5 Consent of Arthur Andersen, Chartered Accountants
23.6 Consent of KPMG (included in Exhibit 8.5)*
23.7 Consent of McCann FitzGerald (included in Exhibit 8.3)*
23.8 Consent of Mourant du Feu & Jeune (included in Exhibit 8.4)*
24.1 Directors' Power of Attorney (included in signature pages)
25.1 Statement of Eligibility of Bankers Trust Company, as
Trustee, under the Indenture to be qualified under the Trust
Indenture Act of 1939**
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letters to DTC Participants
99.4 Form of Letter to Clients and Form of Instruction to
Book-Entry Transfer Participant
99.5 Appraisal of Aircraft Information Services, Inc. relating to
the Aircraft
99.6 Appraisal of BK Associates, Inc. relating to the Aircraft
99.7 Appraisal of Airclaims Limited relating to the Aircraft
* To be filed by amendment.
** To be filed separately.
<PAGE> 1
Exhibit 3.1
[logo - States
of
Jersey]
COMPANIES (JERSEY) LAW 1991
CERTIFICATE OF
INCORPORATION OF A
LIMITED COMPANY
Registered Number 71839
I HEREBY CERTIFY THAT
AERCO LIMITED
is this day incorporated as a public company
under the Companies (Jersey) Law 1991
Dated this 4th day of June 1998.
[LOGO]
Deputy Registrar of Companies
<PAGE> 2
COMPANIES (JERSEY) LAW 1991
MEMORANDUM OF ASSOCIATION
OF
AERCO LIMITED
1. The name of the Company is AerCo Limited.
2. The share capital of the Company is US$10,000 divided into 10,000 shares of
US$1 each.
3. The liability of the members is limited.
4. The Company is established for the following purposes only:-
(a) To purchase or otherwise acquire directly or indirectly a portfolio of
commercial jet and turboprop aircraft, aircraft engines and aircraft
parts (the "Aircraft") and related leases, and to own, hold, maintain,
manage, operate, lease, re-lease, sell or otherwise dispose of the
Aircraft or any interest therein and to enter all contracts
(including, but not limited to, contracts relating to aircraft
servicing, cash management and administrative activities) and engage
in all related activities incidental thereto.
(b) To finance or refinance the activities described in paragraph (a)
above through the creation, offer, sale and issuance of any debt
securities of the Company upon such terms and conditions as the
Directors see fit for cash or in payment or in partial payment for any
property purchased or otherwise acquired by the Company, any
subsidiary of the Company or any entity that may be established in the
future in connection with acquisitions of aircraft and which have
guaranteed the debt securities and other obligations of the Company
(a "Future AerCo Entity") and, to secure the repayment of such debt
securities, to grant a security interest or other form of mortgage or
charge in (i) the shares of its subsidiaries, (ii) interests in
accounts and the cash on deposit therein established by or on behalf
of the Company from time to time, (iii) investments made or acquired
from the proceeds of such accounts and the proceeds from such
investments, (iv) property in which the Company has a security
interest or other form of mortgage or charge, (v) any interest of the
Company in the Aircraft and (vi) proceeds of any of the foregoing and
rights associated with any of the foregoing.
(c) To provide loans to, and guarantee or otherwise support the
obligations and liabilities of, the Company's subsidiaries and any
Future AerCo Entity on such terms and in such manner as the Directors
see fit and whether or not the
<PAGE> 3
Company or such subsidiary or Future AerCo Entity shall derive a
benefit from the same so long as such loans, guarantees or other
support are provided in connection with the purposes set forth in
paragraph (a) above.
(d) To engage in currency and interest rate exchange transactions for the
purposes of avoiding, reducing, minimising, hedging against or
otherwise managing the risk of any loss, cost, expense or liability
arising, or which may arise, directly or indirectly, from any change
or changes in any interest rate or currency exchange rate or in the
price or value of any of the Company's or its subsidiaries' property
or assets, within limits determined by the Directors from time to
time to be necessary in order to perform the activities described in
paragraph (b) above and submitted to the Rating Agencies, including
but not limited to dealings, whether involving purchases, sales or
otherwise, in foreign currency, spot and forward interest rate
exchange rate contracts, forward interest rate agreements, caps,
floors and collars, futures, options, swaps, and any other currency,
interest rate and other similar hedging arrangements and such
instruments as are similar to, or derivatives of, any of the
foregoing.
(e) To establish, promote and aid in promoting, constitute, form or
organise companies, syndicates or partnerships of all kinds in any
part of the world for the purposes set forth in paragraph (a) above
and to acquire, hold and dispose of shares, securities and other
interests in any such company, syndicate or partnership.
(f) To take out, acquire, surrender and assign policies of insurance and
assurances with any insurance company or companies which the Company
or any of its subsidiaries may think fit and to pay the premiums
thereon.
(g) To do all such things as may be deemed incidental or conducive to the
attainment of the above objects or any of them.
5. Capitalised terms used in this Memorandum and not otherwise defined herein
shall bear the meaning ascribed to them in the Articles of Association of
the Company.
6. The Company is a public company.
<PAGE> 4
COMPANIES (JERSEY) LAW 1991
ARTICLES OF ASSOCIATION
OF
AERCO LIMITED
INTERPRETATION
1. In these Articles, if not inconsistent with the subject or context, the
words in the first column of the following table shall bear the meanings set
opposite to them respectively in the second column.
WORDS MEANINGS
Additional Aircraft Shall have the meaning given to that term in
the Indenture.
Additional Ordinary Shares The shares of any direct aircraft owning
subsidiary of the Company (excluding ALPS
94-1, AerCo Ireland, AerCo Ireland II and
AerCo USA) which may be acquired by the
Company (through acquisition or formation of
such subsidiary) after the date of adoption
of these Articles.
AerCo Ireland AerCo Ireland Limited, an Irish limited
liability company.
AerCo Ireland II AerCo Ireland II Limited, an Irish limited
liability company.
AerCo Ireland Ordinary Shares The ordinary shares of AerCo Ireland, par
value IR(pound)1.00 each to be acquired
by the Company.
AerCo Ireland II Ordinary Shares The ordinary shares of AerCo Ireland II, par
value IR(pound)1.00 each to be
acquired by the Company.
AerCo USA AerCo USA Inc., a Delaware corporation.
AerCo USA Shares The beneficial interest in the shares of
common stock of AerCo USA, par value US$1.00
each to be acquired by the Company.
1
<PAGE> 5
Affiliate As to any person, any other person that,
directly or indirectly, controls, is
controlled by or is under the common control
with such person or is a director or officer
of such person. For the purposes of this
definition, the term "control" (including
the terms "controlling", "controlled by" and
"under the common control with") of a person
means possession, direct or indirect, of the
power to vote 5% or more of the voting stock
of such person or to direct or cause the
direction of the management and policies of
such person, whether through the ownership
of voting stock, by contract or otherwise
provided that none of the Company or any of
its subsidiaries shall be Affiliates of GPA
or any of its subsidiaries by virtue of
GPA's (or any successor entity's) 5%
ownership of the share capital of the
Company.
ALPS 94-1 Aircraft Lease Portfolio Securitization 94-1
Limited, a Jersey public limited liability
company.
ALPS 94-1 Ordinary Shares The ordinary shares of ALPS 94-1, par value
US$1.00 each to be acquired by the Company.
these Articles These Articles of Association in their
present form or as from time to time altered.
auditors Auditors of the Company appointed pursuant
to these Articles.
bankrupt Shall have the meaning defined in the
Interpretation (Jersey) Law, 1954.
Class A-C Notes The U.S. dollar denominated Class A, B and C
Notes to be issued by the Company pursuant
to the Indenture.
Class D Notes The U.S. dollar denominated Class D Notes to
be issued by the Company pursuant to the
Indenture.
Class E Notes The U.S. dollar denominated Class E Notes to
be issued by the Company pursuant to the
Indenture.
2
<PAGE> 6
Class E Note Director Any Director who is appointed by the holder
or holders of a majority in aggregate
principal amount of the Class E Notes in
accordance with Article 67.
clear days In relation to the period of a notice, shall
mean that period excluding the day when the
notice is served or deemed to be served and
the day for which it is given or on which it
is to take effect.
DCR Duff & Phelps Credit Rating Co.
Directors The directors of the Company for the time
being.
GPA GPA Group plc.
holding company Shall have the meaning defined in the Law.
Indenture The trust indenture to be entered into by,
inter alia, the Company pursuant to which
the Class A-C Notes, the Class D Notes and
the Class E Notes will be issued by the
Company.
Independent Director A Director who is not at the time of his
appointment or at any time during his
service as Director, and has not been for
the twenty-four months prior to his
appointment as Director, an employee,
consultant, officer or director of GPA, any
holder of the Class E Notes or any Affiliate
of any such person.
the Law The Companies (Jersey) Law 1991.
Member A person whose name is entered in the
Register as the holder of shares in the
Company.
month Calendar month.
Moody's Moody's Investors Service, Inc.
notice A written notice unless otherwise
specifically stated.
Office The registered office of the Company.
3
<PAGE> 7
Ordinary Shares The ALPS 94-1 Ordinary Shares, the AerCo
Ireland Ordinary Shares, the AerCo
Ireland II Ordinary Shares, the AerCo
USA Shares and the Additional Ordinary
Shares.
paid up Shall include credited as paid up.
present in person In relation to general meetings of the
Company and to meetings of the holders of
any class of shares, shall include present
by attorney or by proxy or, in the case of a
corporate shareholder, by representative.
Rating Agencies DCR, Moody's and Standard & Poor's.
Register The register of Members to be kept pursuant
to Article 14 hereof.
Secretary Any person appointed by the Directors to
perform any of the duties of secretary of
the Company (including a temporary or
assistant secretary), and in the event of
two or more persons being appointed as joint
secretaries any one or more of the persons
so appointed.
Servicing Agreement The servicing agreement to be entered into
between the Company, ALPS 94-1 and Babcock &
Brown Limited and dated as of the closing
date of the underwritten offering of the
Class A-C Notes or any successor servicing
agreement providing for similar services.
Special Resolution A resolution of the Company passed as a
special resolution in accordance with the
Law.
Standard & Poor's Standard & Poor's Ratings Group, a division
of The McGraw -- Hill Companies, Inc.
2. In these Articles, unless there be something in the subject or context
inconsistent with such construction:--
(a) the word "may" shall be construed as permissive and the word "shall"
shall be construed as imperative;
4
<PAGE> 8
(b) the word "signed" shall be construed as including a signature or
representation of a signature affixed by mechanical or other means;
(c) the words "in writing" shall be construed as including written,
printed, telexed, electronically transmitted or any other mode of
representing or reproducing words in a visible form;
(d) words importing "persons" shall be construed as including companies or
associations or bodies of persons whether corporate or unincorporate;
(e) words importing the singular number shall be construed as including
the plural number and vice versa;
(f) words importing the masculine gender only shall be construed as
including the feminine gender; and
(g) references to enactments are to such enactments as are from time to
time modified, re-enacted or consolidated and shall include any
enactment made in substitution for an enactment that is repealed.
3. The headings herein are for convenience only and shall not affect the
construction of these Articles.
PRELIMINARY
4. The preliminary expenses incurred in forming the Company may be discharged
out of the funds of the Company.
5. The business of the Company shall be commenced as soon after the
incorporation of the Company as the Directors think fit.
SHARE CAPITAL AND SHARES
6. The share capital of the Company is as specified in the Memorandum of
Association and the shares of the Company shall have the rights and be subject
to the conditions contained in these Articles.
7. Save as permitted by the Law, the Company shall not give financial
assistance directly or indirectly for the purpose of, or in connection with, the
acquisition made or to be made by any person of any shares in the Company or its
holding company (if any).
8. Except as required by law, the Company shall not be bound by or recognise
any equitable, contingent, future or partial interest in any share, or (except
only as by these Articles otherwise provided or as by law required) any interest
in any fraction of a share, or
5
<PAGE> 9
any other right in respect of any share, except an absolute right to the
entirety thereof in the registered holder.
SHARE CERTIFICATES
9. Every Member shall be entitled:--
(a) without payment, to one certificate for all his shares of each class
and, when part only of the shares comprised in a certificate is sold
or transferred, to a new certificate for the remainder of the shares
so comprised; or
(b) upon payment of such sum for each certificate as the Directors shall
from time to time determine, to several certificates each for one or
more of his shares of any class.
10. Every certificate shall be issued within two months after allotment or
lodgment of transfer (or within such other period as the conditions of issue
shall provide), shall be under seal, and shall specify the shares to which it
relates and the amount paid up thereon and if so required by the Law, the
distinguishing numbers of such shares.
11. In respect of a share held jointly by several persons, the Company shall
not be bound to issue more than one certificate, and delivery of a certificate
for a share to one of several joint holders shall be sufficient delivery to all
such holders.
12. If a share certificate is defaced, loss or destroyed, it may be renewed on
payment of such fee and on such terms (if any) as to evidence and indemnity and
the payment of out-of-pocket expenses of the Company in relation thereto as the
Directors think fit.
JOINT HOLDERS OF SHARES
13. Where two or more persons are registered as the holders of any share they
shall be deemed to hold the same as joint tenants with the benefit of
survivorship, subject to the following provisions:--
(a) the Company shall not be bound to register more than four persons as
the joint holders of any share;
(b) the joint holders of any share shall be liable, severally as well as
jointly, in respect of all payments to be made in respect of such
share;
(c) any one of such joint holders may give a good receipt for any
dividend, bonus or return of capital payable to such joint holders;
(d) only the senior of the joint holders of a share shall be entitled to
delivery of the certificate relating to such share or to receive
notices from the Company or to
6
<PAGE> 10
attend general meetings of the Company and any notice given to the
senior joint holder shall be deemed notice to all the joint holders;
and
(e) for the purpose of the provisions of this Article, seniority shall be
determined by the order in which the names of the joint holders
appear in the Register.
REGISTER OF MEMBERS
14. The Directors shall keep or cause to be kept at the Office or at such
other place in the Island of Jersey where it is made up, as the Directors may
from time to time determine, a Register in the manner required by the Law. In
each year the Directors shall prepare or cause to be prepared and filed an
annual return containing the particulars required by the Law.
TRANSFER AND TRANSMISSION OF SHARES
15. All transfers of shares shall be effected by notice (a "Transfer
Notice") in the usual common form or in any other form approved by the
Directors.
16. All Transfer Notices shall be signed by or on behalf of the transferor
and, in the case of a partly paid share, by the transferee. The transferor
shall be deemed to remain the holder of the share until the name of the
transferee is entered on the Register in respect thereof.
17. No shares may be transferred without the prior approval of the Directors
who may, in their absolute discretion, and without assigning any reason
therefor, refuse to approve any transfer of shares, including, without
limitation, a transfer of shares on which the Company has a lien.
18. The Directors may decline to recognise any Transfer Notice, unless the
Transfer Notice is deposited at the Office or such other place as the Directors
may appoint accompanied by the certificate for the shares to which it relates
and such other evidence as the Directors may reasonably require to show the
right of the transferor to make the transfer.
19. If the Directors refuse to register any transfer of shares they shall,
within two months after the date on which the Transfer Notice was lodged with
the Company, send to the proposed transferor and transferee notice of the
refusal.
20. All Transfer Notices relating to transfers of shares which are registered
shall be retained by the Company, but any Transfer Notices relating to
transfers of shares which the Directors decline to register shall (except in
any case of fraud) be returned to the person depositing the same.
21. The registration of transfers of shares or of any class of shares may be
suspended whenever the Directors determine.
7
<PAGE> 11
22. Unless otherwise decided by the Directors in their sole discretion, no fee
shall be charged in respect of the registration of any power of attorney or
other document relating to or affecting the title to any shares.
23. Any legal representative of a Member under legal disability and any person
becoming entitled to a share in consequence of the insolvency or bankruptcy of a
Member may, upon such evidence as to his title being produced as may from time
to time be required by the Directors and subject as hereinafter provided, elect
either to be registered himself as the holder of the share or to have some
person nominated by him registered as the holder thereof.
24. If the person so becoming entitled shall elect to be registered himself, he
shall deliver or send to the Company a Transfer Notice signed by him stating
that he so elects. If he shall elect to have another person registered, he shall
testify his election by signing a Transfer Notice in favour of that person. All
the limitations, restrictions and provisions of these Articles relating to the
right to transfer and the registration of transfers of shares shall be
applicable to any such Transfer Notice as aforesaid as would have existed had
such transfer occurred before the death, insolvency or bankruptcy of the Member
concerned.
25. A person becoming entitled to a share by reason of the insolvency or
bankruptcy of a Member shall be entitled to the same dividends and other
advantages to which he would be entitled if he were the registered holder of the
share, except that he shall not, before being registered as a Member in respect
of the share, be entitled in respect of it to exercise any right conferred by
membership in relation to meetings of the Company provided always that the
Directors may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within one month such person shall be deemed to have so elected to
be registered himself and all the restrictions on the transfer and transmission
of shares contained in these Articles shall apply to such election.
GENERAL MEETINGS
26. An annual general meeting shall be held once in every calendar year, either
in or outside the Island, at such time and place as may be determined by the
Directors; but so long as the Company holds its first annual general meeting
within eighteen months of its incorporation it need not hold it in the year of
its incorporation or in the following year. All other general meetings shall be
called extraordinary general meetings.
27. The Directors may whenever they think fit, and upon a requisition made in
writing by Members in accordance with the Law the Directors shall, convene an
extraordinary general meeting of the Company.
28. At any extraordinary general meeting called pursuant to a requisition,
unless such meeting is called by the Directors, no business other than that
stated in the requisition as the objects of the meeting shall be transacted.
8
<PAGE> 12
NOTICE OF GENERAL MEETINGS
29. At least twenty-one clear days' notice shall be given of every annual
general meeting and of every general meeting called for the passing of a Special
Resolution, and at least fourteen clear days' notice shall be given of all other
general meetings. Every notice shall specify the place, the day and the time of
the meeting and in the case of special business, the general nature of such
business and, in the case of an annual general meeting, shall specify the
meeting as such. Notice of every meeting shall be given in the manner
hereinafter mentioned to all the Members and to the Directors and to the
auditors.
30. A meeting of the Company shall, notwithstanding that it is called by
shorter notice than that specified in Article 29 hereof, be deemed to have been
duly called if it is so agreed:--
(a) in the case of an annual general meeting, by all the Members entitled
to attend and vote thereat; and
(b) in the case of any other meeting, by a majority in number of Members
having a right to attend and vote at the meeting, being a majority
together holding not less than ninety-five per cent in nominal value
of the shares giving that right.
31. In every notice calling a meeting of the Company there shall appear with
reasonable prominence a statement that a Member entitled to attend and vote is
entitled to appoint one of more proxies to attend and vote instead of him and
that a proxy need not also be a Member.
32. It shall be the duty of the Company, subject to the provisions of the Law,
on the calling of a meeting on the requisition in writing of such number of
Members as is specified by the Law:--
(a) to give to the Members entitled to receive notice of general meetings
and to the Directors notice of any resolution which may properly be
moved and which it is intended to move at that meeting; and
(b) to circulate to Members entitled to have notice of any general meeting
sent to them, any statement of not more than one thousand words with
respect to the matter referred to in any proposed resolution or the
business to be dealt with at that meeting.
33. The accidental omission to give notice of a meeting to, or the non-receipt
of notice of a meeting by, any person entitled to receive notice shall not
invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
34. The business of an annual general meeting shall be to receive and consider
the accounts of the Company and the reports of the Directors and auditors, to
elect Directors (if necessary).
9
<PAGE> 13
to elect auditors and fix their remuneration, to sanction a dividend if thought
fit so to do, and to transact any other business of which notice has been given.
35. No business shall be transacted at any general meeting except the
adjournment of the meeting unless a quorum of Members is present at the time
when the meeting proceeds to business. Such quorum shall consist of not less
than two Members present in person, but so that not less than two individuals
will constitute the quorum, provided that, if at any time all of the issued
shares in the Company are held by or by a nominee for a holding company, such
quorum shall consist of the Member present in person.
36. If within half an hour from the time appointed for the meeting a quorum is
not present, or if during the meeting a quorum ceases to be present, the
meeting, if convened by or upon the requisition of Members, shall be dissolved.
If otherwise convened the meeting shall stand adjourned to the same day in the
next week at the same time and place or such day, time and place as the
Directors shall determine.
37. The chairman (if any) of the Directors shall preside as chairman at every
general meeting of the Company. If there is no such chairman, or if at any
meeting he is not present the Members present in person shall choose one of the
Directors present to be chairman, or if no Director shall be present and willing
to take the chair the Members present in person shall choose one of their number
to be chairman.
38. The chairman may with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn the meeting from time
to time and from place to place, but no business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place. When a meeting is adjourned for thirty days or
more, notice of the adjourned meeting shall be given as in the case of the
original meeting. Save as aforesaid, it shall not be necessary to give any
notice of any adjourned meeting or of the business to be transacted at an
adjourned meeting.
39. Except where otherwise provided in the Law or in these Articles, all
resolutions shall be adopted if approved by a majority of the votes cast. In the
event of an equality of votes at any general meeting, whether upon a show of
hands or on a poll, the chairman shall not be entitled to a second or casting
vote.
40. At any general meeting every question shall be decided in the first
instance by a show of hands and, unless a poll is demanded by the chairman or by
any Member, a declaration by the chairman that a resolution has on a show of
hands been carried or not carried, or carried or not carried by a particular
majority or lost, and an entry to that effect in the minutes of the meeting
shall be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against such resolution.
41. If a poll is demanded in the manner mentioned above, it shall be taken at
such time (within twenty-one days) and in such manner as the chairman directs
and the results of such poll shall be deemed to be the resolution of the Company
in general meeting. A poll may be
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demanded upon the election of the chairman and upon a question of adjournment
and such poll shall be taken forthwith without adjournment. Any business other
than that upon which a poll has been demanded may proceed pending the taking of
the poll.
42. Minutes of all resolutions and proceedings of general meetings shall be
duly and regularly entered in books kept for that purpose and shall be
available for inspection by a Member during business hours without charge. A
Member may require a copy of any such minutes in such manner, and upon payment
of such sum, as provided in the Law.
43. If a Member is by any means in communication with one or more other
Members so that each Member participating in the communication can hear what is
said by any other of them, each Member so participating in the communication is
deemed to be present in person at a meeting with the other Members so
participating, notwithstanding that all the Members so participating are not
present together in the same place. A meeting at which any or all of the
Members participate as aforesaid shall be deemed to be a general meeting of the
Company for the purposes of these Articles notwithstanding any other provisions
of these Articles and all of the provisions of these Articles and of the Law
relating to general meetings of the Company and to the proceedings thereat
shall apply, mutatis mutandis, to every such meeting.
44. A resolution in writing (including a Special Resolution but excluding a
resolution removing an auditor) signed by all Members who would be entitled to
receive notice of and to attend and vote at a general meeting at which such a
resolution would be proposed, or by their duly appointed attorneys, shall be as
valid and effectual as if it had been passed at a general meeting of the
Company duly convened and held. Any such resolution may consist of several
documents in the like form each signed by one or more of the Members or their
attorneys and signature in the case of a corporate body which is a Member shall
be sufficient if made by a director or other duly authorised officer thereof or
its duly appointed attorney.
45. (1) On a show of hands every Member present in person shall have one vote.
(2) Subject to any special voting powers or restrictions for the time
being attached to any shares, as may be specified in the terms of issue thereof
or these Articles, on a poll every Member present in person shall have one vote
for each share held by him.
46. Where there are joint registered holders of any share, such persons shall
not have the right of voting individually in respect of such share but shall
elect one of their number to represent them and to vote whether in person or by
proxy in their name. In default of such election the person whose name appears
first in order in the Register in respect of such share shall be the only
person entitled to vote in respect thereof.
47. A Member for whom a special or general attorney is appointed or who is
suffering from some other legal incapacity or interdiction in respect of whom
an order has been made by any court having jurisdiction (whether in the Island
of Jersey or elsewhere) in matters concerning legal incapacity or interdiction
may vote, whether on a show of hands or on a poll, by his attorney, curator, or
other person authorised in that behalf appointed by that court, and
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any such attorney, curator or other person may vote by proxy. Evidence to the
satisfaction of the Directors of the authority of such attorney, curator or
other person may be required by the Directors prior to any vote being exercised
by such attorney, curator or other person.
48. The Directors and the auditors shall be entitled to receive notice of and
to attend and speak at any meeting of Members. Save as aforesaid and as
provided in Article 47 hereof, no person shall be entitled to be present or take
part in any proceedings or vote either personally or by proxy at any general
meeting unless he has been registered as owner of the shares in respect of which
he claims to vote.
49. (1) No objection shall be raised to the qualification of any voter except
at the meeting or adjourned meeting at which the vote objected to is given or
tendered, and every vote not disallowed at such meeting shall be valid for all
purposes. Any such objection made in due time shall be referred to the chairman
of the meeting whose decision shall be final and conclusive.
(2) Where a person is authorized under Article 57 hereof to represent a
body corporate at a general meeting of the Company the Directors or the chairman
of the meeting may require him to produce a certified copy of the resolution
from which he derives his authority.
50. On a poll a Member entitled to more than one vote need not use all his
votes or cast all the votes he uses in the same way.
51. The instrument appointing a proxy shall be in writing under the hand of the
appointor or of his attorney duly authorised in writing or if the appointor is a
corporation either under seal or under the hand of an officer or attorney duly
authorised. A proxy need not be a Member.
52. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed, or a notarially certified copy of
that power or authority, shall be deposited at the Office within such time (not
exceeding forty-eight hours) before the time for holding the meeting or
adjourned meeting or for the taking of a poll at which the person named in the
instrument proposes to vote as the Directors may from time to time determine.
53. The instrument appointing a proxy may be in any common form or in any other
form approved by the Directors including the following form:-
"AERCO LIMITED
I/We of
being a Member/Members of the above named Company
hereby appoint of
or failing him of
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as my/our proxy to vote for me/us on my/our behalf at the (annual or
extraordinary as the case may be) general meeting of the Company to be held on
the day of and at any adjournment thereof.
Signed this day of "
54. Unless the contrary is stated thereon the instrument appointing a proxy
shall be as valid as well for any adjournment of the meeting as for the meeting
to which it relates.
55. A vote given in accordance with the terms of an instrument of proxy shall
be valid notwithstanding the previous death or insanity of the principal or
revocation of the proxy or of the authority under which the proxy was executed
provided that no intimation in writing of such death, insanity or revocation
shall have been received by the Company at the Office before the commencement of
the meeting or adjourned meeting or the taking of the poll at which the proxy is
used.
56. The Directors may at the expense of the Company send by post or otherwise
to the Members instruments of proxy (with or without provision for their return
prepaid) for use at any general meeting or at any separate meeting of the
holders of any class of shares of the Company either in blank or nominating in
the alternative any one or more of the Directors or any other persons. If for
the purpose of any meeting invitations to appoint as proxy a person or one or
more of a number of persons specified in the invitations are issued at the
Company's expense they shall be issued to all (and not to some only) of the
Members entitled to be sent a notice of the meeting and to vote thereat by
proxy.
CORPORATE MEMBERS
57. Any body corporate which is a Member may by resolution of its directors or
other governing body authorise such person as it thinks fit to act as its
representative at any meeting of Members (or of any class of Members) and the
person so authorised shall be entitled to exercise on behalf of the body
corporate which he represents the same powers as that body corporate could
exercise if it were an individual.
DIRECTORS
58. The number of Directors shall be five, except that prior to the issuance of
the Class E Notes, the number shall be not less than two. Following the issuance
of the Class E Notes, two of such Directors shall be Class E Note Directors who
shall be nominated and appointed pursuant to Article 67 and the remaining
Directors shall be Independent Directors. Save as provided in Article 67, no
person shall be appointed as a Director of the Company unless that person has
been approved by a majority of the existing Directors (if any) as having
sufficient knowledge and experience in the business conducted by the Company as
described in is Memorandum of Association such approval not to be unreasonably
withheld. At all times the Directors appointed pursuant to Article 67 shall
constitute a minority of the Directors. The
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Company shall keep or cause to be kept at the Office a register of its Directors
in the manner required by the Law.
59. A Director need not be a Member but shall nevertheless be entitled to
receive notice of and to attend and speak at any general meeting or at any
separate meeting of the holders of any class of shares in the Company.
60. The Directors shall be paid out of the funds of the Company their
reasonable travelling and other expenses properly and necessarily expended by
them in attending meetings of the Directors or Members or otherwise on the
affairs of the Company. The Independent Directors shall also each be paid by way
of remuneration for their services a sum equal to US$75,000 per annum which
shall be deemed to accrue from day to day. The Independent Directors shall also
each be entitled to receive by way of additional remuneration US$1,000 in
respect of each day, or portion thereof, which they are required to devote to
the activities of the Company save for those days on which meetings of the
Directors are held in accordance with these Articles. The Directors appointed
pursuant to Article 67 shall not be entitled to remuneration for their services
as Directors.
ALTERNATE DIRECTORS
61. Any Director may at his sole discretion and at any time and from time to
time appoint any person (other than a person disqualified by law from being a
director of a company or, in the case of an Independent Director, a person who
would not meet the criteria for being an Independent Director) as an alternate
Director to attend and vote in his place at any meetings of Directors at which
he is not personally present. Each Director shall be at liberty to appoint under
this Article more than one alternate Director provided that only one such
alternate Director may at any one time act on behalf of the Director by whom he
has been appointed. Every such appointment shall be effective and the following
provisions shall apply in connection therewith:-
(a) every alternate Director while he holds office as such shall be
entitled to notice of meetings of Directors and to attend and to
exercise all the rights and privileges of his appointor at all such
meetings at which his appointor is not personally present;
(b) every alternate Director shall ipso facto vacate office if and when
his appointment expires or the Director who appointed him ceases to be
a Director of the Company or removes the alternate Director from
office by notice under his hand served upon the Company;
(c) every alternate Director shall be entitled to be paid all travelling,
hotel and other expenses reasonably incurred by him in attending
meetings. The remuneration (if any) of an alternate Director shall be
payable out of the remuneration payable to the Director appointing him
as may be agreed between them;
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(d) a Director may act as alternate Director for another Director and
shall be entitled to vote for such other Director as well as on his
own account, but no Director shall at any meeting be entitled to act
as alternate Director for more than one other Director; and
(e) a Director who is also appointed an alternate Director shall be
considered as two Directors for the purpose of making a quorum of
Directors when such quorum shall exceed two.
62. The instrument appointing an alternate Director may be in any form approved
by the Directors including the following form:-
"AERCO LIMITED
I,
a Director of the above named Company, in pursuance of the power in that
behalf contained in the Articles of Association of the Company, do hereby
nominate and appoint of
to act as alternate Director in my place at the meeting of the Directors to be
held on the day of and at any adjournment thereof
which I am unable to attend and to exercise all my duties as a Director of the
Company at such meeting.
Signed this day of "
63. Save as otherwise provided in Article 61(b) hereof, any appointment or
removal of an alternate Director shall be by notice signed by the Director
making or revoking the appointment and shall take effect when lodged at the
Office or otherwise notified to the Company in such manner as is approved by the
Directors.
EXECUTIVE DIRECTORS
64. The Directors may from time to time appoint one or more of the Independent
Directors to be the holder of any executive office on such terms and for such
periods as they may determine provided however that such an appointment will not
entitle the Director to remuneration in excess of that provided in Article 60.
The appointment of any Director to any executive office shall be subject to
termination if he ceases to be a Director, but without prejudice to any claim
for damages for breach of any contract of service between him and the Company.
65. The Directors may entrust to and confer upon a Director holding any
executive office any of the powers exercisable by the Directors other than those
powers expressly requiring the unanimous affirmative vote of the Directors, upon
such terms and conditions and with such restrictions as they think fit, and
either collaterally with or to the exclusion of their own powers and may from
time to time revoke, withdraw, alter or vary all or any of such powers.
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APPOINTMENT OF DIRECTORS
66. The first Directors of the Company appointed in writing by the Subscribers
to the Memorandum of Association and holding office on the date of adoption of
these Articles shall resign on the date of adoption of these Articles and shall
appoint three Independent Directors in their place.
67. (1) For so long as any amount is outstanding or payable in respect of the
Class E Notes, the holder or holders of a majority in aggregate principal amount
of the Class E Notes shall be entitled (by instrument in writing) to:
(a) nominate and appoint two Directors at any time;
(b) remove any Director appointed pursuant to sub-paragraph (i)(a) above;
and
(c) nominate and appoint a new Director to take the place of any Director
nominated and appointed pursuant to sub-paragraph (i)(a) above who
vacates his office for any reason.
Appointments pursuant to sub-paragraphs (i)(a) and (i)(c) above shall take
effect upon written acceptance by the nominated Director and written notice
delivered to the Office.
(2) The Independent Directors shall not have the right to remove a
Director appointed pursuant to this Article.
68. Subject to the provisions of Articles 58 and 66 hereof, a majority of the
Directors (which majority shall include the remaining Independent Director or
Independent Directors) shall have power at any time and from time to time to
appoint any person to be an Independent Director in order to ensure that the
provisions of these Articles as to the number of Independent Directors required
to be in office are fulfilled. If at any time there are no Independent Directors
holding office the Company in general meeting (and not, for the avoidance of
doubt, the Class E Note Directors) shall be entitled to nominate and appoint
such number of Independent Directors as are required to be in office pursuant
to these Articles. For the purpose of making such appointment the Class E Note
Directors shall be entitled to make recommendations to the Members and the
Members may, if they think fit, at the expense of the Company hire an
independent adviser to make recommendations. The Members, in making the
appointment, shall be entitled but not bound to act in accordance with any such
recommendations. Any Independent Director so appointed shall hold office until
he resigns, is removed or is disqualified in accordance with Article 71 hereof.
69. At any general meeting at which an Independent Director retires or is
removed from office a majority of the remaining Directors (which majority shall
include the remaining Independent Director or Independent Directors) shall elect
an Independent Director to fill the vacancy. If there are no remaining
Independent Directors the Company in general meeting (and not, for the avoidance
of doubt, the Class E Note Directors) shall elect an Independent
16
<PAGE> 20
Director to fill the vacancy. For the purpose of making such appointment the
Class E Note Directors shall be entitled to make recommendations to the Members
and the Members may, if they think fit, at the expense of the Company hire an
independent adviser to make recommendations. The Members, in making the
appointment, shall be entitled but not bound to act in accordance with any such
recommendations.
70. Two clear days' notice shall be given to the Company of the intention of
any Member to propose any person for election to the office of Director provided
always that, if the Members present at a general meeting unanimously consent,
the chairman of such meeting may waive the said notice and submit to the meeting
the name of any person duly qualified and willing to act.
RESIGNATION, DISQUALIFICATION AND REMOVAL OF DIRECTORS
71. The office of a Director shall be vacated if:-
(a) he resigns his office by notice to the Company; or
(b) he ceases to be a Director by virtue of any provision of the Law or he
becomes prohibited or disqualified by law from being a Director; or
(c) he becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
(d) he is removed from office by resolution of the Members; or
(e) in the case of a Director appointed pursuant to Article 67(i), he is
removed from office pursuant to Article 67(i); or
(f) in the case of an Independent Director, he ceases to be an Independent
Director within the meaning of that term contained in these Articles;
or
(g) save in the case of the Directors appointed pursuant to Article 67, he
is removed from office by a resolution passed by a majority of the
other Directors including each remaining Independent Director.
POWERS OF DIRECTORS
72. The business of the Company shall be managed by the Directors who may
exercise all such powers of the Company as are not by the Law or these Articles
required to be exercised by the Company in general meeting, and the power and
authority to represent the Company in all transactions relating to real and
personal property and all other legal or judicial transactions, acts and matters
and before all courts of law shall be vested in the Directors. The Directors'
powers shall be subject to any regulations of these Articles, to the provisions
of the Law and to such regulations, being not inconsistent with the aforesaid
regulations or
17
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provisions, as may be prescribed by the Company in general meeting, but no
regulations made by the Company in general meeting shall invalidate any prior
act of the Directors which would have been valid if such regulations had not
been made.
73. The Directors may, by power of attorney, mandate or otherwise, appoint any
person to be the agent of the Company for such purposes and on such conditions
as they determine, including authority for the agent to delegate all or any of
his powers.
74. (1) Notwithstanding any other provision of these Articles or any
provision of law that otherwise so empowers the Directors, for so long as any
amount is outstanding or payable under any of the Class A - C Notes, the
Class D Notes or the Class E Notes, the Directors shall not have the power to
take any corporate action that would cause the Company or any of its
subsidiaries to be in violation of Section 5.02 of the Indenture.
(2) Notwithstanding any other provision of these Articles or any other
provision of law that otherwise so empowers the Directors, the Directors shall
conduct the business of the Company, and shall procure that the business of
each of the subsidiaries of the Company is conducted, such that it is a
separate and readily identifiable business from GPA and any of its Affiliates
(it being understood that the Company may publish financial statements that are
consolidated with those of GPA and any of its Affiliates, if to do so is
required by any applicable law or accounting principles from time to time in
effect) and the Directors:-
(a) will observe, and will cause the Company's subsidiaries to observe,
all corporate formalities necessary to remain legal entities separate
and distinct from GPA and any of its Affiliates;
(b) will maintain the Company's assets and liabilities and will cause the
Company's subsidiaries to maintain each of their respective assets
and liabilities, separate and distinct from those of GPA and any of
its Affiliates;
(c) will maintain, and will cause the Company's subsidiaries to maintain
records, books, accounts and minutes separate from those of GPA and
any of its Affiliates;
(d) will cause the Company to pay its obligations in the ordinary course
of business, and will cause the Company's subsidiaries to pay each of
their respective obligations in the ordinary course of business, as
legal entities separate from GPA and any of its Affiliates;
(e) will keep the Company's funds, and will cause the Company's
subsidiaries to keep each of their respective funds, separate and
distinct from any funds of GPA and any of its Affiliates, and will
receive, deposit, withdraw and disburse such funds separately from
any funds of GPA and any of its Affiliates;
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(f) will conduct the Company's business, and will cause the Company's
subsidiaries to conduct each of their respective businesses, in its or
their own name, and not in the name of GPA or any of its Affiliates;
(g) will not agree, and will cause the Company's subsidiaries not to
agree, to pay or become liable for any debt of GPA or any of its
Affiliates;
(h) will not hold out, and will cause the Company's subsidiaries not to
hold out, that the Company or any of its subsidiaries is a division of
GPA or any of its Affiliates, or that GPA or any of its Affiliates is
a division of the Company or any of its subsidiaries;
(i) will not induce, and will cause the Company's subsidiaries not to
induce, any third party to rely on the creditworthiness of GPA or any
of its Affiliates in order that such third party will be induced to
contract with the Company, or any of its subsidiaries, as the case may
be; and
(j) will not enter into, and will cause the Company's subsidiaries not to
enter into, any transactions between the Company or any of its
subsidiaries, as the case may be, and GPA or any of its Affiliates
that are more favourable to either party than transactions that the
parties would have been able to enter into at such time on an arm's
length basis with a non-affiliated third party, other than any
agreements in effect on the date hereof.
TRANSACTIONS WITH DIRECTORS
75. A Director, including an alternate Director but excluding a Class E
Note Director, may hold any other office or place of profit under the Company
(other than the office of auditor) in conjunction with his office of Director
and may act in a professional capacity to the Company on such terms as to
tenure of office, remuneration and otherwise as the Directors may determine.
For the avoidance of doubt the foregoing provision shall not prevent a Class E
Note Director from acting as a director, officer or employee of any company
which provides cash management, administrative or other services to the Company
or of any holding company of any such company.
76. Subject to the provisions of the Law, and provided that he has disclosed
to the Directors the nature and extent of any of his material interests, a
Director notwithstanding his office:-
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) other than, in the case of an Independent Director, to the extent
limited by the definition thereof, may be a director or other officer
of, or employed by, or a party to any transaction or arrangement with,
or otherwise interested in, any
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<PAGE> 23
body corporate promoted by the Company or in which the Company is
otherwise interested or which engages in transactions similar to
those engaged in by the Company and might present a conflict of
interest for such Director in discharging his duties; and
(c) shall not, by reason of his office, be accountable to the Company
for any benefit which he derives from any such office or
employment or from any such transaction or arrangement or from any
interest in any such body corporate and no such transaction or
arrangement shall be liable to be avoided on the ground of any
such interest or benefit.
77. For the purposes of Article 76:-
(a) a general notice given to the Directors that a Director is to be
regarded as having an interest of the nature and extent specified
in the notice in any transaction or arrangement in which a
specified person or class of persons is interested shall be deemed
to be a disclosure that the Director has an interest in any such
transaction of the nature and extent so specified; and
(b) an interest of which a Director has no knowledge and of which it
is unreasonable to expect him to have knowledge shall not be
treated as an interest of the Director.
PROCEEDINGS OF DIRECTORS
78. The Directors may meet together for the despatch of business, adjourn and
otherwise regulate their meetings as they think fit. Questions arising at any
meeting shall be determined by a majority of votes provided however that at any
meeting of the Directors, including a meeting held by telephone or other means
of communication in accordance with Article 86 hereof a resolution shall not be
considered to be validly passed unless approved by a majority of the
Independent Directors. In the case of an equality of votes the chairman elected
in accordance with Article 84 shall not have a second or casting vote. A
Director who is also an alternate Director shall be entitled, in the absence of
the Director whom he is representing, to a separate vote on behalf of such
Director in addition to his own vote. A Director may, and the Secretary on the
requisition of a Director shall, at any time, summon a meeting of the Directors
by giving to each Director and alternate Director not less than twenty-four
hours' notice of the meeting provided that any meeting may be convened at
shorter notice and in such manner as each Director or his alternate Director
shall approve provided further that unless otherwise resolved by the Directors
notices of Directors' meetings need not be in writing.
79. A meeting of the Directors at which a quorum is present shall be competent
to exercise all powers and discretions for the time being exercisable by the
Directors. The quorum necessary for the transaction of the business of the
Directors shall be two Independent Directors personally present (and not, for
the avoidance of doubt, present through an alternate
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Director) except that the quorum necessary for the transaction of any business
specified in Article 80 shall be all of the Directors.
80. Notwithstanding any other provision of these Articles and provided that
any such action referred to below does not contravene the terms of the
Indenture, the powers the Directors shall be limited such that an affirmative
unanimous vote of all of the Directors shall be required to:
(a) (i) cause the Company to take any action, or, in its capacity as a
shareholder, cause any of its subsidiaries to take any action, with
respect to the institution of any proceeding by the Company or any of
its subsidiaries seeking liquidation, winding up, reorganisation,
arrangement, adjustment, protection, relief or composition of its
debts under any law relating to bankruptcy, insolvency or
reorganisation or relief of debtors or seeking the entry of an order
for relief or the appointment of a receiver, trustee, or other similar
official for it or any substantial part of its property, or seeking
termination of the Company's existence or the existence of any of its
subsidiaries, or to propose the passing by the Members of a Special
Resolution to effect any of the foregoing, and (ii) in the case of any
such proceeding instituted against the Company or any of its
subsidiaries (but not instituted by it), cause the Company or any of
its subsidiaries to take any corporate action to authorise or consent
to such proceedings (including, without limitation, the entry of an
order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for the Company or any of its
subsidiaries or any substantial part of its property, or that of any
subsidiary);
(b) cause the Company, in its capacity as shareholder, to cause any of its
subsidiaries to take any action to increase or reduce or reclassify
the share capital of any of its subsidiaries or issue additional
shares of any of its subsidiaries;
(c) propose the passing by the Members of a Special Resolution to amend
the Memorandum or these Articles;
(d) cause the Company, in its capacity as a shareholder, to cause any of
its subsidiaries to take any action to waive, repeal, amend, vary,
supplement or otherwise modify the constitutional documents of any
such subsidiaries;
(e) transfer the Ordinary Shares or any part thereof or any interest
therein;
(f) cause the Company to take any action, or, in its capacity as a
shareholder, cause any of its subsidiaries to take any action, with
respect to the acquisition of any Additional Aircraft; or
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(g) cause the Company to take any action, or, in its capacity as a
shareholder, cause any of its subsidiaries to take any action, with
respect to any merger, consolidation, amalgamation or reorganisation
of the Company or any of its subsidiaries, as the case may be, with or
into any other person or entity, or any conveyance, transfer or other
disposal of (whether in one transaction or in a series of
transactions) all or substantially all of the ALPS 94-1 Ordinary
Shares, the AerCo Ireland Ordinary Shares, the AerCo Ireland II
Ordinary Shares, the AerCo USA Shares, the Additional Ordinary Shares
or all or substantially all of the assets of the Company and/or its
subsidiaries.
81. A Director, notwithstanding his interest, may be counted in the quorum
present at any meeting at which he is appointed to hold any office or place of
profit under the Company, or at which the terms of his appointment are arranged,
but he may not vote on his own appointment or the terms thereof.
82. A Director, notwithstanding his interest, may be counted in the quorum
present at any meeting at which any contract or arrangement in which he is
interested is considered and, subject to the provisions of Articles 76 and 77
hereof, he may vote in respect of any such contract or arrangement.
83. The continuing Directors or a sole continuing Director may act
notwithstanding any vacancies in their number, but, if the number of Independent
Directors is less than the number fixed as the quorum, the continuing Directors
or Director may act only for the purpose of calling a general meeting of the
Company. If there are no Directors or no Director is able or willing to act,
then any Member or the Secretary may summon a general meeting for the purpose of
appointing Directors.
84. The Directors may from time to time elect from their number, and remove, a
chairman and/or deputy chairman and/or vice-chairman and determine the period
for which they are to hold office provided always that only an Independent
Director may be elected as chairman. The chairman, or in his absence the deputy
chairman, or in his absence, the vice-chairman, shall preside at all meetings of
the Directors, but if no such chairman, deputy chairman or vice-chairman be
elected, or if at any meeting the chairman, the deputy chairman and
vice-chairman be not present within five minutes after the time appointed for
holding the same, the Directors present my choose one of their number to be the
chairman of the meeting.
85. The Directors may delegate any of their powers to committees consisting of
such Directors or Director or such other persons as they think fit provided
that where any such committee includes one or both of the Class E Note Directors
a majority of any such committee shall consist of Independent Directors. Any
committee so formed shall in the exercise of the powers so delegated conform to
any regulations that may be imposed on it by the Directors. The meetings and
proceedings of any such committee consisting of one or more persons shall be
governed by the provisions of these Articles regulating the meetings and
proceedings of the Directors, so far as the same are applicable and are not
superseded by any regulations made by the Directors under this Article.
22
<PAGE> 26
86. If a Director is by any means in communication with one or more other
Directors so that each Director participating in the communication can hear what
is said by any other of them, each Director so participating in the
communication is deemed to be present at a meeting with the other Directors so
participating, notwithstanding that all the Directors so participating are not
present together in the same place.
87. A resolution in writing of which notice has been given to all of the
Directors or to all of the members of a committee appointed pursuant to Article
85 hereof (as the case may be), if signed by a majority of the Directors or of
the members of such committee (as the case may be) (which majority (i) in the
case of a resolution in writing of which notice has been given to all of the
Directors, shall also include all of the Independent Directors and (ii) in the
case of a resolution in writing of which notice has been given to all of the
members of a committee approved pursuant to Article 85 hereof and which includes
one or both Class E Note Directors, shall also include all of the Independent
Directors who are members of that committee), shall be valid and effectual as if
it had been passed at a meeting of the Directors or of the relevant committee
duly convened and held, except that any resolution necessary for the transaction
of any business specified in Article 80 shall be signed by all of the Directors.
Such resolution may consist of two or more documents in like form each signed by
one or more of the Directors or members of the relevant committee.
88. All acts done bona fide by any meeting of Directors or of a committee
appointed by the Directors or by any person acting as a Director shall,
notwithstanding that it is afterwards discovered that there was some defect in
the appointment of any such Director or committee or person acting as aforesaid,
or that they or any of them were disqualified or had vacated office or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a Director or a member of a committee
appointed by the Directors and had been entitled to vote.
MINUTE BOOK
89. The Directors shall cause all resolutions in writing passed in accordance
with Articles 44 and 87 hereof and minutes of proceedings at all general
meetings of the Company or of the holders of any class of the Company's shares
and of the Directors and of committees appointed by the Directors to be entered
in books kept for the purpose. Any minutes of a meeting, if purporting to be
signed by the chairman of the meeting or by the chairman of the next succeeding
meeting, shall be evidence of the proceedings.
SECRETARY
90. The Secretary shall be appointed by the Directors and any secretary so
appointed may be removed by the Directors. Anything required or authorised to be
done by or to the Secretary may, if the office is vacant or there is for any
other reason no secretary capable of acting, be done by or to any assistant or
deputy secretary or if there is no assistant or deputy secretary capable of
acting, by or to any officer of the Company authorised generally or specially in
that behalf by the Directors provided that any provisions of these Articles
23
<PAGE> 27
requiring or authorising a thing to be done by or to a Director and the
Secretary shall not be satisfied by its being done by or to the same person
acting both as Director and as, or in place of, the Secretary. The Company
shall keep or cause to be kept at the Office a register of particulars with
regard to its Secretary in the manner required by the law.
SEALS
91. The Company shall have a common seal and may in accordance with the Law
have an official seal for use outside of the Island and an official seal for
sealing securities issued by the Company or for sealing documents creating or
evidencing securities so issued.
92. The Directors shall provide for the safe custody of all seals and no seal
shall be used except by the authority of a resolution of the Directors or of a
committee of the Directors authorised in that behalf by the Directors.
93. The Directors may from time to time make such regulations as they think
fit determining the persons and the number of such persons who shall sign every
instrument to which a seal is affixed and until otherwise so determined every
such instrument shall be signed by one Director and shall be countersigned by
the Secretary or by a second Director. The Company may, in writing under its
common seal, authorise an agent appointed for the purpose to affix any official
seal to a document to which the Company is party.
DIVIDENDS
94. Subject to the provisions of the Law, the Company may by resolution
declare dividends in accordance with the respective rights of the Members, but
no dividend shall exceed the amount recommended by the Directors.
95. All unclaimed dividends may be invested or otherwise made use of by the
Directors for the benefit of the Company until claimed. No dividend shall bear
interest as against the Company.
96. Any dividend which has remained unclaimed for a period of ten years from
the date of declaration thereof shall, if the Directors so resolve, be
forfeited and cease to remain owing by the Company and shall thenceforth belong
to the Company absolutely.
97. Any dividend or other monies payable on or in respect of a share may be
paid by cheque or warrant sent through the post to the registered address of
the Member or person entitled thereto, and in the case of joint holders to any
one of such joint holders, or to such person and to such address as the holder
or joint holders may in writing direct. Every such cheque or warrant shall be
made payable to the order of the person to whom it is sent or to such other
person as the holder or joint holders may in writing direct, and payment of the
cheque or warrant shall be a good discharge to the Company. Every such cheque
or warrant shall be sent at the risk of the person entitled to the money
represented thereby.
24
<PAGE> 28
98. A general meeting declaring a dividend may, upon the recommendation of the
Directors, direct payment of such dividend wholly or in part by the distribution
of specific assets, and in particular of paid up shares or debentures of any
other company, and the Directors shall give effect to such resolution; and where
any difficulty arises in regard to the distribution they may settle the same as
they think expedient, and in particular may issue certificates representing part
of a shareholding or fractions of shares, and may fix the value for distribution
of such specific assets or any part thereof, and may determine that cash
payments shall be made to any Members upon the footing of the value so fixed, in
order to adjust the rights of Members, and may vest any specific assets in
trustees upon trust for the persons entitled to the dividend as may seem
expedient to the Directors, and generally may make such arrangements for the
allotment, acceptance and sale of such specific assets or certificates
representing part of a shareholding or fractions of shares, or any part thereof,
and otherwise as they think fit.
99. Any resolution declaring a dividend on the shares of any class, whether a
resolution of the Company in general meeting or a resolution of the Directors,
or any resolution of the Directors for the payment of a fixed dividend on a date
prescribed for the payment thereof, may specify that the same shall be payable
to the persons registered as the holders of shares of the class concerned at the
close of business on a particular date, notwithstanding that it may be a date
prior to that on which the resolution is passed (or, as the case may be, that
prescribed for payment of a fixed dividend), and thereupon the dividend shall be
payable to them in accordance with their respective holdings so registered, but
without prejudice to the rights inter se in respect of such dividend of
transferors and transferees of any shares of the relevant class.
ACCOUNTS AND AUDIT
100. The Company shall keep accounting records and the Directors shall prepare
accounts of the Company, made up to such date in each year as the Directors
shall from time to time determine, in accordance with and subject to the
provisions of the Law.
101. No Member shall have any right to inspect any accounting records or other
book or document of the Company except as conferred by the Law or authorised by
the Directors or by resolution of the Company.
102. The Directors, or the Company by resolution in general meeting, shall from
time to time appoint auditors for any period or periods to examine the accounts
of the Company and to report thereon in accordance with the Law and the auditors
shall, unless and until otherwise resolved by the Company in general meeting, be
Arthur Andersen.
NOTICES
103. Any notice to be given to or by any person pursuant to these Articles
shall be in writing, save as provided in Article 78 hereof. In the case of joint
holders of a share, all notices shall be given to that one of the joint holders
whose name stands first in the Register
25
<PAGE> 29
in respect of the joint holding and notice so given shall be sufficient notice
to all the joint holders.
104. Any notice may be posted to or left at the registered address of any
person, and any notice so posted shall be deemed to be served one clear day
after the day it was posted.
105. Any Member present in person at any meeting of the Company shall, for all
purposes, be deemed to have received due notice of such meeting and, where
requisite, of the purposes for which such meeting was convened.
106. Any notice or document served on a Member shall, notwithstanding that such
Member be then dead or bankrupt and whether or not the Company has notice of
his death or bankruptcy, be deemed to have been duly served on such Member as
sole or joint holder, unless his name shall at the time of the service of the
notice or document have been removed from the Register, and such service shall
for all purposes be deemed a sufficient service of such notice or document on
all persons interested (whether jointly with or as claiming through or under
him) in the shares of such Member.
107. Notwithstanding any of the provisions of these Articles, any notice to be
given by the Company to a Director or to a Member may be given in any manner
agreed in advance by any such Director or Member.
WINDING UP
108. Subject to any particular rights or limitations for the time being attached
to any shares, as may be specified in these Articles or upon which such shares
may be issued, if the Company is wound up, the assets available for distribution
among the Members shall be applied first in repaying to the Members the amount
paid up on their shares respectively, and if such assets shall be more than
sufficient to repay to the Members the whole amount paid up on their shares, the
balance shall be distributed among the Members in proportion to the amount which
at the time of the commencement of the winding up had been actually paid up on
their said shares respectively.
109. If the Company is wound up, the Company may, with the sanction of a
Special Resolution and any other sanction required by the Law, divide the whole
or any part of the assets of the Company among the Members in specie and the
liquidator or, where there is no liquidator, the Directors, may, for that
purpose, value any assets and determine how the division shall be carried out
as between the Members or different classes of Members, and with the like
sanction, vest the whole or any part of the assets in trustees upon such trusts
for the benefit of the Members as he with the like sanction determines, but no
Member shall be compelled to accept any assets upon which there is a liability.
26
<PAGE> 30
INDEMNITY
110. (1) A Director of the Company shall not be liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a Director to
the fullest extent permitted by Jersey law.
(2) (a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Jersey law. The right to indemnification conferred in this Article shall also
include the right to be paid by the Company the expenses incurred in connection
with any such proceeding in advance of its final disposition to the fullest
extent authorised by Jersey law. The right to indemnification conferred in this
Article shall be a contract right.
(b) The Company may, by action of its Board of Directors, provide
indemnification to such of the officers, employees and agents of the Company
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorised by Jersey law.
(3) The Directors shall have power to purchase and maintain in the name
of and at the expense of the Company insurance for the benefit of any person
who is or was a Director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss incurred by such person
in any such capacity or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under
Jersey law.
(4) The rights and authority conferred in this Article shall not be
exclusive of any other right which any person may otherwise have or hereafter
acquire.
(5) Neither the amendment nor repeal of this Article nor the adoption of
any provision of the Memorandum of Association or these Articles nor, to the
fullest extent permitted by Jersey law, any modification of law, shall
eliminate or reduce the effect of this Article in respect of any acts or
omissions occurring prior to such amendment, repeal, adoption or modification.
NON-APPLICATION OF STANDARD TABLE
111. The regulations constituting the Standard Table in the Companies (Standard
Table) (Jersey) Order 1992 shall not apply to the Company.
27
<PAGE> 31
ARTICLES OF ASSOCIATION
INDEX
<TABLE>
<CAPTION>
PAGE
ARTICLE NO.
<S> <C>
Accounts and Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Alternate Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Appointment of Directors. . . . . . . . . . . . . . . . . . . . . . . . 16
Corporate Members . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Executive Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 15
General Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Joint Holders of Shares . . . . . . . . . . . . . . . . . . . . . . . . 6
Minute Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Non-Application of Standard Table . . . . . . . . . . . . . . . . . . . 27
Notice of General Meetings. . . . . . . . . . . . . . . . . . . . . . . 9
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Powers of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Preliminary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Proceedings at General Meetings . . . . . . . . . . . . . . . . . . . . 9
Proceedings of Directors. . . . . . . . . . . . . . . . . . . . . . . . 20
Register of Members . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Resignation, Disqualification and Removal of Directors. . . . . . . . . 17
Seals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Share Capital and Shares. . . . . . . . . . . . . . . . . . . . . . . . 5
Share Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Transactions with Directors . . . . . . . . . . . . . . . . . . . . . . 19
Transfer and Transmission of Shares . . . . . . . . . . . . . . . . . . 7
Winding Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
28
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
INDENTURE
dated as of July 15, 1998
by and between
AerCo LIMITED, a limited liability company incorporated
in Jersey, Channel Islands, as issuer of the Notes,
and
BANKERS TRUST COMPANY, as initial
trustee of the Notes
- --------------------------------------------------------------------------------
<PAGE> 2
Reconciliation and tie between the Indenture, dated as of July 15, 1998, and
the Trust Indenture Act of 1939, as amended. This reconciliation does not
constitute part of the Indenture.
<TABLE>
<S> <C>
Trust Indenture Act
of 1939 Section Indenture Section
------------------- -----------------
310(a)(1) 6.09
(a)(2) 6.09
(b) 6.08
311 6.08
312(a) 2.07
313(a) 6.10
313(c) 6.10/6.11(c)
314(a) 6.11(a) - (c)
(a)(4) 6.11(d)
(c)(1) 1.03
(c)(2) 1.03
(e) 1.03
315(b) 6.07
315(d) 6.01
316(a)(last sentence) 1.04(c)
(a)(1)(A) 4.12
(a)(1)(B) 4.05
(b) 4.09
(c) 1.04(d)
317(a)(1) 4.03; 13.04
(a)(2) 4.10
(b) 2.04
318(a) 13.13
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
DEFINITIONS PAGE
<S> <C>
Section 1.01. Definitions........................................... 1
Section 1.02. Rules of Construction................................. 34
Section 1.03. Compliance Certificates and Opinions.................. 35
Section 1.04. Acts of Noteholders................................... 36
Section 1.05. Incorporation by Reference of Trust Indenture Act..... 37
ARTICLE II
THE NOTES
Section 2.01. Amount Not to Exceed the Initial Outstanding Principal
Balance; Terms; Form; Execution and Delivery....................... 38
Section 2.02. Restrictive Legends.................................... 41
Section 2.03. Registrar and Paying Agent............................. 42
Section 2.04. Paying Agent to Hold Money in Trust.................... 44
Section 2.05. Method of Payment...................................... 44
Section 2.06. Minimum Denomination................................... 45
Section 2.07. Transfer and Exchange; Cancellation.................... 45
Section 2.08. Mutilated, Destroyed, Lost or Stolen Notes............. 48
Section 2.09. Payments of Transfer Taxes............................. 48
Section 2.10. Refinancing of A-D Notes............................... 48
Section 2.11. Issuer Additional Notes................................ 50
Section 2.12. Remaining Subclass D-1 Notes and Remaining Subclass E-1
Notes................................................................. 51
Section 2.13. Special Transfer Provisions............................ 52
Section 2.14. Temporary Definitive Registered Notes.................. 54
Section 2.15. Statements to Noteholders.............................. 55
Section 2.16. CUSIP, CINS AND ISIN Numbers........................... 56
ARTICLE III
ACCOUNTS; PRIORITY OF PAYMENTS
Section 3.01. Establishment of Accounts.............................. 56
Section 3.02. Investments of Cash.................................... 61
Section 3.03. Closing Date Deposits, Withdrawals and Transfers....... 62
Section 3.04. Interim Deposits and Withdrawals....................... 62
</TABLE>
<PAGE> 4
ii
<TABLE>
<S> <C>
Section 3.05. Interim Deposits and Withdrawals for Modification
Payments or Dispositions of Aircraft.................... 64
Section 3.06. Calculation Date Calculations........................... 64
Section 3.07. Payment Date First Step Withdrawals and Transfers....... 66
Section 3.08. Payment Date Second Step Withdrawals.................... 67
Section 3.09. Allocations of Principal Payments Among Subclasses
of the Notes............................................ 72
Section 3.10. Certain Redemptions; Certain Premiums................... 73
Section 3.11. Adjustment of Class Percentages and Target
Principal Balances...................................... 75
ARTICLE IV
DEFAULT AND REMEDIES
Section 4.01. Events of Default....................................... 75
Section 4.02. Acceleration, Rescission and Annulment.................. 77
Section 4.03. Other Remedies.......................................... 78
Section 4.04. Limitation on Suits..................................... 78
Section 4.05. Waiver of Existing Defaults............................. 78
Section 4.06. Restoration of Rights and Remedies...................... 79
Section 4.07. Remedies Cumulative..................................... 79
Section 4.08. Authority of Courts Not Required........................ 79
Section 4.09. Rights of Noteholders to Receive Payment................ 79
Section 4.10. Trustee May File Proofs of Claim........................ 80
Section 4.11. Undertaking for Costs................................... 80
Section 4.12. Control by Noteholders.................................. 80
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. Representations and Warranties.......................... 80
Section 5.02. General Covenants....................................... 83
Section 5.03. Operating Covenants..................................... 95
ARTICLE VI
THE TRUSTEE
Section 6.01. Acceptance of Trusts and Duties......................... 100
Section 6.02. Absence of Duties....................................... 100
Section 6.03. Representations or Warranties........................... 100
Section 6.04. Reliance; Agents; Advice of Counsel..................... 100
Section 6.05. Not Acting in Individual Capacity....................... 102
</TABLE>
<PAGE> 5
iii
<TABLE>
<S> <C>
Section 6.06. No Compensation from Noteholders....................... 102
Section 6.07. Notice of Defaults..................................... 102
Section 6.08. May Hold Notes......................................... 103
Section 6.09. Corporate Trustee Required; Eligibility................ 103
Section 6.10. Reports by Trustee..................................... 103
Section 6.11. Reports by the Issuer.................................. 103
ARTICLE VII
SUCCESSOR TRUSTEES
Section 7.01. Resignation and Removal of Trustee..................... 104
Section 7.02. Appointment of Successor............................... 104
ARTICLE VIII
INDEMNITY
Section 8.01. Indemnity.............................................. 106
Section 8.02. Noteholders' Indemnity................................. 106
ARTICLE IX
MODIFICATION
Section 9.01. Modification with Consent of Holders................... 106
Section 9.02. Modification Without Consent of Holders................ 107
Section 9.03. Subordination and Priority of Payments................. 107
Section 9.04. Execution of Amendments by Trustee..................... 108
Section 9.05. Swap Providers......................................... 108
Section 9.06. Conformity with Trust Indenture Act.................... 108
ARTICLE X
SUBORDINATION
Section 10.01. Subordination of the Notes............................ 108
ARTICLE XI
DISCHARGE OF INDENTURE; DEFEASANCE
Section 11.01. Discharge of Liability on the Notes; Defeasance....... 110
</TABLE>
<PAGE> 6
iv
<TABLE>
<S> <C>
Section 11.02. Conditions to Defeasance.............................. 111
Section 11.03. Application of Trust Money............................ 113
Section 11.04. Repayment to Issuer................................... 113
Section 11.05. Indemnity for Government Obligations and Corporate
Obligations........................................... 113
Section 11.06. Reinstatement......................................... 113
ARTICLE XII
GUARANTEE
Section 12.01. Guarantee............................................. 114
Section 12.02. Conditions to Effectiveness of Guarantee.............. 116
Section 12.03. Ranking and Subordination of the Guarantees........... 116
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Right of Trustee to Perform........................... 117
Section 13.02. Waiver................................................ 117
Section 13.03. Severability.......................................... 118
Section 13.04. Restrictions on Exercise of Certain Rights............ 118
Section 13.05. Notices............................................... 118
Section 13.06. Assignments........................................... 121
Section 13.07. Currency Conversion................................... 121
Section 13.08. Application to Court.................................. 122
Section 13.09. Governing Law......................................... 122
Section 13.10. Jurisdiction.......................................... 122
Section 13.11. Counterparts.......................................... 123
Section 13.12. Table of Contents, Headings, Etc...................... 123
Section 13.13. Trust Indenture Act................................... 123
</TABLE>
<PAGE> 7
PAGE
Schedules
---------
<TABLE>
<S> <C>
Schedule A - Initial Appraised Value of the Initial Aircraft
Schedule B - Issuer Subsidiaries
</TABLE>
Exhibits
--------
<TABLE>
<S> <C>
Exhibit A-1 - Form of Subclass A-1 Floating Rate Note
Exhibit A-2 - Form of Subclass A-2 Floating Rate Note
Exhibit B - Form of Subclass B-1 Floating Rate Note
Exhibit C - Form of Subclass C-1 Floating Rate Note
Exhibit D - Form of Subclass D-1 Fixed Rate Note
Exhibit E - Form of Subclass E-1 Fixed Rate Note
Exhibit F - Concentration Limits
Exhibit G - Agents for Service of Process
Exhibit H - Insurance Provisions
Exhibit I - Form of Monthly Report to the Issuer and Each Rating Agency
Exhibit J - Form of Certificate of Transfer
Exhibit K - Core Lease Provisions
</TABLE>
Appendices
----------
<TABLE>
<S> <C>
Appendix A - Class Percentages
Appendix B - Target Principal Balances
</TABLE>
<PAGE> 8
TRUST INDENTURE, dated as of July 15, 1998 (this "Indenture"), by
and among AerCo LIMITED, a limited liability company incorporated
in Jersey, Channel Islands ("AerCo"), as issuer of the Notes (the
"Issuer"), and BANKERS TRUST COMPANY, as trustee of each subclass
of Notes (the "Trustee").
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For purposes of this Indenture, the
following terms shall have the meanings indicated below:
"A-C Note Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Initial Closing Date, between the Issuer and Morgan
Stanley & Co. Incorporated.
"A-D Notes" means the Class A Notes, the Class B Notes, the Class C Notes
and the Class D Notes.
"Acceleration Default" means any Event of Default of the type described in
Section 4.01(f) or 4.01(g) hereof.
"Accounts" means the Rental Accounts, the Collection Account, the
Defeasance/Redemption Account, the Expense Account, the Lessee Funded Account,
the Aircraft Purchase Account and the Refinancing Account and any ledger and
subledger accounts maintained therein in accordance with this Indenture.
"Acquisition Agreements" means the Share Purchase Agreement, the ALPS 94-1
Share Purchase Agreement and any agreements pursuant to which Remaining or
Substitute Aircraft or Issuer Additional Aircraft are acquired, the AerFi Share
Purchase Agreement and the Cash Flow Swap Agreement.
"Act", with respect to any Noteholder, has the meaning given to such term
in Section 1.04 hereof.
"Additional Aircraft" means the Issuer Additional Aircraft and the
Guarantor Additional Aircraft.
"Additional Issuance" has the meaning given to such term in Section 2.11
hereof.
"Additional Lease" means, with respect to each Additional Aircraft, each
aircraft lease agreement, conditional sale agreement, hire purchase agreement
or other similar arrangement with respect to such Additional Aircraft on the
relevant Closing Date.
<PAGE> 9
2
"Additional Servicer" means a servicer of any Issuer Additional Aircraft
pursuant to an Additional Servicing Agreement.
"Additional Servicing Agreement" means any servicing agreement entered
into to service any Issuer Additional Aircraft.
"Adjusted Base Value" means, with respect to any Aircraft on any
Calculation Date, the average of the Base Values of such Aircraft as determined
by the Appraisals of such Aircraft delivered in connection with the Relevant
Appraisal with respect to such Calculation Date.
"Adjusted Portfolio Value" means, in respect of any Payment Date, the sum
of the products of (i) the Adjusted Base Value of each Aircraft in the
Portfolio on the Calculation Date preceding such Payment Date and (ii) the
quotient obtained by dividing the applicable Depreciation Factor for such
Aircraft on such Calculation Date by the applicable Depreciation Factor for
such Aircraft as of the Relevant Appraisal with respect to such Calculation
Date.
"Administrative Agency Agreement" means the Administrative Agency
Agreement dated as of the Initial Closing Date among the Administrative Agent,
GPA Group, AerCo and the Issuer Subsidiaries parties thereto.
"Administrative Agent" means GPA Administrative Services Limited, a
company incorporated under the laws of Ireland, in its capacity as
administrative agent under the Administrative Agency Agreement, including its
successors in interest and permitted assigns, until a successor Person shall
have become the administrative agent under such agreement, and thereafter
"Administrative Agent" shall mean such successor Person.
"AerCo Group" means the Issuer, any Issuer Subsidiary, any Guarantor and
any Guarantor Subsidiary.
"AerCo Group A-D Notes" means the AerCo Group Class A Notes, the AerCo
Group Class B Notes, the AerCo Group Class C Notes and the AerCo Group Class D
Notes.
"AerCo Group Additional Notes" means the Issuer Additional Notes and the
Guarantor Additional Notes.
"AerCo Group Class A Notes" means the Class A Notes and the Guarantor
Class A Additional Notes.
"AerCo Group Class B Notes" means the Class B Notes and the Guarantor
Class B Additional Notes.
"AerCo Group Class C Notes" means the Class C Notes and the Guarantor
Class C Additional Notes.
<PAGE> 10
3
"AerCo Group Class D Notes" means the Class D Notes and the Guarantor
Class D Additional Notes.
"AerCo Group Class E Notes" means the Class E Notes and the Guarantor
Class E Additional Notes.
"AerCo Group Fixed Rate Notes" means the AerCo Group Notes issued with a
fixed rate of interest.
"AerCo Group Floating Rate Notes" means the AerCo Group Notes issued with
a floating or variable rate of interest.
"AerCo Group Member" means the Issuer, any Guarantor, any Issuer
Subsidiary or any Guarantor Subsidiary.
"AerCo Group Notes" means the Notes and the Guarantor Additional Notes.
"AerCo Group Refinancing Notes" means the Refinancing Notes and the
"Refinancing Notes" referred to in a Guarantor Indenture.
"AerCo Group Related Collateral Document" means any Related Collateral
Document or any "Related Collateral Document" referred to in a Guarantor
Indenture.
"AerCo Ireland" means AerCo Ireland Limited, an Irish limited liability
company with a registered number of 275814.
"AerCo Ireland II" means AerCo Ireland II Limited, an Irish limited
liability company with a registered number of 275810.
"AerCoUSA" means AerCoUSA Inc., a Delaware corporation wholly-owned by the
Issuer.
"AerFi" means AerFi Belgium N.V., a company incorporated under the laws of
Belgium with a registered number of 467.580.
"AerFi Share Purchase Agreement" means the Share Purchase Agreement dated
as of the date hereof between AerCo Ireland II and GPA Group.
"affiliate" has the meaning given to such term in Section 5.02(b) hereof.
"Agreed Currency" has the meaning given to such term in Section 13.07(a)
hereof.
<PAGE> 11
4
"Agreed Value Payment" means a payment to be made by or on behalf of a
Lessee under a Lease upon or following a Total Loss of an Aircraft with respect
to such Total Loss.
"Aircraft" means the Initial Aircraft and the Additional Aircraft.
"Aircraft Agreement" has the meaning given to such term in Section 5.02(g)
hereof.
"Aircraft Owning Subsidiaries" means initially, ALPS 94-1, AerCo Ireland,
AerCo Ireland II, AerCoUSA, any successor corporations and any other Issuer
Subsidiaries holding title to an Aircraft.
"Aircraft Purchase Account" has the meaning given to such term in Section
3.01(h) hereof.
"Aircraft Sale" means any sale or other disposition of any Aircraft,
including by reason of such Aircraft suffering a Total Loss.
"Allowed Restructuring" has the meaning given to such term in Section
5.02(e) hereof.
"ALPS 94-1" means Aircraft Lease Portfolio Securitization 94-1 Limited, a
company incorporated with limited liability under the laws of Jersey, Channel
Islands.
"ALPS 94-1 (Belgium)" means ALPS 94-1 (Belgium) N.V., a company
incorporated under the laws of Belgium with a registered number 392.073.
"ALPS 94-1 Share Purchase Agreement" means the Share Purchase Agreement
dated as of July 15, 1998, between Mourant & Co. Trustees Limited as trustees
of the ALPS 94-1 Trust and the Issuer for all the outstanding share capital of
ALPS 94-1.
"Applicable Aviation Authority" means, in relation to any Aircraft, each
governmental or regulatory authority that has responsibility for the
supervision of civil aviation and/or the registration and operations of civil
aircraft in the State of Registration of such Aircraft.
"Applicable Law" means, with respect to any Person, all laws, rules,
regulations and orders of governmental regulatory authorities applicable to
such Person, including, without limitation, the regulations of each Applicable
Aviation Authority applicable to such Person.
"Applicable Procedures" means, with respect to any transfer or exchange of
Book-Entry Interests, the rules and procedures of the Book-Entry Depositary,
the Depository,
<PAGE> 12
5
Euroclear and Cedel and any of their Participants and Indirect Participants
that apply to such transfer or exchange.
"Appraisal" means a desktop appraisal of the Base Value of an Aircraft
made pursuant to Section 5.03(c) hereof.
"Appraisers" has the meaning set forth in Section 5.03(c) hereof.
"Assumed Portfolio Value" means, in respect of any Payment Date, the sum
of the products of (i) the Initial Appraised Value of each Aircraft in the
Portfolio on the Calculation Date preceding such Payment Date and (ii) the
quotient obtained by dividing the Depreciation Factor applicable to such
Aircraft on such Calculation Date by the Depreciation Factor applicable to such
Aircraft on the relevant Closing Date.
"Authorized Agent" means, with respect to the Notes of any subclass, any
authorized Paying Agent or Registrar for the Notes of such subclass.
"Available Collections Amount" means, as of any Calculation Date, amounts
on deposit in the Collection Account less the Required Expense Amount
determined as of such date.
"Babcock & Brown" means Babcock & Brown Limited, a limited liability
company organized under the laws of Ireland.
"Bankers Trust" means Bankers Trust Company, a New York banking
corporation currently located at Four Albany Street, New York, New York 10006.
"Base Value" means the value of an Aircraft in an open, unrestricted,
stable market environment with a reasonable balance of supply and demand, and
with full consideration of the Aircraft's "highest and best use", presuming an
arm's-length, cash transaction between willing, able and knowledgeable parties,
acting prudently, with an absence of duress and with a reasonable period of
time available for marketing, adjusted to account for the maintenance status of
such Aircraft (with certain assumptions as to use since the last reported
status).
"Basic Terms Modification" has the meaning given to such term in Section
9.01 hereof.
"Belgian Security Documents" means the Pledge Agreement by AerFi to AerCo
Ireland II, the Pledge Agreement from ALPS 94-1 (Belgium) to Pergola, the Share
Pledge in respect of the shares of ALPS 94-1 (Belgium) and the Share Pledge in
respect of the shares of AerFi, each dated as of the date hereof.
<PAGE> 13
6
"Board" means, with respect to the Issuer, the board of directors of the
Issuer and, with respect to any AerCo Group Member other than the Issuer, an
equivalent governing body.
"Board Resolution" means a copy of a resolution certified as having been
duly adopted by the Board of the Issuer and being in full force and effect on
the date of such certification.
"Book-Entry Depositary" means Bankers Trust in its capacity as book-entry
depositary pursuant to the terms of the Deposit Agreement, including its
successors in interest and permitted assigns.
"Book-Entry Interest" means an indirect beneficial interest in a Global
Note held through a corresponding Depositary Interest and shown on, and
transferred only through, records maintained in book-entry form by the
Depository (with respect to the Participants) and its Participants.
"Business Day" means a day on which U.S. dollar deposits may be dealt in
on the London inter-bank market and commercial banks and foreign exchange
markets are open in New York, New York and London, England and, with respect to
payments to or withdrawals from the Non-Trustee Accounts, a day on which the
financial institution at which such account is located is open for business.
"Calculation Date" means the fourth Business Day immediately preceding
each Payment Date.
"Cash Management Agreement" means the Cash Management Agreement dated as
of the Initial Closing Date among AerCo, the Issuer Subsidiaries parties
thereto, GPA Group, the Trustee, the Security Trustee and the Cash Manager.
"Cash Manager" means GPA Cash Manager II Limited, a limited company
organized under the laws of Ireland, in its capacity as cash manager under the
Cash Management Agreement, including its successors in interest, until a
successor Person shall have become the cash manager under that agreement, and
thereafter, "Cash Manager" shall mean such successor Person.
"Cedel" means Cedel Bank, societe anonyme.
"Charitable Trust" means the charitable trust established under the laws
of Jersey, Channel Islands, which beneficially owns 95% of the issued shares of
the Issuer.
"Charitable Trustee" means the trustee of the Charitable Trust.
"Class A Notes" means, collectively, the Subclass A-1 Notes and the
Subclass A-2 Notes, each substantially in the form attached as Exhibits A-1 and
A-2 hereto, any
<PAGE> 14
7
Refinancing Notes issued to refinance any subclass of the Class A Notes and any
Issuer Additional Notes of such class.
"Class B Notes" means the Subclass B-1 Notes, each substantially in the
form attached as Exhibit B-1 hereto, any Refinancing Notes issued to refinance
any subclass of the Class B Notes and any Issuer Additional Notes of such
class.
"Class C Notes" means the Subclass C-1 Notes, each substantially in the
form attached as Exhibit C-1 hereto, any Refinancing Notes issued to refinance
any subclass of the Class C Notes and any Issuer Additional Notes of such
class.
"Class D Notes" means the Subclass D-1 Notes, each substantially in the
form attached as Exhibit D-1 hereto, any Refinancing Notes issued to refinance
any subclass of the Class D Notes and any Issuer Additional Notes of such
class.
"Class E Note Accrued Interest Amount" means, on any Payment Date, the
aggregate interest accrued on the Outstanding Principal Balance of the AerCo
Group Class E Notes during the related Interest Accrual Period at the adjusted
interest rate per annum set forth on the face of such AerCo Group Class E Notes
(after giving effect to the Class E Note Primary Interest Amount paid on such
Payment Date) and the aggregate interest accrued and unpaid from any prior
Interest Accrual Period on the AerCo Group Class E Notes.
"Class E Note Primary Interest Amount" means, on any Payment Date, the
aggregate interest accrued on the Initial Outstanding Balance of the AerCo
Group Class E Notes during the related Interest Accrual Period at a rate of 15%
per annum.
"Class E Note Representative" means the representative of the Noteholders
of the Class E Notes selected by Holders of a majority of the Outstanding
Principal Balance of the Class E Notes, initially GPA Group.
"Class E Notes" means the Subclass E-1 Notes, each substantially in the
form attached as Exhibit E-1 hereto and any Issuer Additional Notes of such
class.
"Class Percentage" means each of the Minimum Class Percentage, Scheduled
Class Percentage and Supplemental Class Percentage.
"Closing Date" means in the case of (i) the Initial Notes and the Initial
Aircraft, the Initial Closing Date, (ii) any Remaining Subclass D-1 Notes,
Remaining Subclass E-1 Notes, Refinancing Notes or AerCo Group Additional
Notes, the relevant date of issuance of such Notes and (iii) any Additional
Aircraft, the date of issuance of the AerCo Group Additional Notes issued to
finance the acquisition of such Additional Aircraft.
"Collateral" has the meaning given to such term in the Security Trust
Agreement.
<PAGE> 15
8
"Collection Account" has the meaning given to such term in Section 3.01(b)
hereof.
"Collections" means, without duplication, (i) Rental Payments (other than
Segregated Funds) and all other amounts received by any AerCo Group Member
pursuant to any Lease or AerCo Group Related Collateral Document, (ii) the
amount on deposit in the Collection Account in respect of the Liquidity Reserve
Amount, (iii) amounts received in respect of claims for damages or in respect
of any breach of contract for nonpayment of any of the foregoing (including any
amounts received from any AerCo Group Member, whether by way of distribution,
dividend, repayment of a loan or otherwise, and any proceeds received in
connection with any Allowed Restructuring), (iv) the amount received by any
AerCo Group Member in connection with any Aircraft Sale or otherwise received
under any Aircraft Agreement, including sale proceeds, Total Loss Proceeds,
Agreed Value Payments, proceeds of PRI, Requisition Compensation and all
Partial Loss Proceeds, less, in each case, any expenses payable by such AerCo
Group Member to any Person that is not an AerCo Group Member in connection
therewith, (v) other amounts received by any AerCo Group Member from insurance
with respect to any Aircraft, (vi) any amounts transferred from the Lessee
Funded Account into the Collection Account in accordance with Section 3.07
hereof, (vii) any Swap Receipts, (viii) the proceeds of any investments of the
funds in the Accounts (except to the extent that any such proceeds are required
to be paid over to any Lessee under a Lease), (ix) any amounts transferred from
the Aircraft Purchase Account into the Collection Account in accordance with
Section 3.04 hereof, (x) any amounts transferred from the Tax Defeasance
Account into the Collection Account in accordance with Section 3.04 hereof,
(xi) prior to the delivery of the Remaining Aircraft or Substitute Aircraft,
(X) the amount of the rental and other payments received by GPA under the
Leases of such Remaining Aircraft less (Y) the amount of the Investments on the
funds on deposit in the Aircraft Purchase Account allocable to such Remaining
Aircraft in respect of the period commencing on the day next following the
preceding Calculation Date and ending on the Calculation Date of an Interest
Accrual Period; provided that if GPA does not receive payments in full of such
rental and other payments due during such period, the amount of Investments
deducted from (Y) above will be reduced by multiplying a ratio the numerator of
which is the amount of nonpayments in respect of such period and the
denominator of which is the amount of rental and other payments due in respect
of such period and (xii) any other amounts received by any AerCo Group Member
other than (A) Segregated Funds, (B) funds to be applied in connection with a
redemption under Section 3.10(a) or (b) under this Indenture or under any
Guarantor Indenture, which shall be deposited in the Defeasance/Redemption
Account, (C) funds received in connection with a Refinancing and (D) other
amounts required to be paid over to any third party pursuant to any Related
Document or Tax-Related Disposition Agreement, in each case subject to the
restrictions set forth in this Indenture and any Guarantor Indenture.
"Commission" means the U.S. Securities and Exchange Commission, as from
time to time constituted or created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.
<PAGE> 16
9
"Company Secretary" means Mourant & Co. Secretaries Limited, including its
successors in interest and permitted assigns.
"Concentration Default" has the meaning given to such term in Section
5.02(g) hereof.
"Concentration Limits" has the meaning given to such term in Section
5.03(a) hereof.
"control" has the meaning given to such term in Section 5.02(b) hereof,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Core Lease Provisions" has the meaning given to such term in Section
5.03(f) hereof.
"Corporate Obligations" has the meaning given to such term in Section
11.02 hereof.
"Corporate Trust Office" means, with respect to the Trustee, the office of
such trustee in the city at which at any particular time its corporate trust
business shall be principally administered and, with respect to the Trustee on
the date hereof, shall be Four Albany Street, New York, New York 10006,
Attention: Corporate Trust and Agency Group--Structured Finance, Facsimile No:
+212-250-6439.
"covenant defeasance" has the meaning given to such term in Section 11.01
hereof.
"Credit Facility" means any letter of credit, guarantee or other credit
enhancement or liquidity enhancement facility in favor of the Issuer.
"D Note Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof between GPA Group and the Issuer.
"DCR" means Duff and Phelps Credit Rating Co., and any successor thereto,
or, if such corporation or its successor shall for any reason no longer perform
the functions of a securities rating agency, "DCR" shall be deemed to refer to
any other nationally recognized rating agency designated by the Issuer.
"Default" means a condition, event or act which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"Default Notice" means a notice given to the Issuer by Holders
representing 25% of the aggregate Outstanding Principal Balance of the Senior
Class of Notes, with a copy to the Trustee of each subclass of Notes, the Cash
Manager and the Administrative Agent,
<PAGE> 17
10
declaring all Outstanding principal of and accrued and unpaid interest on the
Notes to be immediately due and payable.
"Defeasance/Redemption Account" has the meaning given to such term in
Section 3.01(g) hereof.
"Definitive Registered Notes" has the meaning given to such term in
Section 2.01(b) hereof.
"Deposit Agreement" means the Note Depositary Agreement, dated as of July
15, 1998, between the Issuer and Bankers Trust, as Book-Entry Depositary, with
respect to the Global Notes, as amended from time to time in accordance with
the terms thereof.
"Depositary Interest" means a certificateless depositary interest
representing a 100% beneficial interest in a Global Note.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Depreciation Factor" means, (i) with respect to each Initial Aircraft on
any date of determination, if positive, the product of (1-kn) and 1.02n ,
where "n" equals the age of such Aircraft in years from the date of its
manufacture and "k" equals a fraction, the numerator of which is 1 and the
denominator of which is the Expected Useful Life of such Initial Aircraft and
(ii) with respect to each Additional Aircraft, the Depreciation Factor
determined by the Board in connection with the issuance of the AerCo Group
Additional Notes funding the acquisition of such Additional Aircraft.
"Direction" has the meaning given to such term in Section 1.04(c) hereof.
"DTC" means The Depository Trust Company.
"Eligibility Requirements" has the meaning given to such term in Section
2.03(b) hereof.
"Eligible Account" means a segregated trust account with an Eligible
Institution.
"Eligible Credit Facility" means any Credit Facility provided by, or
supported with a further Credit Facility provided by, an Eligible Provider.
"Eligible Institution" means (a) Bankers Trust, so long as it has (A) a
long-term unsecured debt rating of A (or the equivalent) or better by each
Rating Agency or (B) a certificate of deposit rating of A-1 by Standard &
Poor's and P-1 by Moody's and is otherwise acceptable to DCR; and (b) any bank
organized under the laws of the United States of America or any state thereof,
or the District of Columbia (or any domestic branch of a foreign
<PAGE> 18
11
bank), which at all times has either (A) a long-term unsecured debt rating of
AA (or the equivalent) or better by each Rating Agency or (B) a certificate of
deposit rating of A-l+ by Standard & Poor's, P-1 by Moody's and D-1 by DCR.
"Eligible Provider" means a Person whose short-term unsecured debt is
rated A-1+ by Standard & Poor's, P-1 by Moody's and D-1+ by DCR.
"Encumbrance" has the meaning given to such term in Section 5.02(b)
hereof.
"Engine" means each engine installed on any Aircraft, or, where any such
engine has been replaced under the terms of the relevant Lease, the engine
replacing such engine, and includes any and all Parts incorporated in,
installed on or attached to such engine.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Event of Default", with respect to a class of Notes, has the meaning
given to such term in Section 4.01 hereof.
"Excess Amortization Date" means, with respect to (i) the Subclass A-1
Notes, July 15, 2000, (ii) the Subclass A-2 Notes, the Subclass B-1 Notes and
the Subclass C-1 Notes, August 15, 1998, (iii) the Subclass D-1 Notes, July 15,
2010 and (iv) any Refinancing Notes or Issuer Additional Notes, the Excess
Amortization Date established by or pursuant to a Board Resolution or in any
indenture supplemental hereto providing for the issuance of such Notes or
specified in the form of such Notes.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any securities of the Issuer containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to a Registration Rights Agreement and this Indenture.
"Exchange Offer" has the meaning given to such term in the A-C Note
Registration Rights Agreement.
"Expected Final Payment Date" means with respect to (i) the Subclass A-1
Notes, July 15, 2000, (ii) the Subclass A-2 Notes, December 15, 2005, (iii) the
Subclass B-1 Notes and the Subclass C-1 Notes, July 15, 2013, (iv) the Subclass
D-1 Notes, April 15, 2014 and (v) any Refinancing Notes or Issuer Additional
Notes, the Expected Final Payment Date established by or pursuant to a Board
Resolution or in any indenture supplemental hereto providing for the issuance
of such Notes or specified in the form of such Notes.
"Expected Useful Life" means, with respect to each Initial Aircraft, 25
years from the date of manufacture except that any Initial Aircraft converted
to freighter service
<PAGE> 19
12
shall have an Expected Useful Life of 15 years from the date of conversion and,
with respect to any Issuer Additional Aircraft, the "Useful Life" established
by or pursuant to a Board Resolution or in any indenture supplemental hereto
providing for the issuance of Issuer Additional Notes funding the acquisition
of such Additional Aircraft.
"Expense Account" has the meaning given to such term in Section 3.01(d)
hereof.
"Expenses" means, with respect to AerCo Group, collectively, any fees,
costs, expenses or Taxes incurred by any AerCo Group Member in the course of
the business activities permitted under Section 5.02(e) of this Indenture or
under any Guarantor Indenture, including, without limitation, the fees and
expenses of any Service Provider and the annual undertaking fee to the
Charitable Trustee; provided, however, that Expenses shall not include any
amount payable on the AerCo Group Notes, under any Swap Agreement or under any
Credit Facilities or any other amounts ranking pari passu with or junior to
interest payable on the AerCo Group Class A Notes in the priority of payments
set forth under Section 3.08 hereof.
"Extended Pool Factor" means, with respect to each subclass of AerCo Group
Notes, the "Extended Pool Factor" set forth in the appendix to such Notes.
"Extension Amount" has the meaning given to such term in Section 3.09
hereof.
"Final Maturity Date" means with respect to (i) the Subclass A-1 Notes,
the Subclass A-2 Notes, the Subclass B-1 Notes, the Subclass C-1 Notes, the
Subclass D-1 Notes and the Subclass E-1 Notes, July 15, 2023 and (ii) any
Refinancing Notes or Issuer Additional Notes, the date specified in the form of
such Notes.
"Fixed Rate Notes" means the Subclass D-1 Notes, the Subclass E-1 Notes
and any Refinancing Notes or Issuer Additional Notes issued with a fixed rate
of interest.
"Floating Rate Notes" means the Subclass A-1 Notes, the Subclass A-2
Notes, the Subclass B-1 Notes, the Subclass C-1 Notes and any Refinancing Notes
or Issuer Additional Notes issued with a floating or variable rate of interest.
"Future Lease" means, with respect to each Aircraft, any aircraft lease
agreement, conditional sale agreement, hire purchase agreement or other similar
arrangement for such Aircraft as may be in effect at any time after the
relevant Closing Date between the related AerCo Group Member (as lessor or
vendor) and a Person not an AerCo Group Member (as lessee or purchaser), as
such agreement or arrangement may be amended, modified, extended, supplemented,
assigned or novated from time to time, in each case other than any Initial
Lease.
<PAGE> 20
13
"Global Notes" means any Rule 144A Global Notes, Regulation S Global Notes
and any global Exchange Notes.
"GPA" means GPA Group and its subsidiaries and affiliates.
"GPA Group" means GPA Group plc, a public limited company incorporated in
Ireland.
"Guarantee" has the meaning given to such term in Section 5.02(f) hereof.
"guarantee" has the meaning given to such term in Section 5.02(f) hereof.
"Guarantor" means a special purpose vehicle, other than an Issuer
Subsidiary, organized to (i) issue Guarantor Additional Notes pursuant to an
indenture the terms of which are substantially identical to those of this
Indenture, the proceeds of which shall be used to acquire Guarantor Additional
Aircraft and (ii) guarantee the Notes.
"Guarantor Additional Aircraft" means any aircraft held or acquired by a
Guarantor or any Guarantor Subsidiary after the Initial Closing Date, excluding
any such aircraft sold or disposed of by way of a completed Aircraft Sale.
"Guarantor Additional Notes" has the meaning given to such term in Section
12.02 hereof.
"Guarantor Class A Additional Note Guarantee" has the meaning given to
such term in Section 12.03 hereof.
"Guarantor Class A Additional Notes" means the Guarantor Additional Notes
issued by a Guarantor ranking pari passu with the Class A Notes.
"Guarantor Class B Additional Note Guarantee" has the meaning given to
such term in Section 12.03 hereof.
"Guarantor Class B Additional Notes" means the Guarantor Additional Notes
issued by a Guarantor ranking pari passu with the Class B Notes.
"Guarantor Class C Additional Note Guarantee" has the meaning given to
such term in Section 12.03 hereof.
"Guarantor Class C Additional Notes" means the Guarantor Additional Notes
issued by a Guarantor ranking pari passu with the Class C Notes.
"Guarantor Class D Additional Note Guarantee" has the meaning given to
such term in Section 12.03 hereof.
<PAGE> 21
14
"Guarantor Class D Additional Notes" means the Guarantor Additional Notes
issued by a Guarantor ranking pari passu with the Class D Notes.
"Guarantor Class E Additional Note Guarantee" has the meaning given to
such term in Section 12.03 hereof.
"Guarantor Class E Additional Notes" means the Guarantor Additional Notes
issued by a Guarantor ranking pari passu with the Class E Notes.
"Guarantor Indenture" has the meaning given to such term in Section 12.02
hereof.
"Guarantor Subsidiary" means each subsidiary of a Guarantor.
"Guarantor Trustee" means a trustee or any successor trustee appointed in
accordance with a Guarantor Indenture.
"Holder" has the same meaning given to such term as the definition of
"Noteholder" hereunder.
"incur" has the meaning given to such term in Section 5.02(f) hereof.
"Indebtedness" has the meaning given to such term in Section 5.02(f)
hereof.
"Indenture" has the meaning set forth in the preamble hereof.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Aircraft" means each of the aircraft (including any related
Engines) identified in Schedule A hereto, any Remaining Aircraft and Substitute
Aircraft delivered, excluding any such aircraft sold or disposed of by way of a
completed Aircraft Sale.
"Initial Appraised Value", in the case of each Initial Aircraft, means the
average of the appraisals by each of the Initial Appraisers of the Base Value
of such Aircraft as of March 1, 1998 and, in the case of any Additional
Aircraft, the average of the appraisals by each of the Appraisers of the Base
Value of such Aircraft as of a date not more than six months prior to the
Closing Date for the issuance of the relevant AerCo Group Additional Notes.
"Initial Appraisers" means Aircraft Information Services, Inc., BK
Associates, Inc. and Airclaims Limited.
"Initial Closing Date" means July 15, 1998.
<PAGE> 22
15
"Initial Lease" means, with respect to each Initial Aircraft, each
aircraft lease agreement, conditional sale agreement, hire purchase agreement
or other similar arrangement with respect to such Initial Aircraft in existence
on the date of this Agreement, as such agreement or arrangement may be amended,
modified, extended, supplemented, assigned or novated from time to time.
"Initial Notes" means the Subclass A-1 Notes, the Subclass A-2 Notes, the
Subclass B-1 Notes, the Subclass C-1 Notes, the Subclass D-1 Notes (other than
the Remaining Subclass D-1 Notes) and the Subclass E-1 Notes (other than the
Remaining Subclass E-1 Notes).
"Initial Outstanding Balance" means, with respect to any AerCo Group
Notes, the initial total principal amount on the date of issuance therefor of
such Notes unpaid and outstanding at any time.
"Intercompany Loan" has the meaning given to such term in Section 5.02(f)
hereof.
"Intercompany Loan Agreements" has the meaning given to such term in the
Security Trust Agreement.
"Interest Accrual Period" means, as to each subclass of AerCo Group Notes,
the period beginning on (and including) the relevant Closing Date with respect
to such subclass of AerCo Group Notes and ending on (but excluding) the first
Payment Date thereafter and each successive period beginning on (and including)
a Payment Date and ending on (but excluding) the next succeeding Payment Date;
provided that the final Interest Accrual Period with respect to any subclass of
AerCo Group Notes shall end on but exclude the Final Maturity Date with respect
to such subclass of AerCo Group Notes (or, if earlier, with respect to any
subclass of AerCo Group Notes repaid in full, the date such subclass of AerCo
Group Notes is repaid in full). Account balances with respect to each Interest
Accrual Period shall be determined by reference to the balances of funds on
deposit in the Accounts on the Calculation Date immediately preceding each
Payment Date.
"Interest Amount" means, with respect to each subclass of AerCo Group A-D
Notes, on any Payment Date, the amount of accrued and unpaid interest at the
Stated Rate of Interest with respect to such subclass of AerCo Group A-D Notes
on such Payment Date (including, to the fullest extent permitted by applicable
law, interest on accrued and unpaid interest (excluding any unpaid Step-Up
Interest) from any prior Interest Accrual Period at the Stated Rate of Interest
for such subclass), determined in accordance with the terms of such subclass of
AerCo Group A-D Notes. Any amount of Premium or interest on any subclass of
AerCo Group A-D Notes not paid when due shall, to the fullest extent permitted
by applicable law, bear interest at an interest rate per annum equal to the
Stated Rate of Interest for such AerCo Group A-D Notes from the date when due
until such amount is paid or duly provided for, payable on the next succeeding
Payment Date, subject to the availability of the
<PAGE> 23
16
Available Collections Amount therefor after making payments entitled to
priority under Section 3.08 hereof.
"investment" has the meaning given to such term in Section 5.02(c) hereof.
"Irish Conduit Share Mortgage" means the Mortgage of Shares in Pergola
Limited, dated as of the date hereof.
"Irish Share Mortgages" means the Irish Conduit Share Mortgage and the
Irish Subsidiary Share Mortgage.
"Irish Subsidiary Share Mortgage" means the Mortgage of Shares in AerCo
Ireland, AerCo Ireland II and Submortgage of Shares in Pergola Limited, dated
as of the date hereof.
"Issuer" has the meaning set forth in the preamble hereof.
"Issuer Additional Aircraft" means any aircraft acquired by the Issuer or
any Issuer Subsidiary after the Initial Closing Date (other than any Remaining
Aircraft or Substitute Aircraft), excluding any such aircraft sold or disposed
of by way of a completed Aircraft Sale.
"Issuer Additional Notes" means any notes issued pursuant to this
Indenture the proceeds of which are used to acquire Issuer Additional Aircraft.
"Issuer Subsidiary" means each subsidiary of the Issuer existing on the
Initial Closing Date and listed on Schedule B to this Indenture and any other
subsidiary of the Issuer.
"Jersey Debt Security Agreement" means the Debt Security Agreement between
the Issuer and ALPS 94-1, dated as of the date hereof.
"Jersey Share Security Agreement" means the Share Security Agreement in
respect of the shares of ALPS 94-1, dated as of the date hereof.
"Leases" means the Initial Leases, the Future Leases and the Additional
Leases; provided that if, under any sub-leasing arrangement with respect to an
Aircraft, the lessor thereof agrees to receive payments or collateral directly
from, or is to make payments directly to the sub-lessee, in any such case to
the exclusion of the related Lessee, then the relevant sub-lease shall
constitute the "Lease".
"legal defeasance" has the meaning given to such term in Section 11.01
hereof.
"Lessee" means each Person who is the lessee of an Aircraft from time to
time leased from any AerCo Group Member; provided that if, under any
sub-leasing arrangement
<PAGE> 24
17
with respect to an Aircraft, the lessor thereof agrees to receive payments or
collateral directly from, or is to make payments directly to, the sub-lessee,
in any such case to the exclusion of the related Lessee, then the sub-lessee
shall constitute the "Lessee".
"Lessee Funded Account" has the meaning given to such term in Section
3.01(c) hereof.
"LIBOR" means, unless otherwise specified, the London interbank offered
rate for one month U.S. dollar deposits, determined pursuant to the Reference
Agency Agreement.
"Liquidity Reserve Amount" means an amount, initially approximately $56
million, and may be comprised of cash and/or Eligible Credit Facilities, which
may be increased or decreased from time to time by the Board of the Issuer for
any reason; provided that any such reduction, other than any reduction
attributable solely to a decrease in the Security Deposit Reserve Amount as a
result of AerCo entering into Future Leases requiring lower security deposits
than expired Leases, shall be subject to Rating Agency Confirmation.
"Listing Agent" means Banque Internationale a Luxembourg S.A.
"Losses" means any loss, cost, charge, expense, interest, fee, payment,
demand, liability, claim, action, proceeding, penalty, fine, damages, judgment,
order or other sanction other than Taxes.
"Minimum Class Percentage" means, with respect to the AerCo Group Class A
Notes and the AerCo Group Class B Notes on any Payment Date, the "Minimum Class
Percentage" set forth in Appendix A to this Indenture for such Payment Date, as
such percentage shall be adjusted from time to time in accordance with Section
3.11 hereof.
"Minimum Liquidity Reserve Amount" means an amount, initially equal to $15
million, which may be increased or decreased from time to time by the Board of
the Issuer for any reason; provided that any such reduction shall be subject to
Rating Agency Confirmation.
"Minimum Principal Payment Amount" means, with respect to each class of
AerCo Group A-D Notes on any Payment Date, the difference, if positive, between
the aggregate Outstanding Principal Balance of such class of AerCo Group Notes
and the Minimum Target Principal Balance of such class of AerCo Group Notes on
such Payment Date.
"Minimum Target Principal Balance" means, with respect to (i) the AerCo
Group Class A Notes and the AerCo Group Class B Notes on any Payment Date, the
product of (x) the Minimum Class Percentage for such class of AerCo Group Notes
on such Payment Date and (y) the Assumed Portfolio Value in respect of such
Payment Date; provided that, if on any Payment Date the Outstanding Principal
Balance of AerCo Group Class A Notes is greater than the Adjusted Portfolio
Value in respect of such Payment Date, then the
<PAGE> 25
18
"Minimum Target Principal Balance" of AerCo Group Class A Notes shall be equal
to the Scheduled Target Principal Balance of AerCo Group Class A Notes and (ii)
the AerCo Group Class C Notes and the AerCo Group Class D Notes on any Payment
Date, the "Minimum Target Principal Balance" set forth in Appendix A to this
Indenture for such Payment Date, as such amount shall be adjusted from time to
time in accordance with Section 3.11 hereof.
"Modification Payment" has the meaning given to such term in Section
5.02(i) hereof.
"Monthly Report" has the meaning given to such term in Section 2.15(a)
hereof.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto.
"Net Sale Proceeds" has the meaning given to such term in Section 5.02(g)
hereof.
"Non-Trustee Accounts" has the meaning given to such term in Section
3.01(e) hereof.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
"Note Account" has the meaning given to such term in Section 3.01(i)
hereof.
"Noteholder" or "Holder" means (a) in the case of any Global Note, the
bearer thereof, which shall initially be the Book-Entry Depositary and (b) in
the case of any Definitive Registered Note, the Person in whose name such Note
is registered from time to time.
"Notes" means the Initial Notes, the Remaining Subclass D-1 Notes, the
Remaining Subclass E-1 Notes, the Issuer Additional Notes and any Exchange
Notes.
"Note Target Price" has the meaning given to such term in Section 5.02(g)
hereof.
"Notices" has the meaning given to such term in Section 13.05 hereof.
"Officer's Certificate" means a certificate signed by, with respect to the
Issuer, any director and, with respect to a Guarantor or any other Person, any
officer, director, trustee or equivalent representative.
"Operating Bank" means Bankers Trust or any other Eligible Institution at
which the Accounts are held; provided that (i) upon the resignation or removal
and the replacement of the Senior Trustee pursuant to the terms of this
Indenture, the successor
<PAGE> 26
19
trustee appointed hereunder shall be the Operating Bank; and (ii) if at any
time the Operating Bank ceases to be an Eligible Institution, a successor
operating bank shall be appointed by the Administrative Agent on behalf of the
Security Trustee and all Accounts (other than the Non-Trustee Accounts) shall
thereafter be transferred to and be maintained at such successor operating bank
in the name of the Security Trustee and such successor operating bank shall
thereafter be the "Operating Bank".
"Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Issuer, that meets the requirements of
Section 1.03 hereof.
"Outstanding" means (a) with respect to the Notes of any class or subclass
at any time, all Notes of such class or subclass theretofore authenticated and
delivered by the Trustee except (i) any such Notes cancelled by, or delivered
for cancellation to, the Trustee; (ii) any such Notes, or portions thereof, for
the payment of principal of and accrued and unpaid interest on which moneys
have been deposited in the applicable Note Account or distributed to
Noteholders by the Trustee and any such Notes, or portions thereof, for the
payment or redemption of which moneys in the necessary amount have been
deposited in the Defeasance/Redemption Account; provided that if such Notes are
to be redeemed prior to the maturity thereof in accordance with the
requirements of Section 3.10(a) or 3.10(b) hereof, notice of such redemption
shall have been given as provided in Section 3.10(c) hereof, or provision
satisfactory to the Trustee shall have been made for giving such notice; and
(iii) any such Notes in exchange or substitution for which other Notes, as the
case may be, have been authenticated and delivered, or which have been paid
pursuant to the terms of this Indenture (unless proof satisfactory to the
Trustee is presented that any of such Notes is held by a Person in whose hands
such Note is a legal, valid and binding obligation of the Issuer); and (b) when
used with respect to any other evidence of indebtedness shall mean, at any
time, any principal amount thereof then unpaid and outstanding (whether or not
due or payable).
"Outstanding Principal Balance" means, with respect to any AerCo Group
Note or other evidence of indebtedness Outstanding, the total principal amount
of such evidence of indebtedness unpaid and outstanding at any time as
determined in the report to be delivered pursuant to Section 3.06 hereof.
"Partial Loss" means, with respect to any Aircraft or related asset, any
event or occurrence of loss, damage, destruction or the like which is not a
Total Loss.
"Partial Loss Proceeds" means, with respect to any Aircraft or related
asset, the total proceeds of the insurance or reinsurance (other than in
respect of liability insurance) paid in respect of any Partial Loss to any
AerCo Group Member.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect to
DTC, shall include Euroclear and Cedel).
<PAGE> 27
20
"Parts" means any part, component, appliance, accessory, instrument or
other item of equipment (other than any Engine) installed in or attached to any
Aircraft (or part thereof).
"Paying Agent" has the meaning given to such term in Section 2.03 hereof.
The term "Paying Agent" includes any additional Paying Agent.
"Payment Date" means the 15th day of each month, commencing on August 17,
1998; provided that if any Payment Date would otherwise fall on a day which is
not a Business Day, such Payment Date shall be the first following day which is
a Business Day.
"Permitted Account Investments" means, in each case, book-entry
securities, negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America (having original
maturities of no more than 365 days, or such lesser time as is required
for the distribution of funds);
(b) demand deposits, time deposits or certificates of deposit of the
Operating Bank or of depository institutions or trust companies organized
under the laws of the United States of America or any state thereof, or
the District of Columbia (or any domestic branch of a foreign bank) (i)
having original maturities of no more than 365 days, or such lesser time
as is required for the distribution of funds; provided that at the time
of investment or contractual commitment to invest therein, the short-term
debt rating of such depository institution or trust company shall be at
least "A-1+" by Standard & Poor's and "P-1" by Moody's and shall be
acceptable to DCR or (ii) having maturities of more than 365 days and, at
the time of the investment or contractual commitment to invest therein, a
rating of "AA" from Standard & Poor's and "Aa2" from Moody's and a
confirmation that they are acceptable to DCR;
(c) corporate or municipal debt obligations (i) having remaining
maturities of no more than 365 days, or such lesser time as is required
for the distribution of funds, having, at the time of the investment or
contractual commitment to invest therein, a rating of at least "A-1+" or
"AA" by Standard & Poor's and "P-1" or "Aa2" by Moody's and a
confirmation that they are acceptable to DCR or (ii) having maturities of
more than 365 days and, at the time of the investment or contractual
commitment to invest therein, a rating of "AA" from Standard & Poor's and
"Aa2" from Moody's and a confirmation that they are acceptable to DCR;
(d) investments in money market funds (including funds in respect of
which the Trustee or any of its affiliates is investment manager or
advisor) having a rating of at least "AA" by Standard & Poor's and "Aa2"
by Moody's and a confirmation that they are acceptable to DCR;
<PAGE> 28
21
(e) notes or bankers' acceptances (having original maturities of no
more than 365 days, or such lesser time as is required for the
distribution of funds) issued by any depository institution or trust
company referred to in (b) above; or
(f) any other investments approved pursuant to a Rating Agency
Confirmation;
provided, however, that no investment shall be made in any obligations of any
depository institution or trust company which has a contractual right to set
off and apply any deposits held, and other indebtedness owing, by any AerCo
Group Member to or for the credit or the account of such bank.
"Permitted Accruals" has the meaning given to such term in Section 3.01(d)
hereof.
"Permitted Additional Aircraft Acquisition" has the meaning given to such
term in Section 5.02(h) hereof.
"Permitted Encumbrance" has the meaning given to such term in Section
5.02(b) hereof.
"Permitted Tax-Related Disposition" has the meaning given to such term in
Section 5.02(g) hereof.
"Person" means any natural person, firm, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any political subdivision thereof or any other legal entity,
including public bodies.
"Pledged Debt" has the meaning given to such term in the Security Trust
Agreement.
"Pledged Stock" has the meaning given to such term in the Security Trust
Agreement.
"Pool Factor" means, with respect to each subclass of AerCo Group Notes on
any Payment Date, the "Pool Factor" for such Payment Date set forth in the
appendix to such Notes.
"Portfolio" means, at any time, all Aircraft owned by AerCo Group.
"Precedent Lease" has the meaning given to such term in Section 5.03(f)
hereof.
"PRI" has the meaning given to such term in Section 5.03(h) hereof.
<PAGE> 29
22
"PRI Guidelines" has the meaning given to such term in Section 5.03(a)
hereof.
"Primary Eligible Credit Facility" means any Eligible Credit Facility,
other than a Secondary Eligible Credit Facility, which provides by its terms
that it is entitled only to the priority of repayment accorded to Primary
Eligible Credit Facilities under Section 3.08 hereof.
"Prior Ranking Amounts" has the meaning assigned to such term in Section
3.08 hereof.
"Private Placement Legend" has the meaning given to such term in Section
2.02 hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Quarterly Report" has the meaning given to such term in Section 2.15(a)
hereof.
"Rating Agency" means each of DCR, Moody's and Standard & Poor's and any
other nationally recognized rating agency designated by the Issuer and any
Guarantor; provided that such organizations shall only be deemed to be a Rating
Agency for purposes of the Indenture with respect to AerCo Group Notes that
they are then rating.
"Rating Agency Confirmation" means a prior written confirmation from each
Rating Agency that a specified action or event shall not result in the
downgrade or withdrawal of such Rating Agency's then current credit rating, if
any, of any subclass of AerCo Group Notes.
"Received Currency" has the meaning given to such term in Section 13.07(a)
hereof.
"Receiver" means any Person or Persons appointed as (and any additional
Person or Persons appointed or substituted as) administrative receiver,
receiver, manager or receiver and manager.
"Record Date" means with respect to each Payment Date, the close of
business on the day that is 15 days prior to such Payment Date, whether or not
such day is a Business Day.
"Redemption" has the meaning given to such term in Section 3.10(c) hereof.
"Redemption Date" means the date, which shall in each case be a Payment
Date, on which Notes of any subclass are redeemed.
<PAGE> 30
23
"Redemption Premium" means (i) in respect of any Initial Note on any date,
the Redemption Premium indicated in the table below:
<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PREMIUM
--------------- -----------------------------------------------------
SUBCLASS SUBCLASS SUBCLASS SUBCLASS SUBCLASS
A-1 NOTES A-2 NOTES B-1 NOTES C-1 NOTES D-1 NOTES
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
On or after the Closing Date 100.50% 101.00% 101.50% 102.50%
On or after July 15, 1999... 100.25% 100.75% 101.25% 102.25%
On or after July 15, 2000... 100.00% 100.50% 101.00% 102.00%
On or after July 15, 2001... - 100.25% 100.75% 101.75%
On or after July 15, 2002... - 100.25% 100.50% 101.50%
On or after July 15, 2003... - 100.25% 100.25% 101.25% 105.25%
On or after July 15, 2004... - 100.25% 100.25% 101.00% 104.50%
On or after July 15, 2005... - 100.00% 100.25% 100.75% 103.75%
On or after July 15, 2006... - - 100.25% 100.50% 103.00%
On or after July 15, 2007... - - 100.25% 100.25% 102.25%
On or after July 15, 2008... - - 100.25% 100.25% 101.50%
On or after July 15, 2009... - - 100.00% 100.25% 100.75%
On or after July 15, 2010... - - - 100.25% 100.00%
On or after July 15, 2011... - - - 100.00% -
</TABLE>
and (ii) in respect of any subclass of Refinancing Notes or Issuer Additional
Notes, the Redemption Premium established by or pursuant to a Board Resolution
or in any indenture supplemental hereto providing for the issuance of such
Notes or designated as such in the form of such Notes.
"Redemption Price" means with respect to (i) the Subclass A-1 Notes, the
Subclass A-2 Notes, the Subclass B-1 Notes and the Subclass C-1 Notes, (A) to
the extent that the redemption is funded other than out of the Available
Collections Amount (including proceeds from Refinancing Notes and proceeds from
third parties), the product of the applicable Redemption Premium and the
Outstanding Principal Balance of the portion of such subclass of Notes being
redeemed and (B) to the extent that the redemption is funded out of the
Available Collections Amount, the Outstanding Principal Balance of the portion
of such subclass of Notes being redeemed, without Redemption Premium, (ii) any
portion of the Subclass D-1 Notes being redeemed, (x) to the extent that the
redemption is funded other than out of the Available Collections Amount
(including proceeds from Refinancing Notes and proceeds from third parties),
(a) if such redemption occurs prior to July 15, 2003, the higher of (1) the
discounted present value of the Scheduled Principal Payment Amounts allocable
in accordance with Section 3.09 hereof in respect of, and interest on, such
portion from the Redemption Date to, but not including, July 15, 2003, plus the
product of the applicable
<PAGE> 31
24
Redemption Premium and the assumed Outstanding Principal Balance for July 15,
2003 of such portion, discounted at a rate equal to the Treasury Yield plus
1.00% and (2) the Outstanding Principal Balance of such portion and (b) if such
redemption occurs on or after July 15, 2003, the product of the applicable
Redemption Premium and the Outstanding Principal Balance of such portion and
(y) to the extent that the redemption is funded out of the Available
Collections Amount, the Outstanding Principal Balance of the portion of such
subclass of Notes being redeemed, without Redemption Premium and (iii) any
Refinancing Notes or Issuer Additional Notes, the Redemption Price established
by or pursuant to a Board Resolution or in any indenture supplemental hereto
providing for the issuance of such Notes or designated as such in the form of
such Notes.
"Reference Agency Agreement" means the Reference Agency Agreement dated as
of the Initial Closing Date, among the Issuer, the Trustee, the Reference Agent
and the Cash Manager pursuant to which LIBOR is established from time to time.
"Reference Agent" means Bankers Trust in its capacity as reference agent
under the Reference Agency Agreement, including its successors in interest,
until another Person shall have become the reference agent under that
agreement, and thereafter "Reference Agent" shall mean such successor Person.
"Reference Date" means, with respect to each Interest Accrual Period, the
day that is two Business Days prior to the Payment Date on which such Interest
Accrual Period commences; provided, however, that the Reference Date with
respect to the initial Interest Accrual Period means the date that is two
Business Days before the Initial Closing Date.
"Refinancing" has the meaning given to such term in Section 2.10 hereof.
"Refinancing Account" has the meaning given to such term in Section
3.01(f) hereof.
"Refinancing Expenses" means all out-of-pocket costs and expenses incurred
in connection with an offering and issuance of Refinancing Notes.
"Refinancing Notes" means any subclass of Notes issued by the Issuer under
this Indenture at any time and from time to time after the date hereof, the
proceeds of which are used to repay all or any part of the Outstanding
Principal Balance of a subclass of Notes and ranking pari passu with such
Notes.
"Register" has the meaning given to such term in Section 2.03 hereof.
"Registrar" has the meaning given to such term in Section 2.03 hereof and
includes any additional Registrar.
"Registration Rights Agreement" means the A-C Note Registration Rights
Agreement, the D Note Registration Rights Agreement and any other agreement
entered into
<PAGE> 32
25
between the Issuer and a purchaser of Notes providing for the registration of
the transfer of such Notes under the Securities Act.
"Registration Statement" means the Registration Statement as defined and
described in a Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" has the meaning given to such term in Section
2.01 hereof.
"Related Collateral Document" means any letter of credit, third-party or
bank guarantee or cash collateral provided by or on behalf of a Lessee to
secure such Lessee's obligations under a Lease.
"Related Collateral Provider" means a provider of a Related Collateral
Document.
"Related Documents" means the Administrative Agency Agreement, the Cash
Management Agreement, each Credit Facility, this Indenture, the Notes, the
Deposit Agreement, the Reference Agency Agreement, the Security Documents, the
Intercompany Loan Agreements, the Servicing Agreement, the Acquisition
Agreements, the Registration Rights Agreement, the Secretarial Services
Agreement, the Voting Trust Agreement, any Additional Servicing Agreements, any
Swap Agreements and any Swap Guarantees.
"Relevant Appraisal" means, with respect to any date of determination, the
most recent Appraisal preceding such date of determination.
"Relevant Information" means any information provided to the
Administrative Agent by any Service Provider or any other service provider
retained from time to time by AerCo Group pursuant to the Related Documents.
"Remaining Aircraft" means those Initial Aircraft title to which has not
been transferred to an Aircraft Owning Subsidiary by the Initial Closing Date.
"Remaining Subclass D-1 Notes" has the meaning given to such term in
Section 2.12 hereof.
"Remaining Subclass E-1 Notes" has the meaning given to such term in
Section 2.12 hereof.
"Renewal Lease" has the meaning given to such term in Section 5.03(f)
hereof.
"Rental Account" has the meaning given to such term in Section 3.01(e)
hereof.
<PAGE> 33
26
"Rental Payments" means all rental payments and other amounts payable by
or on behalf of a Lessee under a Lease.
"Required Expense Amount" means, with respect to AerCo Group on each
Payment Date, (i) the amount of Expenses of AerCo Group due and payable on the
Calculation Date relating to such Payment Date or reasonably anticipated to
become due and payable before the end of the six-month period beginning on such
date, (ii) at the discretion of the Administrative Agent, an amount necessary
to provide for Permitted Accruals (other than accruals in respect of
Modification Payments) and (iii) an amount determined by the Administrative
Agent to be necessary to maintain in the Expense Account after payment of the
Expenses (on such Payment Date and during the next succeeding Interest Accrual
Period) and provision for the Permitted Accruals.
"Requisition Compensation" means all monies or other compensation
receivable by any AerCo Group Member from any government, whether civil,
military or de facto, or public or local authority in relation to an Aircraft
in the event of its requisition for title, confiscation, restraint, detention,
forfeiture or compulsory acquisition or seizure or requisition for hire by or
under the order of any government or public or local authority.
"Responsible Officer" means, (i) with respect to the Trustee, any officer
within the Corporate Trust Office, including any Principal, Vice President,
Managing Director, Assistant Vice President, Assistant Secretary, Assistant
Treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge and familiarity with the
particular subject and (ii) with respect to the Issuer, any director.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Note" has the meaning given to such term in Section 2.01
hereof.
"Scheduled Class Percentage" means, with respect to the AerCo Group Class
A Notes and the AerCo Group Class B Notes on any Payment Date, the "Scheduled
Class Percentage" set forth in Appendix A to this Indenture for such Payment
Date, as such percentage shall be adjusted from time to time in accordance with
Section 3.11 hereof.
"Scheduled Expiration Date" with respect to any Lease, means the date upon
which such lease is scheduled to expire under the terms thereof.
"Scheduled Principal Payment Amount" means, with respect to each class of
AerCo Group A-D Notes on any Payment Date, the difference, if positive, between
the aggregate Outstanding Principal Balance of such class of AerCo Group Notes
(after giving effect to any payment of the Minimum Principal Payment Amount for
such class of AerCo
<PAGE> 34
27
Group Notes) and the Scheduled Target Principal Balance of such class of AerCo
Group Notes on such Payment Date.
"Scheduled Target Principal Balance" means with respect to (i) the AerCo
Group Class A Notes on any Payment Date, the product of (A) the Scheduled Class
Percentage for the AerCo Group Class A Notes on such Payment Date and (B) the
lesser of (x) the Assumed Portfolio Value in respect of such Payment Date and
(y) 105% of the Adjusted Portfolio Value in respect of such Payment Date, (ii)
the AerCo Group Class B Notes on any Payment Date, the product of the Scheduled
Class Percentage for such AerCo Group Notes on such Payment Date and the
Assumed Portfolio Value in respect of such Payment Date and (iii) the AerCo
Group Class C Notes and the AerCo Group Class D Notes on any Payment Date, the
"Scheduled Target Principal Balance" for such Payment Date set forth in
Appendix B to this Indenture, in each case as such amount shall be adjusted
from time to time in accordance with Section 3.11 hereof.
"Secondary Eligible Credit Facility" means any Eligible Credit Facility
designated as a "Secondary Eligible Credit Facility" by the Board of the Issuer
and which provides by its terms that it is entitled only to the priority of
repayment accorded to Secondary Eligible Credit Facilities under Section 3.08
hereof.
"Secretarial Services Agreement" means the Secretarial Services Agreement
dated as of July 15, 1998 between the Issuer and the Company Secretary.
"Secured Parties" has the meaning given to such term in the Security Trust
Agreement.
"Securities Act" means the Securities Act of 1933.
"Security Documents" means the Security Trust Agreement, the Irish Share
Mortgages, the Jersey Share Security Agreement, the Jersey Debt Security
Agreement and the Belgian Security Documents.
"Security Interests" means the security interests granted or expressed to
be granted in the Collateral pursuant to the Security Documents.
"Security Trust Agreement" means the Security Trust Agreement dated as of
the Initial Closing Date, among the Issuer, each other party thereto and the
Security Trustee, for the benefit of the Secured Parties.
"Security Trustee" means the trustee appointed pursuant to Section 6.01 of
the Security Trust Agreement, initially Bankers Trust, including its successors
in interest and permitted assigns.
<PAGE> 35
28
"Segregated Funds" means all of the funds, including any maintenance
reserves and security deposits, received from Lessees and not permitted to be
commingled with the funds of the AerCo Group pursuant to the terms of the
related Leases.
"Seller" means GPA Group and each subsidiary of GPA Group that is a direct
or indirect seller of a Transferring Company having direct or indirect title to
an Aircraft under the Stock Purchase Agreement and any other seller under any
other Acquisition Agreement.
"Senior Claim" has the meaning given to such term in Section 10.01 hereof.
"Senior Class" means, (i) so long as any Class A Notes are Outstanding,
the Class A Notes, (ii) after the Class A Notes have been repaid in full and so
long as any Class B Notes are Outstanding, the Class B Notes, (iii) after the
Class A Notes and Class B Notes have been repaid in full and so long as any
Class C Notes are Outstanding, the Class C Notes, (iv) after the Class A Notes,
Class B Notes and Class C Notes have been paid in full and so long as any Class
D Notes are Outstanding, the Class D Notes and (v) after the Class A Notes,
Class B Notes, Class C Notes and Class D Notes have been paid in full and so
long as any Class E Notes are Outstanding, the Class E Notes.
"Senior Trustee" means the Trustee of the Senior Class of the Notes or, if
the Senior Notes shall be the Class E Notes, the Class E Note Representative;
provided that if more than one Person shall otherwise be the Trustee of various
subclasses of the Senior Class of Notes, then the Senior Trustee shall be the
Trustee of the subclass of such Notes with the lowest numerical designation
then Outstanding.
"Service Provider" means each of the Cash Manager, the Servicer, the
Trustee, the Book-Entry Depositary, the Security Trustee, the Administrative
Agent, the Company Secretary, the Reference Agent, the Charitable Trustee and
any Additional Servicer.
"Servicer" means Babcock & Brown in its capacity as servicer under the
Servicing Agreement, including its successors in interest, until a successor
Person shall have become the servicer pursuant to such agreement or any
replacement servicing agreement, and thereafter "Servicer" shall mean such
successor Person.
"Servicer's Pro Forma Lease" has the meaning given to such term in Section
5.03(f) hereof.
"Servicing Agreement" means the Servicing Agreement, dated as of July 15,
1998, among the Servicer, the Issuer and the entities listed in Appendix A
thereto.
"Share Purchase Agreement" means the Share Purchase Agreement dated as of
July 15, 1998, between GPA Group, Skyscape Limited and the Issuer in respect of
all the outstanding shares of the Transferring Companies.
<PAGE> 36
29
"Shelf Registration Statement" has the meaning given to such term in the
applicable Registration Rights Agreement.
"Significant Subsidiary" means at any time and from time to time any
subsidiary of the Issuer or any Guarantor which owns or leases Aircraft having
an aggregate Base Value of more than 2% of the Adjusted Portfolio Value at such
time.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc. and any successor thereto.
"Stated Rate of Interest" means, with respect to each subclass of AerCo
Group Notes, the interest rate set forth in such AerCo Group Notes; provided,
however, if an exchange offer registered under the Securities Act is not
consummated or a Shelf Registration Statement under the Securities Act with
respect to resales of (i) the Initial Notes other than the Subclass D-1 Notes
or the Subclass E-1 Notes is not declared effective by the Commission on or
prior to the date that is 270 days after the Initial Closing Date provided that
if such day is not a Business Day, then the next succeeding Business Day, the
Stated Rate of Interest for such AerCo Group Notes shall increase by 0.5% per
annum until (A) such exchange offer is consummated or (B) the Shelf
Registration Statement is declared effective or (ii) any AerCo Group Additional
Notes is not declared effective by the Commission on or prior to the date
specified in the Registration Rights Agreement relating to such AerCo Group
Notes, the Stated Rate of Interest shall increase by the rate specified in such
Registration Rights Agreement until such time as is specified therein.
"State of Registration" means, in relation to an Aircraft at any time, the
country or state on whose national register such Aircraft is registered at that
time under the laws of such country or state in accordance with the applicable
provisions of any Lease relating to such Aircraft.
"Step-Up Interest" means with respect to (i) any Subclass A-1 Notes not
repaid on or before the Expected Final Payment Date thereof, interest, at a
rate of 0.5% per annum, and (ii) any Refinancing Notes or AerCo Group
Additional Notes that by their terms provide that they are entitled to Step-Up
Interest at any time, interest, at a rate established by or pursuant to a Board
Resolution or in any indenture supplemental hereto providing for the issuance
of such Notes or specified in the form of such Notes, which shall accrue in
addition to the Stated Rate of Interest on the Outstanding Principal Balance of
such AerCo Group Notes.
"Stock" has the meaning given to such term in Section 5.02(b) hereof.
"Subclass A-1 Notes" means the Subclass A-1 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $340,000,000,
substantially in the form of Exhibit A-1 hereto, including any notes issued in
replacement or substitution therefor, any Exchange Note issued in exchange for
such Note pursuant to a Registration Rights Agreement and this Indenture and
any Refinancing Notes designated in the form of such
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Refinancing Notes as being entitled to the rights and benefits of the Subclass
A-1 Notes under this Indenture, in each case ranking pari passu in order of
payment priority to the Subclass A-1 Notes.
"Subclass A-2 Notes" means the Subclass A-2 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $290,000,000,
substantially in the form of Exhibit A-2 hereto, including any notes issued in
replacement or substitution therefor, any Exchange Note issued in exchange for
such Note pursuant to a Registration Rights Agreement and this Indenture and
any Refinancing Notes designated in the form of such Refinancing Notes as being
entitled to the rights and benefits of the Subclass A-2 Notes under this
Indenture, in each case ranking pari passu in order of payment priority to the
Subclass A-2 Notes.
"Subclass B-1 Notes" means the Subclass B-1 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $85,000,000,
substantially in the form of Exhibit B-1 hereto, including any notes issued in
replacement or substitution therefor, any Exchange Note issued in exchange for
such Note pursuant to a Registration Rights Agreement and this Indenture and
any Refinancing Notes designated in the form of such Refinancing Notes as being
entitled to the rights and benefits of the Subclass B-1 Notes under this
Indenture, in each case ranking pari passu in order of payment priority to the
Subclass B-1 Notes.
"Subclass C-1 Notes" means the Subclass C-1 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $85,000,000,
substantially in the form of Exhibit C-1 hereto, including any notes issued in
replacement or substitution therefor, any Exchange Note issued in exchange for
such Note pursuant to a Registration Rights Agreement and this Indenture and
any Refinancing Notes designated in the form of such Refinancing Notes as being
entitled to the rights and benefits of the Subclass C-1 Notes under this
Indenture, in each case ranking pari passu in order of payment priority to the
Subclass C-1 Notes.
"Subclass D-1 Notes" means the Subclass D-1 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $80,000,000 and the
Remaining Subclass D-1 Notes, substantially in the form of Exhibit D-1 hereto,
including any notes issued in replacement or substitution therefor and any
Refinancing Notes designated in the form of such Refinancing Notes as being
entitled to the rights and benefits of the Subclass D-1 Notes under this
Indenture, in each case ranking pari passu in order of payment priority to the
Subclass D-1 Notes.
"Subclass E-1 Notes" means the Subclass E-1 Notes, due July 15, 2023, of
the Issuer in the initial aggregate principal amount of $111,973,000 and the
Remaining Subclass E-1 Notes, substantially in the form of Exhibit E-1 hereto,
including any notes issued in replacement or substitution therefor, in each
case ranking pari passu in order of payment priority to the Subclass E-1 Notes.
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"Subordinated Claim" has the meaning given to such term in Section 10.01
hereof.
"Subordinated Swap Payments" has the meaning given to such term in Section
3.08 hereof.
"Subordinated Tax-Related Disposition Payments" has the meaning given to
such term in Section 3.08(a) hereof.
"Substitute Aircraft" means an aircraft identified to replace a Remaining
Aircraft that has failed to be delivered to the AerCo Group; provided, that
such aircraft (i) is no more than seven years old as of July 15, 1998 (ii) is
subject to an operating lease contract, or letter of intent therefor, that will
become effective within 90 days of the signing of such letter of intent, (iii)
is of the same type as such undelivered Remaining Aircraft and (iv) does not
result in a Concentration Default.
"Supplemental Class Percentage" means, with respect to the AerCo Group
Class A Notes and the AerCo Group Class B Notes on each Payment Date, the
"Supplemental Class Percentage" on such Payment Date set forth in Appendix A to
this Indenture, as such percentage shall be adjusted from time to time in
accordance with Section 3.11 hereof.
"Supplemental Principal Payment Amount" means, with respect to the AerCo
Group Class A Notes and the AerCo Group Class B Notes on any Payment Date, the
difference, if positive, between the Outstanding Principal Balance of such
class of AerCo Group Notes (after giving effect to any payment of the Minimum
Principal Payment Amount and Scheduled Principal Payment Amount for such class
of AerCo Group Notes) and the Supplemental Target Principal Balance of such
class of AerCo Group Notes on such Payment Date.
"Supplemental Target Principal Balance" means, with respect to the AerCo
Group Class A Notes and the AerCo Group Class B Notes on any Payment Date, the
product of (i) the Supplemental Class Percentage for such class of AerCo Group
Notes on such Payment Date and (ii) the Assumed Portfolio Value in respect of
such Payment Date.
"Swap Agreement" means any interest rate swap, cap, floor, Swaption, or
other interest rate hedging agreement among the Issuer and any Swap Provider
existing on the Initial Closing Date or entered into in accordance with
Sections 5.02(e)(iv) and 9.05 of this Indenture.
"Swap Breakage Costs" means any amounts payable by any AerCo Group Member
to a Swap Provider as a result of any early termination (however described or
defined therein) of any Swap Agreement.
"Swap Guarantee" has the meaning given to such term in Section 9.05
hereof.
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"Swap Payment" means, on any Payment Date, a net payment to a Swap
Provider by any AerCo Group Member, other than any Subordinated Swap Payment.
"Swap Provider" means the counterparty of any AerCo Group Member under any
Swap Agreement which has agreed that it is entitled to the relevant priority of
repayment under Section 3.08 hereof.
"Swap Receipt" means a net payment to be made by a Swap Provider into the
Collection Account under a Swap Agreement and includes any such payment made by
a guarantor under any related Swap Guarantee or any termination payment
received from any counterparty to a Swap Agreement.
"Swaption" means any option agreement with respect to a Swap Agreement.
"Target Principal Balance" means, with respect to the AerCo Group Class C
Notes and the AerCo Group Class D Notes on any Payment Date, each of the
Minimum Target Principal Balance and the Scheduled Target Principal Balance on
such Payment Date.
"Tax" and "Taxes" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States or by any state, local or foreign government (or
any subdivision or agency thereof) or other taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value added, taxes on goods and services, gains taxes, license, registration
and documentation fees, customs duties, tariffs, and similar charges.
"Tax Defeasance Account" means one or more accounts established to hold
proceeds of Permitted Tax-Related Dispositions.
"Third Party Event" has the meaning given to such term in Section 5.03(b)
hereof.
"Total Loss" means, with respect to any Aircraft (a) if the same is
subject to a Lease, a Casualty Occurrence or Event of Loss (each as defined in
such Lease) or the like (however so defined); or (b) if the same is not subject
to a Lease, (i) its actual, constructive, compromised, arranged or agreed total
loss, (ii) its destruction, damage beyond repair or being rendered permanently
unfit for normal use for any reason whatsoever, (iii) its requisition for
title, confiscation, restraint, detention, forfeiture or any compulsory
acquisition or seizure or requisition for hire (other than a requisition for
hire for a temporary period not exceeding 180 days) by or under the order of
any government (whether civil, military or de facto) or public or local
authority or (iv) its hijacking, theft or disappearance, resulting in loss
<PAGE> 40
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of possession by the owner or operator thereof for a period of 30 consecutive
days or longer. A Total Loss with respect to any Aircraft shall be deemed to
occur on the date on which such Total Loss is deemed pursuant to the relevant
Lease to have occurred or, if such Lease does not so deem or the relevant
Aircraft is not subject to a Lease, (A) in the case of an actual total loss or
destruction, damage beyond repair or being rendered permanently unfit, the date
on which such loss, destruction, damage or rendering occurs (or, if the date of
loss or destruction is not known, the date on which the relevant Aircraft was
last heard of); (B) in the case of a constructive, compromised, arranged or
agreed total loss, the earlier of (1) the date 30 days after the date on which
notice claiming such total loss is issued to the insurers or brokers and (2)
the date on which such loss is agreed or compromised by the insurers; (C) in
the case of requisition for title, confiscation, restraint, detention,
forfeiture, compulsory acquisition or seizure, the date on which the same takes
effect; (D) in the case of a requisition for hire, the expiration of a period
of 180 days from the date on which such requisition commenced (or, if earlier,
the date upon which insurers make payment on the basis of a Total Loss); or (E)
in the case of clause (iv) above, the final day of the period of 30 consecutive
days referred to therein.
"Total Loss Proceeds" means, in relation to an Aircraft, the total net
proceeds of the insurance and reinsurance paid in respect of a Total Loss
thereof and includes, in the case of a Total Loss of an airframe which does not
involve the Total Loss of all Engines or parts installed thereon at the time
when such Total Loss occurred, the net sale proceeds of any such surviving
Engines or parts.
"Transferring Company" means each of AerCo Ireland, AerCo Ireland II and
AerCoUSA.
"Treasury Yield" means, with respect to any Redemption of the Subclass D-1
Notes on any Payment Date, a per annum rate (expressed as a monthly equivalent
yield) determined to be the per annum rate equal to the semiannual yield to
maturity of the 5 3/4% United States Treasury Notes maturing on August 15, 2003
and any Redemption of any Refinancing Notes or Issuer Additional Notes on any
Payment Date, the Treasury Yield for such Payment Date, if any, established by
or pursuant to a Board Resolution or in any indenture supplemental hereto
providing for the issuance of such Notes or designated as such in the form of
such Notes.
"Trustee" has the meaning given to such term in the preamble hereof and
any successor Trustee appointed in accordance with the terms hereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, (15
U.S. Code Section Section 77aaa-77bbbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06 hereof.
"Undelivered Related Collateral Documents" has the meaning given to such
term in Section 3.04(b) hereof.
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"U.S. GAAP" means generally accepted accounting principles in the United
States.
"U.S. Government Obligations" has the meaning given to such term in
Section 11.02 hereof.
"Voting Trust Agreement" means the Voting Trust Agreement dated as of the
date hereof between the Issuer and First Security Bank, National Association.
Section 1.02. Rules of Construction. Unless the context otherwise
requires:
(a) A term has the meaning assigned to it and an accounting term not
otherwise defined has the meaning assigned to it in accordance with U.S.
GAAP.
(b) The terms "herein", "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
(c) Unless otherwise indicated in context, all references to
Articles, Sections, Appendices, Exhibits or Annexes refer to an Article
or Section of, or an Appendix, Exhibit or Annex to, this Indenture.
(d) Words of the masculine, feminine or neuter gender shall mean and
include the correlative words of other genders, and words in the singular
shall include the plural, and vice versa.
(e) The terms "include", "including" and similar terms shall be
construed as if followed by the phrase "without limitation".
(f) Unless otherwise indicated, references to a subclass of Notes
shall be to the Subclass A-1 Notes, the Subclass A-2 Notes, the Subclass
B-1 Notes, the Subclass C-1 Notes, the Subclass D-1 Notes and the
Subclass E-1 Notes or to a subclass of Refinancing Notes or Issuer
Additional Notes, as applicable; and references to a class of Notes shall
be to the Class A Notes, Class B Notes, Class C Notes, Class D Notes and
Class E Notes or to a class of Refinancing Notes or Issuer Additional
Notes, as applicable.
(g) References in this Indenture to an agreement or other document
(including this Indenture) include references to such agreement or
document as amended, replaced or otherwise modified in accordance with
the provisions of this Indenture, and the provisions of this Indenture
apply to successive events and transactions.
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35
(h) References in this Indenture to any statute or other legislative
provision shall include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor.
(i) References in this Indenture to the Notes of any class or
subclass include the conditions applicable to the Notes of such class or
subclass; and any reference to any amount of money due or payable by
reference to the Notes of any class or subclass shall include any sum
covenanted to be paid by the Issuer under this Indenture in respect of
the Notes of such class or subclass.
(j) References in this Indenture to any action, remedy or method of
judicial proceeding for the enforcement of the rights of creditors or of
security shall be deemed to include, in respect of any jurisdiction other
than the State of New York, references to such action, remedy or method
of judicial proceeding for the enforcement of the rights of creditors or
of security available or appropriate in such jurisdiction as shall most
nearly approximate such action, remedy or method of judicial proceeding
described or referred to in this Indenture.
(k) Where any payment is to be made, funds applied or any
calculation is to be made hereunder on a day which is not a Business Day,
unless any Related Document otherwise provides, such payment shall be
made, funds applied and calculation made on the next succeeding Business
Day, and payments shall be adjusted accordingly.
(l) Where both the Servicer and any Additional Servicer or any
replacement servicer are performing or may perform lease management
and/or remarketing services pursuant to a Related Document in relation to
one or more Aircraft at the same time, a reference in this Indenture to
the "Servicer" shall be construed as a reference to each of the Servicer
and such Additional Servicer or such replacement servicer and the rights
and obligations of the parties hereto shall be construed accordingly.
(m) Any provision in this Indenture providing for a transfer to or
among, or a withdrawal from, an Account or any other bank account by the
Cash Manager shall be construed to be a transfer to or among, or a
withdrawal from, as the case may be, such Account or other bank account
by the Operating Bank or other Eligible Institution at which the
applicable account or accounts are located at the written, electronic or
other automated funds transfer direction of the Cash Manager. Such
direction may be made by the Cash Manager unless and until a Default
Notice shall have been delivered to AerCo or the Cash Manager, or the
Cash Manager shall have defaulted under the Cash Management Agreement,
and any such direction shall be in writing and (i) give full details of
the amount to be transferred or withdrawn, the Account or other bank
account to be debited, the Account or other bank account to be credited
and the date of the relevant payment and (ii) certify that such request
is made pursuant to and in accordance with the terms of this Indenture.
The Operating Bank
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and the Trustee shall be entitled to act in accordance with such a
request, without further question or inquiry, and shall have no
obligation to give any direction to any other Eligible Institution at
which an account or accounts are located unless and until it receives
such a request from the Cash Manager; provided that the Cash Manager
shall at all times comply with the relevant provisions of the Cash
Management Agreement with respect to any such direction.
Section 1.03. Compliance Certificates and Opinions. Upon any application
or request by the Issuer to the Trustee to take any action under any provision
of this Indenture, the Issuer shall furnish to the Trustee an Officer's
Certificate stating that, in the opinion of the signers thereof, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to Section 6.11 hereof) or any indenture supplemental hereto shall
include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Indenture relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.04. Acts of Noteholders. (a) Any direction, consent, waiver or
other action provided by this Indenture in respect of the Notes of any subclass
to be given or taken by Noteholders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Noteholders in
person or by an agent or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee, to each Rating Agency
where it is hereby expressly required pursuant to this Indenture or to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such
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instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose under
this Indenture and conclusive in favor of the Trustee or the Issuer, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds
or administer oaths that the Person executing such instrument acknowledged to
him the execution thereof, or by an affidavit of a witness to such execution
sworn to before any such notary or such other officer and where such execution
is by an officer of a corporation or association, trustee of a trust or member
of a partnership, on behalf of such corporation, association, trust or
partnership, such certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other reasonable manner which the Trustee deems
sufficient.
(c) In determining whether the Holders of Notes have given any direction,
consent, request, demand, authorization, notice, waiver or other Act (a
"Direction"), under this Indenture, Notes owned by the Issuer or any affiliate
of any such Person shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall
be protected in relying upon any such Direction, only Notes which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Notwithstanding the foregoing, (i) if any such Person owns 100% of the Notes of
any subclass Outstanding, such Notes shall not be so disregarded as aforesaid,
and (ii) if any amount of Notes of such subclass so owned by any such Person
have been pledged in good faith, such Notes shall not be disregarded as
aforesaid if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is
not the Issuer or any affiliate of any such Person.
(d) The Issuer may at its option, by delivery of Officers' Certificates to
the Trustee, set a record date other than the Record Date to determine the
Noteholders in respect of the Notes of any subclass entitled to give any
Direction in respect of such Notes. Notwithstanding Section 316(c) of the
Trust Indenture Act, such record date shall be the record date specified in
such Officer's Certificate which shall be a date not more than 30 days prior to
the first solicitation of Noteholders in connection therewith. If such a
record date is fixed, such Direction may be given before or after such record
date, but only the Noteholders of record of the applicable subclass at the
close of business on such record date shall be deemed to be Noteholders for the
purposes of determining whether Noteholders of the requisite proportion of
Outstanding Notes of such subclass have authorized or agreed or consented to
such Direction, and for that purpose the Outstanding Notes of such subclass
shall be computed as of such record date; provided that no such Direction by
the Noteholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
one year after the record date.
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(e) Any Direction or other action by the Holder of any Note shall bind the
Holder of every Note issued upon the transfer thereof or in exchange therefor
or in lieu thereof, whether or not notation of such action is made upon such
Note.
Section 1.05. Incorporation by Reference of Trust Indenture ActSection
1.05. Incorporation by Reference of Trust Indenture Act. Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
ARTICLE II
THE NOTES
Section 2.01. Amount Not to Exceed the Initial Outstanding Principal
Balance; Terms; Form; Execution and Delivery. (a) The Outstanding Principal
Balance of any subclass of Notes which may be authenticated and delivered from
time to time under this Indenture shall not exceed the initial Outstanding
Principal Balance set forth for such subclass of Notes in the definition thereof
or, with respect to any Remaining Subclass D-1 Notes, Remaining Subclass E-1
Notes, any subclass of Refinancing Notes or Issuer Additional Notes, authorized
in a Board Resolution; provided that at no time may the Outstanding Principal
Balance of any such subclass of Refinancing Notes exceed the Outstanding
Principal Balance of the subclass of Notes being refinanced thereby immediately
prior to such Refinancing plus any Redemption Premium and transaction expenses
relating thereto; and provided, further, that any Issuer Additional Notes shall
be issued in accordance with Section 2.11 hereof.
(b) There shall be issued and delivered and authenticated on the relevant
Closing Date to each of the Noteholders Notes in the principal amounts and
maturities and bearing the interest rates, in each case in substantially the
form set forth in the applicable exhibit to this Indenture or in any indenture
supplemental hereto, with such appropriate
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39
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements printed, lithographed or
engraved thereon, as may be required to comply with the rules of any securities
exchange on which such Notes may be listed or to conform to any usage in
respect thereof, or as may, consistently herewith, be prescribed by the Trustee
or by the Responsible Officer executing such Notes, such determination by said
Responsible Officer to be evidenced by his execution of the Notes.
Definitive Registered Notes of each subclass shall be printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Notes may be listed, all as determined by the Responsible
Officer executing such Notes, as evidenced by his execution of such Notes.
Each subclass of Notes or portion thereof offered and sold in reliance on
Rule 144A shall be issued initially in the form of one or more permanent global
Notes in bearer form without interest coupons, substantially in the form set
forth in the applicable exhibit to this Indenture or in any indenture
supplemental hereto (each, a "Rule 144A Global Note"), deposited on behalf of
the purchasers of the Notes represented thereby with the Book-Entry Depositary
at its New York corporate trust office, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of each Rule 144A Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee as hereinafter
provided.
Each subclass of Notes or portion thereof offered and sold in offshore
transactions in reliance on Regulation S shall be issued initially in the form
of one or more permanent global Notes in bearer form without interest coupons,
substantially in the form set forth in the applicable exhibit to this Indenture
or in any indenture supplemental hereto (each, a "Regulation S Global Note"),
deposited on behalf of the purchasers of the Notes represented thereby with the
Book-Entry Depositary at its New York corporate trust office, duly executed by
the Issuer and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of each Regulation S Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
principal amount of outstanding Notes from time to time endorsed thereon and
that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect
transfers of interests therein in accordance with the terms of this Indenture.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the principal amount of outstanding Notes represented thereby shall
be made or caused to be made by the Trustee as required by Section 2.07 hereof.
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Each subclass of the Class E Notes and, until global bearer Exchange Notes
are issued in exchange for a subclass of the Class D Notes, such subclass of
the Class D Notes, shall be issued in the form of a Definitive Registered Note.
The Initial Notes issuable hereunder on the Initial Closing Date shall be
issued in six subclasses. The Initial Notes shall be designated the "Subclass
A-1 Notes", the "Subclass A-2 Notes", the "Subclass B-1 Notes", the "Subclass
C-1 Notes", the "Subclass D-1 Notes" and the "Subclass E-1 Notes".
Interest shall accrue on any subclass of the Floating Rate Notes from the
relevant Closing Date and shall be computed for each Interest Accrual Period on
the basis of a 360-day year and the actual number of days elapsed in such
Interest Accrual Period on the Outstanding Principal Balance of such Note.
Interest shall accrue on any subclass of the Fixed Rate Notes from the relevant
Closing Date and shall be computed for each Interest Accrual Period on the
basis of a 360-day year and one-twelfth of an annual interest payment on the
Outstanding Principal Balance and, in the case of an incomplete Interest
Accrual Period, on the basis of a 360-day year consisting of twelve 30-day
months and the actual number of days elapsed in such Interest Accrual Period.
(c) On the date of any Refinancing, the Issuer shall issue and deliver as
provided in Section 2.10 hereof an aggregate principal amount of Refinancing
Notes having the maturities and bearing the interest rates and such other terms
authorized by one or more Board Resolutions or in any indenture supplemental
hereto providing for the issuance of such Notes or specified in the form of
such Notes, in each case in accordance with such Section 2.10.
(d) On the date of the issuance, if any, of any Issuer Additional Notes,
the Issuer shall issue and deliver, as provided in Sections 2.11 and 5.02(f)
hereof, an aggregate principal amount of Issuer Additional Notes having the
maturities and bearing the interest rates and such other terms authorized by
one or more Board Resolutions or in any indenture supplemental hereto providing
for the issuance of such Notes or specified in the form of such Notes, in each
case in accordance with such Section 2.11.
(e) On the date of the issuance of any Remaining Subclass D-1 Notes or
Remaining Subclass E-1 Notes, the Issuer shall issue and deliver, as provided
in Sections 2.12 and 5.02(f) hereof, an aggregate principal amount of such
Notes equal to the pro rata portion of such subclass of Notes allocable to the
Remaining Aircraft or Substitute Aircraft theretofore delivered and having the
same terms as the Subclass D-1 Notes and the Subclass E-1 Notes issued on the
Initial Closing Date.
(f) The Notes shall be executed on behalf of the Issuer by the manual or
facsimile signature of a Responsible Officer of the Issuer.
(g) Each Note bearing the manual or facsimile signatures of any individual
who was at the time such Note was executed a Responsible Officer of the Issuer
shall bind the
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Issuer, notwithstanding that any such individual has ceased to hold such office
prior to the authentication and delivery of such Notes or any payment thereon.
(h) At any time and from time to time after the execution of any Notes,
the Issuer may deliver such Notes to the Trustee for authentication and,
subject to the provisions of clause (i) below, the Trustee shall authenticate
such Notes by manual or facsimile signature upon receipt by it of written
orders of the Issuer. The Notes shall be authenticated on behalf of the
Trustee by any Responsible Officer of the Trustee.
(i) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless it shall have been executed on
behalf of the Issuer as provided in clause (f) above and authenticated by or on
behalf of the Trustee as provided in clause (h) above. Such signatures shall
be conclusive evidence that such Note has been duly executed and authenticated
under this Indenture. Each Note shall be dated the date of its authentication.
(j) The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.01, authenticate the Global Notes and deliver the Global Notes
to the Book-Entry Depositary.
Upon receipt by the Book-Entry Depositary of each Global Note
authenticated and delivered by the Trustee, the Issuer shall, in accordance
with the terms of the Deposit Agreement, cause the Book-Entry Depositary to
issue to the Depository a Depositary Interest in such Global Note by recording
such Depositary Interest in the register of the Book-Entry Depositary in the
name of Cede & Co., as nominee of the Depository, or such other nominee as the
Depository shall specify.
Neither the Depository nor its Participants shall have any rights either
under this Indenture or under any Global Note held on their behalf by the
Book-Entry Depositary. The Holder of any Global Note may be treated by the
Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of
the Issuer or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Book-Entry Depositary, as a
Holder, or impair, as between the Book-Entry Depositary, as a Holder, and the
Depository and its Participants, the operation of customary practices of such
Depository governing the exercise of the rights of an owner of a beneficial
interest in any Global Note.
(k) The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.01, authenticate the Subclass D-1 Notes and the Subclass E-1
Notes and deliver the same as instructed in writing by the Issuer.
Section 2.02. Restrictive Legends. Unless and until a Note is exchanged
for an Exchange Note in connection with an effective registration under the
Securities Act
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pursuant to the relevant Registration Rights Agreement, each Definitive
Registered Note shall bear the following legend (the "Private Placement
Legend") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY
AUTHORITY IN ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT(A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE
144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) IF APPLICABLE)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AERCO LIMITED
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE (A)
THROUGH (E) ABOVE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE IN THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED
TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
TRANSFER NOTICE ATTACHED HERETO AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS.
Section 2.03. Registrar and Paying Agent. (a) With respect to each
subclass of Notes, there shall at all times be maintained (i) an office or
agency in the location set forth
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43
in Section 13.05 hereof where Definitive Registered Notes of such subclass may
be presented or surrendered for registration of transfer or for exchange (each,
a "Registrar"), (ii) an office or agency in the location set forth in Section
13.05 hereof other than Ireland where Notes of any subclass may, to the extent
required hereunder, be presented for payment (each, a "Paying Agent") and (iii)
an office or agency where notices and demands to or upon the Issuer in respect
of the Notes may be served which shall include the office or agency of its
agent for service of process set forth in Exhibit G hereto and the office or
agency of the Issuer as provided in Section 13.05 hereof. For so long as any
Notes are listed on the Luxembourg Stock Exchange, the Issuer shall appoint and
maintain, or cause the Trustee to appoint and maintain a Paying Agent and a
Registrar in Luxembourg. The Issuer shall cause each Registrar to keep a
register containing the names and addresses of all Holders of such subclass of
Definitive Registered Notes for which it is acting as Registrar and of their
transfer and exchange (the "Register"). Written notice of the location of each
such other office or agency and of any change of location thereof shall be
given by the Trustee to the Issuer and the Holders of such subclass. In the
event that no other such office or agency shall be maintained or no other such
notice of location or of change of location shall be given, presentations and
demands may be made and notices may be served at the Corporate Trust Office of
the Trustee.
(b) Each Authorized Agent shall be a bank or trust company, shall be a
corporation organized and doing business under the laws of the United States or
any state or territory thereof or of the District of Columbia, with a combined
capital and surplus of at least $75,000,000 (or having a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000) and shall be authorized
under the laws of the United States or any state or territory thereof to
exercise corporate trust powers, subject to supervision by Federal or state
authorities (such requirements, the "Eligibility Requirements"). The Trustee
shall initially be a Paying Agent and Registrar hereunder. Each Registrar
other than the Trustee shall furnish to the Trustee, at stated intervals of not
more than six months, and at such other times as the Trustee may request in
writing, a copy of the Register maintained by such Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or such Authorized Agent or such successor
corporation.
(d) Any Authorized Agent may at any time resign by giving written notice
of resignation to the Trustee and the Issuer. The Issuer may, and at the
request of the Trustee shall, at any time terminate the agency of any
Authorized Agent by giving written notice of
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termination to such Authorized Agent and to the Trustee. Upon the resignation
or termination of an Authorized Agent or if at any time any such Authorized
Agent shall cease to be eligible under this Section (when, in either case, no
other Authorized Agent performing the functions of such Authorized Agent shall
have been appointed by the Trustee), the Issuer shall promptly appoint one or
more qualified successor Authorized Agents, reasonably satisfactory to the
Trustee, to perform the functions of the Authorized Agent which has resigned or
whose agency has been terminated or who shall have ceased to be eligible under
this Section. The Issuer shall give written notice of any such appointment
made by it to the Trustee, and in each case the Trustee shall provide notice of
such appointment to all Holders of the related subclass in accordance with the
provisions of Section 13.05 hereof.
(e) The Issuer agrees to pay, or cause to be paid, from time to time to
each Authorized Agent reasonable compensation for its services and to reimburse
it for its reasonable expenses to be agreed to pursuant to separate agreements
with each such Authorized Agent.
Section 2.04. Paying Agent to Hold Money in Trust. The Trustee shall
require each Paying Agent other than the Trustee to agree in writing that all
moneys deposited with any Paying Agent for the purpose of any payment on the
Notes shall be deposited and held in trust for the benefit of the Holders
entitled to such payment, subject to the provisions of this Section. Moneys so
deposited and held in trust shall constitute a separate trust fund for the
benefit of the Holders of such subclass of Notes with respect to which such
money was deposited.
The Trustee may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, direct any Paying
Agent to pay to the Trustee all sums held in trust by such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall
be released from all further liability with respect to such money.
Section 2.05. Method of Payment. (a) On each Payment Date, the Trustee
shall, or shall instruct a Paying Agent to, pay, to the extent of the Available
Collections Amount therefor after the withdrawals, transfers provided for in
Section 3.07 and the payments ranking in priority thereto under Section 3.08
hereof have been made, to the Noteholders all interest, principal and premium,
if any, on the Notes of each subclass; provided, that in the event and to the
extent receipt of any payment is not confirmed by the Trustee or Paying Agent by
1:00 p.m. (New York time) on such Payment Date or any Business Day thereafter,
distribution thereof shall be made on the Business Day following the Business
Day such payment is received.
(b) Payments on a Payment Date with respect to (i) any Notes in the form
of Global Notes shall be made by check or wire transfer to or as instructed by
the Book-Entry Depositary at least five business days before the applicable
Payment Date so long as it is the Holder thereof, and otherwise to the Holder
of a Global Note upon presentation of such Global Note at the Corporate Trust
Office or agency of the Trustee or Paying Agent, and (ii)
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Notes in the form of Definitive Registered Notes shall be made by check mailed
to each Holder of a Definitive Registered Note determined on the applicable
Record Date, at its address appearing in the Register maintained with respect
to such subclass. Alternatively, upon application in writing to the Trustee,
not later than the applicable Record Date, by a Noteholder of one or more
Definitive Registered Notes of any subclass having an aggregate principal
amount of not less than $1,000,000, any such payments shall be made by wire
transfer to an account designated by such Noteholder at a financial institution
in New York, New York; provided that the final payment for each subclass of
Notes shall be made only upon presentation and surrender of the Global Notes or
Definitive Registered Notes of such subclass by the Noteholder or its agent at
the Corporate Trust Office or agency of the Trustee or Paying Agent specified
in the notice of such final payment given by the Trustee or Paying Agent. The
Trustee or Paying Agent shall mail such notice of the final payment of such
subclass to each of the Noteholders of such subclass, specifying the date and
amount of such final payment.
Section 2.06. Minimum Denomination. Each subclass of Notes shall be issued
in minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof.
Section 2.07. Transfer and Exchange; Cancellation. (a) Transfer and
Exchange of Global Notes. Transfer of any Global Note shall be by delivery.
The Issuer represents that it has agreed with the Book-Entry Depositary that a
Global Note and the corresponding Depositary Interests therein shall only be
transferred in the circumstances described in the Deposit Agreement. All Global
Notes will be exchanged by the Issuer for Notes in definitive registered form
substantially as set forth in the applicable exhibit to this Indenture (each, a
"Definitive Registered Note") if (i) the Depository notifies the Book-Entry
Depositary in writing that it is no longer willing or able to properly discharge
its responsibilities as depository with respect to the Depositary Interests and
a successor depositary is not appointed in accordance with the terms of the
Deposit Agreement by the Book-Entry Depositary at the request of the Issuer
within 90 days of such notice, (ii) the Issuer or the Book-Entry Depositary
advises the Trustee in writing that the Book-Entry Depositary is no longer
willing or able to properly discharge its responsibilities as book-entry
depositary and the Issuer is unable to appoint a successor book-entry depositary
acceptable to the Trustee within 90 days of such notice or (iii) after the
occurrence of an Event of Default with respect to any class of Notes, owners of
Book-Entry Interests of a subclass within such class representing an aggregate
of not less than 51% of the aggregate Outstanding Principal Balance of Notes of
such subclass advise the Issuer, the Trustee, the Book-Entry Depositary and the
Depository through the Participants in writing that the continuation of a
book-entry system through the Depository (or a successor thereto) is no longer
in the best interests of such owners. Upon the occurrence of any Event of
Default, the Trustee shall notify all Holders of each affected subclass of the
occurrence of such event and of the availability of Definitive Registered Notes
of such subclass. Upon surrender to the Trustee of the Global Notes of any
subclass, accompanied by registration instructions from the Holder of such
Global Note as provided in the Deposit Agreement, the Issuer shall issue and the
Trustee shall
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46
authenticate and deliver the Definitive Registered Notes of such subclass to
the registered owners thereof.
None of the Issuer, the Paying Agent or the Trustee shall be liable for
any delay in delivery of such registration instructions and may conclusively
rely on, and shall be fully protected in relying on, such instructions as
provided in accordance with the terms of the Deposit Agreement. Upon the
issuance of Definitive Registered Notes of any subclass, the Trustee shall
recognize the Persons in whose name the Definitive Registered Notes are
registered in the Register as Noteholders of such subclass hereunder. Neither
the Issuer nor the Trustee shall be liable if the Trustee or the Issuer is
unable to appoint a successor Depository or Book-Entry Depositary.
The transfer and exchange of Book-Entry Interests shall be effected
through the Depository, in accordance with this Indenture, the Deposit
Agreement and the Applicable Procedures of the Depository therefor. Book-Entry
Interests corresponding to Global Notes shall be subject to restrictions on
transfer comparable to those set forth in Section 2.13 hereof and elsewhere
herein to the extent required by the Securities Act. The Trustee shall have no
obligation to ascertain the Depository's compliance with any such restrictions
on transfer.
Any Book-Entry Interest corresponding to one of the Global Notes of any
subclass that is transferred to a Person who will hold such Book-Entry Interest
in the form of an interest in the other Global Note of such subclass will, upon
transfer, cease to be an interest in such first Global Note and become an
interest in such other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
Book-Entry Interests in such other Global Note for as long as it remains such
an interest.
Global Notes may also be exchanged or replaced, in whole or in part, as
provided in Sections 2.08 and 2.14 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof
pursuant to Section 2.08 or 2.14 hereof shall be authenticated and delivered in
the form of, and shall be, a Global Note in bearer form. A Global Note may not
be exchanged for another Note other than as provided in Sections 2.07(a), 2.08
and 2.14.
(b) Transfer and Exchange of Definitive Registered Notes. A Holder may
transfer a Definitive Registered Note only by written application to the
Registrar stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected until,
and such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar in the Register.
Prior to the due presentment for registration of transfer of a Definitive
Registered Note, the Issuer and the Trustee may deem and treat the applicable
registered Noteholder as the absolute owner and Holder of such Definitive
Registered Note for the purpose of receiving payment of all amounts payable with
respect to such Definitive
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Registered Note and for all other purposes and shall not be affected by any
written notice to the contrary. The Registrar (if different from the Trustee)
shall promptly notify the Trustee and the Trustee shall promptly notify the
Issuer of each request for a registration of transfer of a Definitive Registered
Note.
When Definitive Registered Notes are presented to the Registrar with a
request to register their transfer or to exchange them for an equal principal
amount of Definitive Registered Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transactions are met (including, in the case of a
transfer, that such Definitive Registered Notes are duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and Registrar duly executed by the Holder thereof or by an attorney who
is authorized in writing to act on behalf of the Holder). To permit
registrations of transfers and exchanges, the Issuer shall execute and the
Trustee shall authenticate Definitive Registered Notes at the Registrar's
request. Except as set forth in Sections 2.08 and 2.09 hereof, no service
charge shall be made for any registration of transfer or exchange of any
Definitive Registered Notes.
The Issuer shall not be required to exchange or register the transfer of
any Definitive Registered Notes as above provided during the 15-day period
preceding the Final Maturity Date of any such Notes or during the period after
the first mailing of any notice of Redemption or Refinancing of Notes to be
redeemed or refinanced. The Issuer shall not be required to exchange or
register the transfer of any Definitive Registered Notes that have been
selected, called or are being called for Redemption or Refinancing except, in
the case of any Definitive Registered Notes where notice has been given that
such Definitive Registered Notes are to be redeemed in part, the portion
thereof not so to be redeemed.
(c) Exchange Offer; Registration of Subclass D-1 Notes. Upon the
occurrence of an Exchange Offer in accordance with the relevant Registration
Rights Agreement, the Issuer shall, upon cancellation by the Trustee of the
Notes surrendered for exchange, issue and the Trustee shall authenticate, for
each subclass of Notes, one or more global Exchange Notes in bearer form in an
aggregate principal amount equal to the principal amount of the Book-Entry
Interests tendered for acceptance by persons that are not (x) broker-dealers,
(y) Persons participating in the distribution of the Exchange Notes or (z)
Persons who are affiliates (as defined in Rule 144 under the Securities Act) of
the Issuer and accepted for exchange in the Exchange Offer. Upon a registered
sale of the Subclass D-1 Notes pursuant to the D Note Registration Rights
Agreement, the Issuer shall, upon cancellation by the Trustee of the Subclass
D-1 Notes surrendered, issue and the Trustee shall authenticate one or more
global notes in bearer form in an aggregate principal amount equal to the
principal amount of the Class D Notes for such subclass exchanged therefor.
Concurrently with the issuance of such Exchange Notes, the Trustee shall cause
the aggregate principal amount of the applicable Global Notes to be reduced
accordingly and shall direct the Book-Entry Depositary to make a corresponding
reduction in its books and records of the corresponding Depositary Interests.
Book-Entry Interests and Depositary Interests corresponding to a Global Note so
exchanged for an Exchange Note shall be in turn exchanged for Book-Entry
Interests and Depositary Interests in such Exchange Note.
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(d) Cancellation. The Issuer at any time may deliver Notes to the Trustee
for cancellation. Each Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange, payment or purchase. The
Trustee and no one else shall cancel and destroy in accordance with its
customary practices in effect from time to time (subject to the record
retention requirements of the Exchange Act) any such Notes, together with any
other Notes surrendered to it for registration of transfer, exchange or
payment. The Issuer may not issue new Notes (other than Refinancing Notes
issued in connection with any Refinancing) to replace Notes it has redeemed,
paid or delivered to the Trustee for cancellation.
Section 2.08. Mutilated, Destroyed, Lost or Stolen Notes. If any Note
shall become mutilated, destroyed, lost or stolen, the Issuer shall, upon the
written request of the Holder thereof and presentation of the Note or
satisfactory evidence of destruction, loss or theft thereof to the Trustee or
Registrar, issue, and the Trustee shall authenticate and the Trustee or
Registrar shall deliver in exchange therefor or in replacement thereof, a new
Note of the same subclass, payable to such Holder in the same principal amount,
of the same maturity, with the same payment schedule, bearing the same interest
rate and dated the date of its authentication. If the Note being replaced has
become mutilated, such Note shall be surrendered to the Trustee or a Registrar
and forwarded to the Issuer by the Trustee or such Registrar. If the Note being
replaced has been destroyed, lost or stolen, the Holder thereof shall furnish to
the Issuer, the Trustee or a Registrar (i) such security or indemnity as may be
required by them to save the Issuer, the Trustee and such Registrar harmless and
(ii) evidence satisfactory to the Issuer, the Trustee and such Registrar of the
destruction, loss or theft of such Note and of the ownership thereof. The
Noteholders will be required to pay any tax or other governmental charge imposed
in connection with such exchange or replacement and any other expenses
(including the fees and expenses of the Trustee and any Registrar) connected
therewith.
Section 2.09. Payments of Transfer Taxes. Upon the transfer of any Note
or Notes pursuant to Section 2.07 hereof, the Issuer or the Trustee may require
from the party requesting such new Note or Notes payment of a sum to reimburse
the Issuer or the Trustee for, or to provide funds for the payment of, any
transfer tax or similar governmental charge payable in connection therewith.
Section 2.10. Refinancing of A-D Notes. (a) Subject to paragraphs (b)
and (c) below and Section 5.02(f)(ii) hereof, the Issuer may issue Refinancing
Notes pursuant to this Indenture for the purpose of refinancing the Outstanding
Principal Balance of any subclass of A-D Notes (including refinancings of
Refinancing Notes). Each refinancing of any subclass of A-D Notes with the
proceeds of an offering of Refinancing Notes (a "Refinancing") shall be
authorized pursuant to one or more Board Resolutions. Each Refinancing Note
shall be designated generally as a "Note" for all purposes under this Indenture,
with such further designations added or incorporated in such title as specified
in the related Board Resolutions or in any indenture supplemental hereto
providing for the issuance of such Notes or specified in the form of such Notes,
as the case may be.
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(b) A Refinancing of any subclass of A-D Notes in whole or in part may
occur on any Payment Date after the Initial Closing Date; provided that notice
of such Refinancing shall be given by the Issuer to the Trustee and each Holder
and, for so long as any A-D Notes are listed on the Luxembourg Stock Exchange,
to the Listing Agent and the Luxembourg Stock Exchange, not less than five days
and not more than thirty days prior to the date of such Refinancing in the
manner provided in Section 2.15 hereof; provided, further, that an amount equal
to the Redemption Price plus accrued and unpaid interest will be payable with
respect to any subclass of A-D Notes so refinanced. Each notice in respect of
a Refinancing shall state (i) the date of such Refinancing, (ii) the Redemption
Price of the A-D Notes to be refinanced and the amount of accrued but unpaid
interest thereon, (iii) that the A-D Notes of the subclass to be refinanced
must be surrendered and (iv) that, unless the Issuer defaults in the payment of
the Redemption Price and any accrued and unpaid interest, interest on such
subclass of A-D Notes to be refinanced will cease to accrue on and after the
date of such Refinancing. On the date of any Refinancing, the Issuer shall
issue and sell an aggregate principal amount of Refinancing Notes not to exceed
the Outstanding Principal Balance of the subclass of A-D Notes being refinanced
thereby plus any Redemption Premium and transaction expenses relating thereto.
The proceeds of each sale of Refinancing Notes shall be used to repay the
Outstanding Principal Balance, any Redemption Premium and expenses of the
subclass of A-D Notes being refinanced thereby. Once a Notice of Refinancing
in respect of any Refinancing is published, each subclass of A-D Notes to which
such Notice of Refinancing applies shall become due and payable on the
Refinancing Date stated in such Notice of Refinancing at their Redemption
Price, together with accrued and unpaid interest.
(c) Each Refinancing Note shall contain such terms as may be established
in or pursuant to the related Board Resolutions (subject to Section 2.01
hereof) or in any indenture supplemental hereto providing for the issuance of
such Notes or specified in the form of such Notes to the extent permitted
below, and shall have the same ranking pursuant to Section 3.08 with respect to
all other Outstanding Notes as the subclass of A-D Notes being refinanced
thereby. Prior to any Refinancing, any or all of the following, as applicable,
with respect to the related issue of Refinancing Notes shall have been
determined by the Issuer and set forth in such Board Resolutions or in any
indenture supplemental hereto providing for the issuance of such Notes or
specified in the form of such Notes, as the case may be:
(1) the subclass of A-D Notes to be refinanced by such Refinancing
Notes;
(2) the aggregate principal amount of each subclass of such
Refinancing Notes which may be issued in respect of such Refinancing;
(3) the proposed date of such Refinancing;
(4) the Expected Final Payment Date and the Final Maturity Date of
each subclass of such Refinancing Notes;
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(5) the rate at which such Refinancing Notes shall bear interest or
the method by which such rate shall be determined;
(6) if other than denominations of $100,000 and any integral
multiple of $1,000 in excess thereof, the denomination or denominations
in which any subclass of such Refinancing Notes shall be issuable;
(7) whether any such Refinancing Notes are to be issuable initially
in registered or bearer form, temporary or permanent global form and, if
so, whether beneficial owners of interests in any such permanent global
Refinancing Note may exchange such interests for Refinancing Notes of
such subclass and of like tenor of any other authorized form and
denomination and the circumstances under which any such exchanges may
occur, if other than in the manner provided in Section 2.07 hereof, and
the circumstances under which and the place or places where any such
exchanges may be made and the identity of any initial depository
therefor; and
(8) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to the subclass of
Refinancing Notes (which terms shall comply with Applicable Law and not
be inconsistent with the requirements or restrictions of this Indenture,
including Section 5.02(f)(ii) hereof).
If any of the terms of any issue of Refinancing Notes are established by
action taken pursuant to one or more Board Resolutions, a certified copy of
such Board Resolutions shall be delivered to the Trustee setting forth the
terms of such Refinancing Notes.
Section 2.11. Issuer Additional Notes. (a) Subject to paragraph (b) below
and Section 5.02(f)(iv) hereof, the Issuer may issue Issuer Additional Notes
pursuant to this Indenture the proceeds of which shall be used to acquire Issuer
Additional Aircraft (each, an "Additional Issuance"). Each issuance of any
subclass of Issuer Additional Notes shall be authorized pursuant to one or more
Board Resolutions. Each Issuer Additional Note shall be designated generally as
a "Note" for all purposes under this Indenture, with such further designations
added or incorporated in such title as specified in the related Board
Resolutions or in any indenture supplemental hereto providing for the issuance
of such Notes or specified in the form of such Notes, as the case may be.
(b) Each Issuer Additional Note shall contain such terms as may be
established in or pursuant to the related Board Resolutions (subject to Section
2.01 hereof) or in any indenture supplemental hereto providing for the issuance
of such Notes or specified in the form of such Notes to the extent permitted
below, and shall have the same ranking pursuant to Section 3.08 with respect to
all other Outstanding AerCo Group Notes of the same class. Prior to any
issuance, any or all of the following, as applicable, with respect to the
related Additional Issuance shall have been determined by the Issuer and set
forth in such Board Resolutions or in any indenture supplemental hereto or
specified in the form of such Notes, as the case may be:
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(1) the subclass of Notes to be issued;
(2) the aggregate principal amount of each subclass of such Issuer
Additional Notes which may be issued;
(3) the proposed date of such Additional Issuance;
(4) the Expected Final Payment Date and the Final Maturity Date of
each subclass of such Issuer Additional Notes;
(5) the rate at which such Issuer Additional Notes shall bear
interest or the method by which such rate shall be determined;
(6) if other than denominations of $100,000 and any integral
multiple of $1,000 in excess thereof, the denomination or denominations
in which each subclass of any such Issuer Additional Notes shall be
issuable;
(7) whether any such Issuer Additional Notes are to be issuable
initially in registered or bearer form, temporary or permanent global
form and, if so, whether beneficial owners of interests in any such
permanent global Issuer Additional Note may exchange such interests for
Issuer Additional Notes of the same subclass and of like tenor and of any
other authorized form and denomination and the circumstances under which
any such exchanges may occur, if other than in the manner provided in
Section 2.07 hereof, and the circumstances under which and the place or
places where any such exchanges may be made and the identity of any
initial depository therefor; and
(8) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to each subclass of
Issuer Additional Notes (which terms shall comply with Applicable Law and
not be inconsistent with the requirements or restrictions of this
Indenture, including Sections 5.02(f) and 13.13 hereof).
If any of the terms of any issue of Issuer Additional Notes are
established by action taken pursuant to one or more Board Resolutions, a
certified copy of such Board Resolutions shall be delivered to the Trustee
setting forth the terms of such Issuer Additional Notes.
Section 2.12. Remaining Subclass D-1 Notes and Remaining Subclass E-1
Notes. (a) Subject to paragraphs (a) and (b) of this Section 2.12, the Issuer
may issue to GPA Group or its subsidiaries additional Subclass D-1 Notes (the
"Remaining Subclass D-1 Notes") and Subclass E-1 Notes (the "Remaining Subclass
E-1 Notes") pursuant to this Indenture the proceeds of which shall be used to
acquire the Remaining Aircraft or Substitute Aircraft in an amount equal to the
pro rata portion of the Subclass D-1 Notes or the Subclass E-1 Notes, as the
case may be, allocable to the Remaining Aircraft or Substitute Aircraft
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delivered. The issuance of Remaining Subclass D-1 and Subclass E-1 Notes shall
be authorized pursuant to one or more Board Resolutions. Each Remaining
Subclass D-1 and Subclass E-1 Note shall be designated generally as a "Note".
(b) Each Remaining Subclass D-1 Note and each Remaining Subclass E-1 Note
shall contain terms identical to those of the Subclass D-1 Notes or Subclass
E-1 Notes, as the case may be, issued on the Initial Closing Date, except as to
denomination, date of issuance and principal amount, and shall have the same
ranking with respect to all other Notes as the Subclass D-1 Notes or Subclass
E-1 Notes, as the case may be.
Section 2.13. Special Transfer Provisions. Unless and until a Note is
exchanged for an Exchange Note under an effective registration statement under
the Securities Act pursuant to the relevant Registration Rights Agreement, the
following provisions shall apply:
(a) All Transfers and Exchanges of Book-Entry Interests. In connection
with all transfers and exchanges of Book-Entry Interests, other than transfers
of Book-Entry Interests corresponding to a Global Note to Persons who will hold
such Book-Entry Interest in the form of a Book-Entry Interest corresponding to
the same Global Note, the transferor of such Book-Entry Interest must deliver
to the Trustee either (i) (A) instructions given in accordance with the
Applicable Procedures from a Participant directing the Depository to credit or
cause to be credited a Book-Entry Interest corresponding to the specified
Global Note in an amount equal to the Book-Entry Interest to be transferred or
exchanged, (B) a written order given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase and (C) instructions given by the Holder of the
Global Note to effect the transfer referred to in (A) and (B) above or (ii) (A)
instructions given in accordance with the Applicable Procedures from a
Participant directing the Depository to cause to be issued a Definitive
Registered Note in an amount equal to the Book-Entry Interest to be transferred
or exchanged and (B) instructions given by the Holder of the Global Note to
effect the transfer referred to in (A) above.
(b) Transfer of Book-Entry Interests in the Same Global Note. Book-Entry
Interests corresponding to any Global Note may be transferred to Persons who
will hold such Book-Entry Interest in the form of a Book-Entry Interest
corresponding to the same Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend.
(c) Transfer of Book-Entry Interests to Another Global Note. Book-Entry
Interests corresponding to one of the Global Notes of any subclass may be
transferred to Persons who will hold such Book-Entry Interest in the form of a
Book-Entry Interest corresponding to the other Global Note of such subclass if
the Trustee receives the following:
(i) if the transferee will hold such interests in the form of a
Book-Entry Interest corresponding to a Rule 144A Global Note, then the
transferor must deliver a
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certificate in the form of Exhibit J hereto, including the certifications
in item (1) thereof; and
(ii) if the transferee will hold such interests in the form of a
Book-Entry Interest corresponding to a Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit J hereto,
including the certifications in item (2) thereof.
(d) Notation by the Trustee of Transfer of Book-Entry Interests Among
Global Notes. Upon satisfaction of the requirements for transfer of Book-Entry
Interests pursuant to paragraph (c) above, the Trustee shall reduce or cause to
be reduced the aggregate principal amount of the relevant Global Note from
which the Book-Entry Interest is being transferred, and increase or cause to be
increased the aggregate principal amount of the Global Note to which the
Book-Entry Interest is being transferred, in each case, by the principal amount
of the Book-Entry Interest being transferred and shall direct the Book-Entry
Depositary to make corresponding endorsements on the schedules attached to such
Global Notes and adjustments in its book-entry system of the corresponding
Depositary Interests.
(e) Exchange of Book-Entry Interests for Definitive Registered Notes. Any
Definitive Registered Note delivered in exchange for a Book-Entry Interest
corresponding to a Rule 144A Global Note or Regulation S Global Note, as the
case may be, pursuant to the Deposit Agreement and Section 2.07(a) hereof
shall, except as otherwise provided by paragraph (f) of this Section 2.13, bear
the Private Placement Legend set forth in Section 2.02 hereof.
(f) Private Placement Legend. Upon the transfer, exchange or replacement
of Definitive Registered Notes not bearing the Private Placement Legend, the
Registrar shall deliver Definitive Registered Notes that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of
Definitive Registered Notes bearing the Private Placement Legend, the Registrar
shall deliver only Definitive Registered Notes that bear the Private Placement
Legend unless either (i) the Private Placement Legend is no longer required
under Section 2.02 hereof or (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture. By
its acceptance of a Depositary Interest or Book-Entry Interest corresponding to
any Note, each such owner acknowledges the restrictions on transfer of such
Depositary Interest or Book-Entry Interest set forth in this Indenture and the
Deposit Agreement and agrees that it will transfer such Depositary Interest or
Book-Entry Interest only as set forth in this Indenture and the Deposit
Agreement. The Registrar shall not register a transfer of any Definitive
Registered Note unless such transfer
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complies with the restrictions on transfer of such Definitive Registered Note
set forth in this Indenture. In connection with any transfer of Notes or
Book-Entry Interests corresponding thereto, each Holder or owner thereof agrees
by its acceptance of such Notes or such Book-Entry Interests to furnish the
Trustee the certifications and legal opinions described herein to confirm that
such transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Trustee shall not be required to determine (but may rely on a determination
made by the Issuer with respect to) the sufficiency of any such legal opinions.
The Trustee shall retain copies of all letters, notices and other written
communications received pursuant to this Section 2.13. The Issuer shall have
the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Trustee.
Section 2.14. Temporary Definitive Registered Notes. Pending the
preparation of Definitive Registered Notes of any subclass, the Issuer may
execute and the Trustee may authenticate and deliver temporary Definitive
Registered Notes of such subclass which are printed, lithographed, typewritten
or otherwise produced, in any denomination, containing substantially the same
terms and provisions as are set forth in the applicable exhibit hereto or in any
indenture supplemental hereto, except for such appropriate insertions,
omissions, substitutions and other variations relating to their temporary nature
as the Responsible Officer of the Issuer executing such temporary Definitive
Registered Notes may determine, as evidenced by his execution of such temporary
Definitive Registered Notes.
If temporary Definitive Registered Notes of any subclass are issued, the
Issuer will cause Definitive Registered Notes of such subclass to be prepared
without unreasonable delay. After the preparation of Definitive Registered
Notes of such subclass, the temporary Definitive Registered Notes shall be
exchangeable for Definitive Registered Notes upon surrender of such temporary
Definitive Registered Notes at the Corporate Trust Office of the Trustee,
without charge to the Holder thereof. Upon surrender for cancellation of any
one or more temporary Definitive Registered Notes, the Issuer shall execute and
the Trustee shall authenticate and deliver in exchange therefor Definitive
Registered Notes of like subclass, in authorized denominations and in the same
aggregate principal amounts. Until so exchanged, such temporary Definitive
Registered Notes shall in all respects be entitled to the same benefits under
this Indenture as Definitive Registered Notes.
Section 2.15. Statements to Noteholders. (a) On the second Business Day
before each Payment Date and any other date for distribution of any payments
with respect to any subclass of Notes then Outstanding, the Trustee will
distribute to each Noteholder with each Payment to Noteholders of such subclass
a report, substantially in the form attached as Exhibit I hereto and setting
forth the information described therein after giving effect to such Payment
(each, a "Monthly Report") provided that such report is delivered to the Trustee
in a timely manner. A statement setting forth an analysis of the Collection
Account activity for each fiscal quarter will also be distributed to each
Noteholder within 45 days of the preceding quarter end, provided that such
information is delivered to the Trustee in a timely manner.
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(b) After the end of each calendar year but not later than the latest date
permitted by law, the Trustee in its capacity as Paying Agent shall or, if the
Paying Agent is another Person other than the Trustee, the Trustee shall
instruct such Paying Agent to, furnish to each Person who at any time during
such calendar year was a Noteholder of record of any subclass a statement
containing the sum of the amounts determined pursuant to clause (D) of Exhibit
H hereto (or in accordance with Internal Revenue Service Form 1099) with
respect to the subclass for such calendar year or, in the event such Person was
a Noteholder of record of any subclass during only a portion of such calendar
year, for the applicable portion of such calendar year.
(c) On each Payment Date and any other date specified herein for
distribution of any Payments with respect to the Notes of any subclass, the
Trustee shall provide to the Listing Agent, on behalf of the Luxembourg Stock
Exchange, a copy of the report to Noteholders of such subclass described in
this Section 2.15.
(d) Following each Payment Date and any other date specified herein for
distribution of any Payments with respect to the Notes and prior to a
Refinancing or Redemption, the Trustee shall cause notice of such Payment,
Refinancing or Redemption (including the information specified therefor in
Sections 2.10, 3.06(f) and 3.10, respectively) to be given (i) by publication
in the Luxemburger Wort or, if such newspaper shall cease to be published or
timely publication therein shall not be practicable, in such English language
newspaper or newspapers as the Trustee shall approve having a general
circulation in Europe, (ii) by either of (a) the information contained in such
notice appearing on the relevant page of the Reuters Screen or such other
medium for the electronic display of data as may be approved by the Trustee and
notified to Noteholders or (b) publication in the Financial Times and The Wall
Street Journal (National Edition) or, if either newspaper shall cease to be
published or timely publication therein shall not be practicable, in such
English language newspaper or newspapers as the Trustee shall approve having a
general circulation in Europe and the United States and (iii) until such time
as any Definitive Registered Notes are issued and, so long as Book-Entry
Interests are owned through the facilities of DTC, Euroclear and/or Cedel,
delivery of the relevant notice to DTC, Euroclear and/or Cedel for
communication by them to owners of Book-Entry Interests of such subclass.
(e) The Trustee shall be at liberty to sanction some other method of
giving notice to the Noteholders of any subclass if, in its opinion, such other
method is reasonable, having regard to the number and identity of the
Noteholders of such subclass and/or to market practice then prevailing, is in
the best interests of the Noteholders of such subclass and will comply with the
rules of the Luxembourg Stock Exchange as confirmed by the Listing Agent or
such other stock exchange (if any) on which the Notes of such subclass are then
listed, and any such notice shall be deemed to have been given on such date as
the Trustee may approve; provided that notice of such method is given to the
Noteholders of such subclass in such manner as the Trustee shall require.
(f) Notice specifying the interest rate and amount of any repayment of
principal pursuant to Section 3.10(a) or (b) hereof on any Notes shall, for so
long as such
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Notes are listed on the Luxembourg Stock Exchange and so long as the rules of
the Luxembourg Stock Exchange so require, be given to the Listing Agent. Any
such notice shall be deemed to have been given on the first day on which
requirements for such notification shall have been met.
Section 2.16. CUSIP, CINS AND ISIN Numbers. The Issuer in issuing the
Notes may use "CUSIP", "CINS", "ISIN" or other identification numbers (if then
generally in use), and if so, the Trustee shall use CUSIP numbers, CINS numbers,
ISIN numbers or other identification numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes; provided further, that failure to
use "CUSIP", "CINS", "ISIN" or other identification numbers in any notice of
redemption or exchange shall not affect the validity or sufficiency of such
notice.
ARTICLE III
ACCOUNTS; PRIORITY OF PAYMENTS
Section 3.01. Establishment of Accounts. (a) The Cash Manager, acting on
behalf of the Security Trustee, shall establish and maintain the Accounts set
forth on Schedule I to the Cash Management Agreement and any additional accounts
established from time to time in the manner described in this Section 3.01. To
the greatest extent possible, the Security Trustee shall be granted a security
interest in the Issuer's and the Issuer Subsidiaries' interests in the cash
balances from time to time deposited in all of the Accounts pursuant to the
terms of Section 2.01 of the Security Trust Agreement. The Security Trustee
shall have sole dominion and control over the Accounts (including, inter alia,
the sole power to direct withdrawals or transfers from the Accounts), which
dominion and control is delegated to the Cash Manager pursuant to Section
2.01(a) of the Cash Management Agreement.
(i) The Cash Manager shall make withdrawals and transfers from the
Accounts in accordance with the terms of the Cash Management Agreement
and this Indenture based on the Relevant Information and as calculated by
it pursuant to this Indenture and the Cash Management Agreement.
(ii) If the Operating Bank should change at any time, then the Cash
Manager, acting on behalf of the Security Trustee, shall thereupon
promptly establish replacement accounts as necessary at the successor
Operating Bank and transfer the balance of funds in each Account then
maintained at the former Operating Bank pursuant to the terms of the Cash
Management Agreement to such successor Operating Bank.
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(b) Collection Account. The Cash Manager, acting on behalf of the
Security Trustee, shall establish and maintain at the Operating Bank in the
name of the Security Trustee (or in the name of an Eligible Institution
designated in writing by the Security Trustee to the Operating Bank), a trust
account (the "Collection Account"). The Collection Account shall bear a
designation clearly indicating that the funds deposited therein are held for
the benefit of the Secured Parties. All Collections received by the Issuer
and the Issuer Subsidiaries shall be deposited in the Collection Account and
transferred therefrom in accordance with the terms of this Indenture.
If the balance of funds on deposit in the Collection Account, together
with the amount available for drawing under any Eligible Credit Facilities,
falls below the Liquidity Reserve Amount at any time (including as a result of
any increase in the Liquidity Reserve Amount), the Issuer may continue to make
all payments, including required payments on the AerCo Group Notes and any
Guarantees, which rank prior to, or pari passu with, payments of Minimum
Principal Payment Amounts on the AerCo Group Class D Notes pursuant to Section
3.08(a) hereof and any Permitted Accruals other than in respect of Modification
Payments; provided that the balance of funds in the Collection Account,
together with the amount available for drawing under any Eligible Credit
Facilities does not fall below the Minimum Liquidity Reserve Amount at its then
current level; provided further, however, that the balance of funds in the
Collection Account, together with the amount available for drawing under any
Eligible Credit Facilities, may fall below the Minimum Liquidity Reserve Amount
at its then current level, and the Issuer may continue to make all payments,
including required payments on AerCo Group Notes and any Guarantees, in order
to pay accrued and unpaid interest on, and, on the applicable Final Maturity
Date thereof, principal of, the Senior Class then Outstanding to avoid an Event
of Default, in each case subject to the order of priorities under Section 3.08
hereof.
The Security Trustee shall have sole dominion and control over the
Collection Account and all investments made through and/or maintained in the
Collection Account, including authority to direct withdrawals from or transfers
among the Collection Account and each other Account. Amounts may be withdrawn
or transferred from the Collection Account only in accordance with the
provisions of this Indenture, any Guarantor Indenture and the Cash Management
Agreement by authorized officers or employees of the Security Trustee or agents
authorized by the Security Trustee in writing (including the Cash Manager and
any authorized agent thereof pursuant to the Cash Management Agreement). If,
at any time, the Collection Account ceases to be an Eligible Account, the Cash
Manager or an agent thereof shall, within 10 Business Days, establish a new
collection account meeting the conditions set forth in this Section 3.01(b) and
transfer any cash or investments in the existing Collection Account to such new
collection account; and from the date such new collection account is
established, it shall be the "Collection Account".
(c) Lessee Funded Account. The Cash Manager, acting on behalf of the
Security Trustee, shall establish and maintain at the Operating Bank in the
name of the Security Trustee (or in the name of an Eligible Institution
designated in writing by the Security Trustee to the Operating Bank) one or
more trust accounts (collectively, the "Lessee
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Funded Account"). The Lessee Funded Account shall bear a designation
indicating that the Segregated Funds deposited therein are held for the benefit
of the relevant Lessee pursuant to the terms of any Lease which requires that
such funds be segregated from the other funds of the AerCo Group, and that such
Segregated Funds are to be held in accordance with such Lease. Any Segregated
Funds received from time to time from such Lessees shall be transferred by the
Cash Manager directly into the Lessee Funded Account. All funds on deposit in
the Lessee Funded Account shall be accounted for and, if required by any Lease,
segregated on a per lease basis as set forth below and may not be used to make
payments, other than as permitted under Section 3.07 hereof, in respect of the
Notes at any time, including after the delivery of a Default Notice. Any
Segregated Funds relating to an expired Lease that remain in the Lessee Funded
Account after expiration of such lease and that are not due and owing to the
relevant Lessee under such expired Lease shall be credited in the Lessee Funded
Account to the next Lessee of the relevant Aircraft to the extent, if any,
required under the terms of the next Lease relating to such Aircraft.
The Security Trustee shall have sole dominion and control over the Lessee
Funded Account and all investments made through and/or maintained in the Lessee
Funded Account, including sole authority to direct withdrawals or transfers
therefrom. Amounts may be withdrawn from the Lessee Funded Account only in
accordance with the provisions of this Indenture, any Guarantor Indenture and
the Cash Management Agreement and only by officers, employees or agents
authorized by the Security Trustee in writing (including the Cash Manager and
any authorized agent thereof pursuant to the Cash Management Agreement). If,
at any time, any Lessee Funded Account ceases to be an Eligible Account, the
Cash Manager or an agent thereof shall establish, within 10 Business Days, a
new lessee funded account to replace such Lessee Funded Account meeting the
conditions set forth in this Section 3.01(c) and transfer any cash or
investments in the existing Lessee Funded Account to such new lessee funded
account; and from the date any such new lessee funded account is established,
it shall be the "Lessee Funded Account" with respect to the relevant Lease.
(d) Expense Account. The Cash Manager, acting on behalf of the Security
Trustee, shall establish and maintain at the Operating Bank, in the name of the
Security Trustee (or in the name of an Eligible Institution designated in
writing by the Security Trustee to the Operating Bank), a trust account (the
"Expense Account") bearing a designation indicating that the funds deposited
therein are held for the benefit of the Secured Parties. On each Payment Date,
the Required Expense Amount (other than the part of the Required Expense Amount
paid directly to certain Expense payees on such Payment Date pursuant to
Section 3.08(a)(i) hereof) shall be deposited into the Expense Account from the
Collection Account. The Cash Manager may, but shall not be required to,
maintain in the Expense Account a balance containing accruals in respect of
Expenses that are not regular, monthly recurring Expenses, including
Modification Payments and Refinancing Expenses, if any, of AerCo Group
anticipated to become due and payable in any future Interest Accrual Period
(the "Permitted Accruals").
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The Security Trustee shall have sole dominion and control over the Expense
Account, including sole authority to direct withdrawals from or transfers among
the Accounts. Amounts may be withdrawn or transferred from the Expense Account
only in accordance with the provisions of this Indenture, any Guarantor
Indenture and the Cash Management Agreement by authorized officers or employees
of the Security Trustee or by agents authorized by the Security Trustee in
writing (including the Cash Manager and any authorized agents thereof pursuant
to the Cash Management Agreement). If, at any time, the Expense Account ceases
to be an Eligible Account, the Cash Manager or an agent thereof shall
establish, within 10 Business Days, a new expense account meeting the
conditions set forth in this Section 3.01(d) and transfer any cash or
investments in the existing Expense Account to such new expense account; and
from the date such new expense account is established, it shall be the "Expense
Account".
(e) Rental Accounts. The Cash Manager, acting on behalf of the Security
Trustee, shall establish and maintain, on or prior to the applicable Closing
Date and from time to time thereafter, one or more rental accounts (each, a
"Rental Account") for the deposit of Rental Payments and any amounts received
pursuant to any Related Collateral Documents; provided that all funds on
deposit in each Rental Account (other than certain limited amounts, if any,
required to be left on deposit for local tax or other regulatory or legal
reasons) shall be transferred by the Cash Manager or its agent from such Rental
Account into the Collection Account within one Business Day of receipt thereof.
Each Rental Account (other than the Non-Trustee Accounts) shall be established
and maintained at the Operating Bank (in which case such Rental Account shall
be a trust account), another Eligible Institution or a responsible and
reputable bank in accordance with Section 2.03 of the Cash Management Agreement
in the name of the Security Trustee on behalf of the Secured Parties.
In each case in which, for tax or other regulatory or legal reasons, any
Rental Account cannot be established in the name of the Security Trustee, then,
upon written notice from the Cash Manager to the Security Trustee and each
Rating Agency, the Issuer and any related Issuer Subsidiary shall open such
Rental Account (each, a "Non-Trustee Account") in the name of the Issuer or
relevant Lessor or such other Person as may be specified by the terms of the
relevant Lease, at an Eligible Institution or other reputable and responsible
bank; provided that no Non-Trustee Account may be opened unless the relevant
Lessor is or becomes a party to the Security Trust Agreement.
(f) Refinancing Account. The Cash Manager, acting on behalf of the
Trustee, shall establish and maintain at the Operating Bank in the name of the
Trustee, a trust account (the "Refinancing Account") for the benefit of the
Holders of AerCo Group A-D Notes of any subclass being refinanced for the
purpose of receiving the cash proceeds of any such Refinancing and holding such
proceeds on behalf of the Holders of such AerCo Group A-D Notes until such time
as the Outstanding Principal Balance and all accrued and unpaid interest and
Premium, if any, on such AerCo Group A-D Notes are repaid in full using such
proceeds and such AerCo Group A-D Notes are cancelled by the Trustee.
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(g) Defeasance/Redemption Account. The Cash Manager, acting on behalf of
the Trustee, shall establish and maintain at the Operating Bank in the name of
the Trustee, a trust account (the "Defeasance/Redemption Account") for the
benefit of the Holders of AerCo Group Notes of any subclass being redeemed or
defeased at the Operating Bank or such other Eligible Institution as may be
required for the purpose of receiving funds or securities to be used to redeem
or defease AerCo Group Notes pursuant to Section 3.10 or Article XI hereof or
pursuant to any Guarantor Indenture and holding such funds on behalf of the
Holders of the subclass of AerCo Group Notes to be redeemed or defeased, as the
case may be, until such time as the Outstanding Principal Balance and all
accrued and unpaid interest and Premium, if any, on such AerCo Group Notes are
repaid in full using such funds and such AerCo Group Notes are cancelled by the
Trustee.
(h) Aircraft Purchase Account. The Cash Manager, acting on behalf of the
Security Trustee, shall establish and maintain at the Operating Bank in the
name of the Security Trustee, a trust account (the "Aircraft Purchase Account")
for the purpose of (i) holding proceeds of the issuance of the Initial Notes on
behalf of the Holders until such time as the Remaining Aircraft or Substitute
Aircraft are delivered or such other time as the funds held therein are
transferred to the Collection Account in accordance with Section 3.04 hereof
and (ii) holding proceeds of any Additional Issuance pending application of
such proceeds for the acquisition of Additional Aircraft.
The Security Trustee shall have sole dominion and control over the
Aircraft Purchase Account and all investments made through and/or maintained in
the Aircraft Purchase Account, including authority to direct withdrawals from
or transfers among the Aircraft Purchase Account and each other Account. Any
amounts may be withdrawn or transferred from the Aircraft Purchase Account only
in accordance with the provisions of this Indenture and the Cash Management
Agreement by authorized officers or employees of the Security Trustee or agents
authorized by the Security Trustee in writing (including the Cash Manager and
any authorized agent thereof pursuant to the Cash Management Agreement). If,
at any time such account is required to be maintained by the Issuer, the
Aircraft Purchase Account ceases to be an Eligible Account, the Cash Manager or
an agent thereof shall, within 10 Business Days, establish a new deposit
account meeting the conditions set forth in this Section 3.01(h) and transfer
any cash or investments in the existing Aircraft Purchase Account to such new
deposit account; and from the date such new deposit account is established, it
shall be the "Aircraft Purchase Account".
(i) Note Account. The Cash Manager, acting on behalf of the Trustee,
shall establish and maintain at the Operating Bank in the name of the Trustee a
trust account for the benefit of the Noteholders of each subclass (each, a
"Note Account") as a non-interest-bearing account. The Trustee shall hold each
Note Account in trust for the benefit of the Noteholders of the relevant Note
Account, and shall make or permit withdrawals therefrom only as provided in
this Indenture. On each day when a payment is required to be made under this
Indenture in respect of any subclass of Notes, such amount shall be transferred
from the Collection Account to the relevant Note Account for application to the
payment of such Notes in accordance with the terms of this Indenture.
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Section 3.02. Investments of Cash. For so long as any AerCo Group Notes
remain Outstanding, the Cash Manager, on behalf of the Security Trustee, shall,
at the written direction of AerCo, invest and reinvest the funds on deposit in
the Accounts in Permitted Account Investments; provided, however, that following
the giving of a Default Notice or during the continuance of an Acceleration
Default, the Cash Manager shall invest such amount at the written direction of
the Security Trustee in Permitted Account Investments described in clause (d) of
the definition thereof (but in each case only to the extent such investment is
permitted by the Leases pursuant to which such funds were received) from the
time of receipt thereof until such time as such amounts are required to be
distributed pursuant to the terms of this Indenture. Pursuant to the Cash
Management Agreement, the Cash Manager shall make such investments and
reinvestments in accordance with the terms of the following provisions:
(i) the Permitted Account Investments shall have maturities and
other terms such that sufficient funds shall be available to make
required payments pursuant to this Indenture and any Guarantor Indenture
(A) on or before the first Payment Date after which such investment is
made, in the case of investments of funds on deposit in the Collection
Account and the Expense Account, or (B) in accordance with the
requirements of the relevant Leases or Aircraft Agreements, in the case
of investments of funds on deposit in the Lessee Funded Accounts;
provided that an investment maturing within one year of the date of
investment shall nevertheless be a Permitted Account Investment if it has
been acquired with funds which are not reasonably anticipated, at the
discretion of the Administrative Agent, to be required to be paid to any
other Person or otherwise transferred from the applicable Account prior
to such maturity;
(ii) if any funds to be invested are not received in the Accounts by
1:00 p.m., New York City time, on any Business Day, such funds shall, if
possible, be invested in overnight Permitted Account Investments; and
(iii) if required by the terms of a Lease, any investments of funds
on deposit in a Lessee Funded Account or the Collection Account shall be
made on behalf of the relevant Lessee in such investments as may be
required thereunder.
Section 3.03. Closing Date Deposits, Withdrawals and Transfers. On each
Closing Date, the Cash Manager shall make the following transfers to the
Accounts:
(i) deposit into the relevant Lessee Funded Account the amount of
the initial Segregated Funds, if any, received or deemed to have been
received from the Sellers pursuant to the terms of the relevant
Acquisition Agreements;
(ii) deposit into the Collection Account, in the case of the Initial
Closing Date, an amount equal to (x) the initial Liquidity Reserve Amount
and, in the case of any other Closing Dates, any amount necessary to
reflect the cash portion of the
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required Liquidity Reserve Amount at such date and (y) the available
amount in respect of Undelivered Related Collateral Documents;
(iii) transfer from the Collection Account to the Expense Account an
amount equal to the Required Expense Amount for the relevant initial
Interest Accrual Period; and
(iv) deposit into the Aircraft Purchase Account, (A) in the case of
the Initial Closing Date, an amount equal to the Initial Outstanding
Balance of the Initial Notes raised with respect to the Remaining
Aircraft, other than the Subclass D-1 and Subclass E-1 Notes, and (B) in
the case of any other Closing Dates, if applicable, an amount equal to
the proceeds of any AerCo Group Additional Notes issued to acquire the
Additional Aircraft.
Section 3.04. Interim Deposits and Withdrawals. (a) Interim Withdrawals
and Transfers for Expenses, Certain Lease Obligations and Other Obligations. On
any Business Day, the Cash Manager, on behalf of the Security Trustee, may make,
without duplication, the following withdrawals for the following purposes, in
each case after written notice from the Servicer or the Administrative Agent to
the Trustee, which notice shall identify the basis for such withdrawal or
transfer in reasonable detail:
(i) withdraw from the Expense Account or the Lessee Funded Account
or draw under the applicable Related Collateral Documents to the extent
that funds on deposit therein or available thereunder may be withdrawn or
drawn pursuant to the terms of the related Lease or Related Collateral
Document, to discharge any Expense or Permitted Accruals then due and
payable;
(ii) transfer from the Collection Account from time to time (but in
no event on less than one Business Day's prior written notice to the
Trustee, such notice to be given by the delivery of a notice in the form
of Exhibit B to the Cash Management Agreement, from the Cash Manager
(unless such one Business Day's notice requirement is waived by the
Trustee)), other amounts, including amounts constituting the Liquidity
Reserve Amount, from the Collection Account into the Expense Account, in
each case only to the extent that such funds are to be applied to
unanticipated Expenses which become due and payable during such Interest
Accrual Period; provided that no such transfer from the Collection
Account in respect of Expenses shall be made prior to the next succeeding
Payment Date if, in the reasonable judgment of the Cash Manager such
transfer would have a material adverse effect on the ability of AerCo
Group to make payments of accrued and unpaid interest on the Senior Class
of AerCo Group Notes then Outstanding on the next Payment Date therefor
in accordance with Section 3.08 hereof;
(iii) withdraw Segregated Funds from the Lessee Funded Account or
draw under any applicable Related Collateral, in any case to the extent
required by or necessary in connection with a Lease, any documents
related thereto and the Related
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Collateral Documents, for deposit in the Collection Account to satisfy
any default in Rental Payments under any related Lease;
(iv) transfer any Segregated Funds from the Collection Account to
the Lessee Funded Account in accordance with the terms of any Lease;
(v) withdraw from the Aircraft Purchase Account an amount equal to
the purchase price of any Remaining Aircraft, Substitute Aircraft or
Additional Aircraft, to the extent necessary to effect payment therefor;
and
(vi) (A) in the case of the Initial Notes, on January 15, 2000 and
(B) in the case of any AerCo Group Additional Notes, on such date as
shall be set forth in a Board Resolution, transfer any balance in the
Aircraft Purchase Account to the Collection Account for application in
accordance with Section 3.08(a) hereof.
(b) Interim Withdrawals and Transfers in respect of Undelivered Related
Collateral. On any Business Day, the Cash Manager, on behalf of the Security
Trustee, shall if, during any Interest Accrual Period, any Related Collateral
Document not delivered on or before the relevant Closing Date (the "Undelivered
Related Collateral Documents") is transferred to, reissued in the name of, or
amended with the consent of the Related Collateral Provider so that the
beneficiary becomes the Issuer or any Issuer Subsidiary, as the case may be,
after written notice to the Security Trustee, transfer to the relevant Seller
the amount due in respect thereof under the relevant section of an Acquisition
Agreement; provided that any reissued Related Collateral Document must be on
substantially the same or better terms as the Related Collateral Document in
place prior to the relevant Closing Date, and the Issuer or any Issuer
Subsidiary, as the case may be, must receive substantially the same rights to
enforce such Related Collateral Document as the prior beneficiary had prior to
such transfer or reissuance. Any payment made pursuant to this Section 3.04(b)
shall be made from the Collection Account promptly upon the transfer or reissue
of the applicable Related Collateral Documents in the name of the Issuer or
relevant Issuer Subsidiary, as the case may be.
Section 3.05. Interim Deposits and Withdrawals for Modification Payments
or Dispositions of Aircraft. On any Business Day, the Cash Manager, on behalf
of the Security Trustee, shall withdraw from time to time from the Permitted
Accruals on deposit in the Expense Account and, to the extent permitted under
Section 3.08(a) hereof, such other amounts as may be necessary from the
Collection Account to pay amounts due and owing in respect of a Modification
Payment and shall transfer such amounts to the appropriate payees. Upon the
sale or other disposition of any Aircraft, Engine or other asset, the Cash
Manager shall deposit any and all proceeds received in respect thereof by any
AerCo Group Member in the Collection Account (other than in connection with any
sale of all or substantially all of the assets of AerCo Group, in which case the
Cash Manager shall deposit any and all proceeds thereof into the
Defeasance/Redemption Account in connection with the redemption of each subclass
of the AerCo Group Notes). Any funds then on deposit in the Lessee Funded
Account related to the Aircraft subject to such sale or other disposition shall
be applied on a
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basis consistent with the terms of the Lease related to such Aircraft, if any,
or as otherwise provided by the relevant agreements related to such sale or
other disposition.
Section 3.06. Calculation Date Calculations. (a) Calculation of Required
Amounts. As soon as practicable after each Calculation Date, but in no event
later than two Business Days preceding the immediately succeeding Payment Date,
the Cash Manager shall, based on information known to it or Relevant Information
provided to it, determine the Collections received during the period commencing
on the day next following the preceding Calculation Date and ending on such
Calculation Date and calculate the following amounts:
(A) the balance of funds on deposit in the Accounts on the
Calculation Date and the required Liquidity Reserve Amount on such
Calculation Date;
(B) the Required Expense Amount as of such Calculation Date;
(C) the Available Collections Amount on such Calculation Date
(separately listing any Swap Payments and Swap Breakage Costs and amounts
to be retained in the Collection Account pursuant to Section 3.08(a)(iii)
and (xi));
(D) the net Segregated Funds available to be transferred into the
Collection Account on such Calculation Date;
(E) with respect to each Remaining Aircraft, the amount of earnings
(net of losses and investment expenses), if any, on investments of funds
on deposit allocable to such Remaining Aircraft in the Aircraft Purchase
Account during the Period since the immediately preceding Calculation
Date; and
(F) any other information, determinations and calculations
reasonably required in order to give effect to the terms of this
Indenture and the Related Documents.
(b) Calculation of Interest Amounts. Not later than five Business Days
prior to each Payment Date, the following calculations or determinations with
respect to Interest Amounts due on such Payment Date shall be performed or made
and, if calculated or determined by a Person other than the Cash Manager,
provided to the Cash Manager:
(i) the Reference Agent shall calculate the applicable interest rate
on each subclass of AerCo Group Floating Rate Notes based on LIBOR
determined on the Reference Date for the relevant Interest Accrual
Period;
(ii) the Cash Manager shall calculate the Interest Amount in respect
of each subclass of AerCo Group Floating Rate Notes on such Payment Date;
(iii) the Cash Manager shall calculate the amount of Step-Up
Interest (including Step-Up Interest on any accrued and unpaid Step-Up
Interest), if any, in
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respect of each subclass of AerCo Group Notes entitled to such Step-Up
Interest on such Payment Date;
(iv) the Cash Manager shall calculate the Interest Amount in respect
of each subclass of AerCo Group Fixed Rate Notes on such Payment Date;
and
(v) the Cash Manager shall calculate the Class E Note Primary
Interest Amount and the Class E Note Accrued Interest Amount.
(c) Calculation of Principal Payment Amounts. Not later than five
Business Days prior to each Payment Date, the Cash Manager shall calculate or
determine the following with respect to principal payments due on such Payment
Date:
(i) the Outstanding Principal Balance of each class and subclass of
the AerCo Group Notes on such Payment Date immediately prior to any
principal payment on such date;
(ii) the Adjusted Portfolio Value and the Assumed Portfolio Value on
such Payment Date;
(iii) the Minimum Target Principal Balance for each applicable class
of AerCo Group Notes Outstanding and Minimum Principal Payment Amount on
such Payment Date with respect to each class of AerCo Group Notes;
(iv) the Scheduled Target Principal Balance for each applicable
class of AerCo Group Notes Outstanding and Scheduled Principal Payment
Amount on such Payment Date with respect to each class of AerCo Group
Notes; and
(v) the Supplemental Principal Balance for each applicable class of
AerCo Group Notes Outstanding and Supplemental Principal Payment Amount
on such Payment Date with respect to each class of AerCo Group Notes.
(d) Calculation of Refinancing Amounts. Not later than two Business Days
prior to the date on which a Refinancing of any subclass of AerCo Group Notes
is scheduled to occur, the Cash Manager shall perform the calculations
necessary to determine, with respect to each such subclass of AerCo Group Notes
to be repaid on such date, the Redemption Price of such subclass and the
accrued and unpaid interest on such subclass.
(e) Application of the Available Collections Amount. Not later than 1:00
p.m., New York City time, on the second Business Day prior to each Payment
Date, the Cash Manager shall determine the amounts to be applied on such
Payment Date to make each of the payments contemplated by Section 3.08(a) or
3.08(b), as applicable, setting forth separately, in the case of payments in
respect of AerCo Group Notes, the amount to be applied on such Payment Date to
pay interest, principal and Premium, if any, on each subclass of AerCo Group
Notes in accordance with Sections 3.08 and 3.09.
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(f) Reports. (i) The Cash Manager shall provide all of the information
required to be provided in the report set forth as Exhibit I hereto setting
forth the information described in Sections 3.06(a), (b), (c), (d) and (e) and
such other information as is required to be set forth therein, together with as
many copies of such reports as the Trustee may reasonably request, to the
Issuer, each Rating Agency, the Administrative Agent, the Servicer, any
Additional Servicer, the Listing Agent and the Trustee, no later than 1:00
p.m., New York City time, two Business Days immediately preceding each Payment
Date.
(ii) The Cash Manager will provide to the Trustee, on the first Payment
Date following the filing by AerCo Group of any Report on Form 6-K or Annual
Report on Form 20-F under the Exchange Act with the Commission, a copy of
Schedule A hereto, updated and revised to reflect the then current composition
of the Portfolio.
(iii) The Cash Manager will provide to the Trustee, not later than 90 days
after the end of each calendar year, a statement containing (A) the cumulative
amount of each type of payment reported in clauses (B), (D), (E) and (F) of
Section 3.06(a) during the preceding calendar year (or any portion thereof) for
each subclass of Notes Outstanding at any time during such year and (B) such
other items as are readily ascertainable and that the Trustee or any Noteholder
shall reasonably request as necessary for the purpose of such Noteholder's
preparation of its U.S. federal income tax returns.
Section 3.07. Payment Date First Step Withdrawals and Transfers. On each
Payment Date, the Cash Manager, on behalf of the Security Trustee, shall make
the following withdrawals from and transfers among the Accounts:
(a) transfer the proceeds of any Refinancing of any subclass of
Notes from the Refinancing Account to the applicable Note Account in each
case in accordance with Section 2.10(b) and Section 5.02(f) hereof and
Section 2.04(d) of the Cash Management Agreement;
(b) subject to the applicable Leases, transfer from the Lessee
Funded Account to the Collection Account any available Segregated Funds;
(c) transfer from the Collection Account to the Lessee Funded
Account the amount of any Segregated Funds then on deposit in the
Collection Account;
(d) transfer from any Account (other than the Collection Account) to
the Collection Account the amount of earnings (net of losses and
investment expenses), if any, on investments of funds on deposit therein
during the preceding Interest Accrual Period, except that earnings on any
portion of the funds on deposit in any Account required under the terms
of the related Lease to be repaid to the related Lessee shall be retained
therein; and
(e) after the giving of a Default Notice or following the Interest
Accrual Period in which an Aircraft Sale occurs with respect to the last
remaining Aircraft,
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transfer any amounts remaining in the Lessee Funded Account (other than
amounts required to be maintained in such account pursuant to the terms
of the related Lease or Aircraft Agreement) into the Collection Account.
Section 3.08. Payment Date Second Step Withdrawals. (a) On each Payment
Date, after the withdrawals and transfers provided for in Section 3.07 hereof
have been made, the Cash Manager, on behalf of the Security Trustee, shall
distribute the amounts set forth below in the order of priority set forth below
but, in each case, only to the extent that all amounts then required to be paid
ranking prior thereto "Prior Ranking Amounts" have been paid in full. All
payments of Available Collections Amount to be made to a Note Account for
Holders of any subclass of Notes pursuant to this Section 3.08 shall be made
through a direct transfer of funds to the applicable Note Account with respect
to such subclass of Notes. To the extent that any amounts are retained in the
Collection Account on any Payment Date pursuant to this Section 3.08(a), such
amounts shall not be distributed thereafter on such Payment Date out of the
Collection Account as Available Collections Amount pursuant to any succeeding
payment required to be made under this Section 3.08(a) other than pursuant to
the second paragraph of Section 3.01(b) hereof.
(i) First, to the Expense Account or directly to the relevant
Expense payees in accordance with the Cash Management Agreement, an
amount equal to the Required Expense Amount and then to the relevant
Expense payees;
(ii) Second, in no order of priority inter se, but pro rata (A)
among the Note Accounts for each subclass of AerCo Group Class A Notes,
the Interest Amount on such subclass of AerCo Group Class A Notes in no
order of priority inter se, but pro rata according to the amount of
accrued and unpaid interest on such subclass of AerCo Group Class A Notes
and (B) pro rata, to any Swap Provider, an amount equal to any Swap
Payment due pursuant to any Swap Agreement (other than any Subordinated
Swap Payments);
(iii) Third, first, to any Persons providing any Primary Eligible
Credit Facilities, any amounts then payable to such Persons under the
terms of their respective Primary Eligible Credit Facilities and then,
after giving effect to the transfers made in respect of all Prior Ranking
Amounts, retain in the Collection Account an amount, if positive, equal
to the Minimum Liquidity Reserve Amount less the amounts available for
drawing under any Primary Eligible Credit Facilities;
(iv) Fourth, to the Note Accounts for each subclass of AerCo Group
Class A Notes, in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Minimum Principal Payment Amount of
the AerCo Group Class A Notes;
(v) Fifth, among the Note Accounts for each subclass of AerCo Group
Class B Notes, the Interest Amount on such subclass of AerCo Group Class
B Notes
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in no order of priority inter se, but pro rata according to the amount of
accrued and unpaid interest on such subclass of AerCo Group Class B
Notes;
(vi) Sixth, to the Note Accounts for each subclass of AerCo Group
Class B Notes, in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Minimum Principal Payment Amount of
the AerCo Group Class B Notes;
(vii) Seventh, among the Note Accounts for each subclass of AerCo
Group Class C Notes, the Interest Amount on such subclass of AerCo Group
Class C Notes in no order of priority inter se, but pro rata according to
the amount of accrued and unpaid interest on such subclass of AerCo Group
Class C Notes;
(viii) Eighth, to the Note Accounts for each subclass of AerCo Group
Class C Notes, in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Minimum Principal Payment Amount of
the AerCo Group Class C Notes;
(ix) Ninth, among the Note Accounts for each subclass of AerCo Group
Class D Notes, the Interest Amount on such subclass of AerCo Group Class
D Notes in no order of priority inter se, but pro rata according to the
amount of accrued and unpaid interest on such subclass of AerCo Group
Class D Notes;
(x) Tenth, to the Note Accounts for each subclass of AerCo Group
Class D Notes in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Minimum Principal Payment Amount of
the AerCo Group Class D Notes;
(xi) Eleventh, first, to any Persons providing any Credit Facilities
that are not Primary Eligible Credit Facilities, any amounts then payable
to such Persons under the terms of their respective Credit Facilities and
then, after giving effect to the transfers made in respect of all Prior
Ranking Amounts, retain in the Collection Account an amount equal to the
difference, if positive, between the Liquidity Reserve Amount and the sum
of (x) the amount of cash reserved under (iii) above and (y) the amount
available for drawing under any Eligible Credit Facilities;
(xii) Twelfth, to the Note Accounts for each subclass of AerCo Group
Class A Notes, in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Scheduled Principal Payment Amount of
the AerCo Group Class A Notes;
(xiii) Thirteenth, to the Note Accounts for each subclass of AerCo
Group Class B Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Scheduled Principal Payment
Amount of the AerCo Group Class B Notes;
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(xiv) Fourteenth, to the Note Accounts for each subclass of AerCo
Group Class C Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Scheduled Principal Payment
Amount of the AerCo Group Class C Notes;
(xv) Fifteenth, to the Note Accounts for each subclass of AerCo
Group Class D Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Scheduled Principal Payment
Amount of the AerCo Group Class D Notes;
(xvi) Sixteenth, to the Permitted Accruals balance in the Expense
Account, an amount equal to Permitted Accruals in respect of Modification
Payments (or any part thereof);
(xvii) Seventeenth, among the Note Accounts for each subclass of
AerCo Group Notes entitled thereto, an amount equal to all accrued and
unpaid Step-Up Interest, if any, in no order of priority inter se, but
pro rata according to the amount of such accrued and unpaid Step-Up
Interest;
(xviii) Eighteenth, to the Note Accounts for each subclass of AerCo
Group Class A Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Supplemental Principal
Payment Amount of the AerCo Group Class A Notes;
(xix) Nineteenth, among the Note Accounts for each subclass of AerCo
Group Class E Notes, the Class E Note Primary Interest Amount for the
current Interest Accrual Period, in no order of priority inter se, but
pro rata according to the amount due on each subclass of AerCo Group
Class E Notes;
(xx) Twentieth, to the Note Accounts for each subclass of AerCo
Group Class B Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Supplemental Principal
Payment Amount of the AerCo Group Class B Notes;
(xxi) Twenty-first, to the Note Accounts for each subclass of AerCo
Group Class A Notes, in the order of priority by subclass set forth in
Section 3.09 hereof, an amount equal to the Redemption Price of the
Outstanding Principal Balance of each such subclass;
(xxii) Twenty-second, to the Note Accounts for each subclass of
AerCo Group Class B Notes, in the order of priority by subclass set forth
in Section 3.09 hereof, an amount equal to the Redemption Price of the
Outstanding Principal Balance of each such subclass;
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(xxiii) Twenty-third, to the Note Accounts for each subclass of
AerCo Group Class C Notes, in the order of priority by subclass set forth
in Section 3.09 hereof, an amount equal to the Redemption Price of the
Outstanding Principal Balance of each such subclass;
(xxiv) Twenty-fourth, to the Note Accounts for each subclass of
AerCo Group Class D Notes, in the order of priority by subclass set forth
in Section 3.09 hereof, an amount equal to the Redemption Price of the
Outstanding Principal Balance of each such subclass;
(xxv) Twenty-fifth, in no order of priority inter se, but pro rata,
to the Swap Providers, an amount equal to any amounts then payable under
the relevant Swap Agreements which are subordinated in accordance with
the terms thereof ("Subordinated Swap Payments");
(xxvi) Twenty-sixth, in no order of priority inter se, but pro rata,
to investors or other persons in respect of obligations incurred in
connection with Permitted Tax-Related Dispositions, if any, which are
subordinated in accordance with the terms of the relevant Permitted
Tax-Related Disposition ("Subordinated Tax-Related Disposition Payments")
an amount equal to the amount of such Subordinated Tax-Related
Disposition Payments then payable;
(xxvii) Twenty-seventh, to the Note Accounts for each subclass of
AerCo Group Class E Notes, the Class E Note Accrued Interest Amount and
an amount equal to the cash portion of the Liquidity Reserve Amount then
on deposit in the Collection Account, in no order of priority inter se,
but pro rata according to the amount due on each subclass of AerCo Group
Class E Notes;
(xxviii) Twenty-eighth, to the Note Account for each subclass of
AerCo Group Class E Notes, in the order of priority by subclass set forth
in Section 3.09 hereof, an amount equal to the Redemption Price of the
Outstanding Principal Balance of each such subclass; and
(xxix) Twenty-ninth, to the Charitable Trustee for the Charitable
Trust, all remaining amounts.
(b) Anything to the contrary contained in Section 3.08(a) hereof
notwithstanding, following delivery to the Issuer, any Guarantor or the Cash
Manager of a Default Notice or during the continuance of an Acceleration
Default, the allocation of payments described in such Section 3.08(a) shall not
apply and all amounts on deposit in the Collection Account and the Expense
Account shall be applied by the Cash Manager in the following order of
priority:
(i) First, to the Expense Account for distribution by the Cash
Manager or, in accordance with the Cash Management Agreement, directly to
the relevant
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Expense payees, an amount equal to the Required Expense Amount and then
to the relevant Expense payees;
(ii) Second, in no order of priority inter se, but pro rata to the
providers of any Primary Eligible Credit Facilities, such amounts as are
required to make any payments due to such providers pursuant to the terms
of their respective Primary Eligible Credit Facilities;
(iii) Third, in no order of priority inter se, but pro rata in
respect of amounts outstanding or payable on such date, (A) pro rata
among the Note Accounts for each subclass of AerCo Group Class A Notes,
all accrued and unpaid interest (including any Step-Up Interest) on, and
the Outstanding Principal Balance of such subclass of AerCo Group Class A
Notes and (B) pro rata to any Swap Provider, such amounts as are required
to pay any Swap Payments (other than Subordinated Swap Payments) due
pursuant to any Swap Agreement;
(iv) Fourth, in no order of priority inter se, but pro rata in
respect of amounts outstanding or payable on such date, pro rata among
the Note Accounts for each subclass of AerCo Group Class B Notes, all
accrued and unpaid interest (including any Step-Up Interest) on, and the
Outstanding Principal Balance of such subclass of AerCo Group Class B
Notes;
(v) Fifth, in no order of priority inter se, but pro rata in respect
of amounts outstanding or payable on such date, pro rata among the Note
Accounts for each subclass of AerCo Group Class C Notes, all accrued and
unpaid interest (including any Step-Up Interest) on, and the Outstanding
Principal Balance of such subclass of AerCo Group Class C Notes;
(vi) Sixth, in no order of priority inter se, but pro rata in
respect of amounts outstanding or payable on such date, pro rata among
the Note Accounts for each subclass of AerCo Group Class D Notes, all
accrued and unpaid interest (including any Step-Up Interest) on, and the
Outstanding Principal Balance of such subclass of AerCo Group Class D
Notes;
(vii) Seventh, in no order of priority inter se, but pro rata to the
providers of Credit Facilities other than Primary Eligible Credit
Facilities, such amounts as are required to make payments due to such
providers pursuant to the terms of their respective Credit Facilities;
(viii) Eighth, in no order of priority inter se, but pro rata, to
any Swap Provider, such amounts as are required to make any Subordinated
Swap Payments due pursuant to any Swap Agreement;
(ix) Ninth, in no order of priority inter se, but pro rata, to any
investor or other person in respect of obligations incurred in connection
with any Permitted Tax-
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Related Disposition, such amounts as are required to make any
Subordinated Tax-Related Disposition Payments;
(x) Tenth, in no order of priority inter se, but pro rata in respect
of amounts outstanding or payable on such date, pro rata among the Note
Accounts for each subclass of AerCo Group Class E Notes, all accrued and
unpaid interest on, and the Outstanding Principal Balance of such
subclass of AerCo Group Class E Notes; and
(xi) Eleventh, to the Charitable Trustee for the Charitable Trust,
all remaining amounts.
Section 3.09. Allocations of Principal Payments Among Subclasses of the
Notes. To the extent that any payment of principal pursuant to Section 3.08(a)
hereof is allocable to any class of AerCo Group Notes on any Payment Date, the
Available Collections Amount will be applied to repay all AerCo Group Notes in
such class in the following order of priority: (i) First, to each subclass, in
order of the earliest issued subclass, the difference, if positive, between the
Outstanding Principal Balance of each such subclass and the product of the
applicable Extended Pool Factor on such Payment Date and the Initial Outstanding
Balance of each such subclass (any such difference, the "Extension Amount");
provided that in the case of two or more subclasses issued on the same date, the
Available Collections Amount will be applied to each such subclass pro rata
according to the amount of, but not to exceed, the Extension Amount of such
subclass; (ii) Second, to each subclass, in no order of priority inter se, but
pro rata according to the amount of, but not to exceed, the difference, if
positive, between the Outstanding Principal Balance of each such subclass (after
giving effect to any payment under clause (i) above) and the product of the
applicable Pool Factor on such Payment Date and the Initial Outstanding Balance
of each such subclass; (iii) Third, to each subclass with an Expected Final
Payment Date on or before such Payment Date, in order of the earliest issued
subclass; provided that in the case of two or more subclasses issued on the same
date, the Available Collections Amount will be applied to such subclasses in
order of the subclass with the earliest Expected Final Payment Date and, with
respect to any two or more subclasses having the same Expected Final Payment
Date, the Available Collections Amount will be applied to such subclasses pro
rata according to the Outstanding Principal Balance of each such subclass (after
giving effect to any payment under clauses (i) and (ii) above) on such Payment
Date; (iv) Fourth, to each subclass with an Excess Amortization Date on or
before such Payment Date, in no order of priority inter se, but pro rata
according to the Outstanding Principal Balance of each such subclass (after
giving effect to any payment under clauses (i), (ii) and (iii) above) on such
Payment Date; and (v) Fifth, to each subclass in order of the earliest Expected
Final Payment Date, provided, in the case of two or more subclasses having the
same Expected Final Payment Date, in no order of priority inter se, but pro
rata, according to the Outstanding Principal Balance of each such subclass
(after giving effect to any payment under clauses (i), (ii), (iii) and (iv)
above) on such Payment Date.
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Section 3.10. Certain Redemptions; Certain Premiums. (a) Optional
Redemption. Subject to the provisions of Section 3.10(c) hereof, on any Payment
Date the Issuer may elect to redeem any subclass of the A-D Notes in whole or in
part, out of amounts available for such purpose, if any, other than Collections,
at the Redemption Price plus any accrued and unpaid interest thereon to the
Redemption Date; provided that written notice of any such redemption shall be
given to the Trustee not less than 30 days prior to such Redemption Date; and
provided further, the provisions of this Section 3.10(a) shall not apply to any
Refinancing pursuant to Section 3.10 hereof.
(b) Redemption for Taxation Reasons. Subject to the provisions of Section
3.10(c) hereof, if, at any time,
(i) the Issuer is, or on the next succeeding Payment Date will be,
required to make any withholding or deduction under the laws or
regulations of any applicable tax authority with respect to any payment
on any subclass of AerCo Group A-D Notes; or
(ii) the Issuer is or will be subject to any circumstance (whether
by reason of any law, regulation, regulatory requirement or
double-taxation convention, or the interpretation or application thereof,
or otherwise) leading to the imposition of a tax (whether by direct
assessment or by withholding at source) or other similar imposition by
any jurisdiction which would (A) materially increase the cost to the
Issuer of making payments in respect of any subclass of AerCo Group A-D
Notes or of complying with its obligations under or in connection with
the AerCo Group A-D Notes; (B) materially increase the operating or
administrative expenses of the Issuer; or (C) otherwise obligate the
Issuer or any of its subsidiaries to make any material payment on, or
calculated by reference to, the amount of any sum received or receivable
by the Issuer, or by the Cash Manager on behalf of AerCo Group as
contemplated by the Cash Management Agreement;
then the Issuer shall inform the Trustee in writing at such time of any such
requirement or imposition and shall use its best efforts to avoid the effect of
the same; provided that no actions shall be taken by the Issuer to avoid such
effects without Rating Agency Confirmation. If, after using its reasonable
best efforts to avoid the adverse effects described above, the Issuer or any of
its subsidiaries has not avoided such effects, the Issuer may, at its election,
redeem the AerCo Group A-D Notes in whole, without Redemption Premium, on any
Payment Date; provided, however, that any such redemptions may not occur more
than 30 days prior to such time as the requirement or imposition described in
(i) or (ii) above is to become effective; and provided further that notice of
any such redemption shall be given to the Trustee not less than 30 days prior
to such Redemption Date.
(c) Method of Redemption. The Trustee (or the Administrative Agent acting
as its agent (or any authorized agent of the Administrative Agent)) shall give
notice in the manner set forth in Section 2.15(e) in respect of any redemption
of any subclass of AerCo Group A-D Notes under Section 3.10(a) or 3.10(b)
hereof (a "Redemption") to each Holder of
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AerCo Group A-D Notes and, for so long as the Notes are listed on the
Luxembourg Stock Exchange, the Listing Agent, at least 20 days but not more
than 60 days before such Redemption Date. The Trustee shall not be permitted
to deliver any notice under this Section 3.10(c) unless and until it shall have
received evidence satisfactory to it that amounts sufficient to (A) redeem such
subclass(es) of AerCo Group A-D Notes and (B) pay all accrued and unpaid
interest in respect of each subclass of AerCo Group A-D Notes ranking pari
passu therewith or prior thereto are, or will on or before the Redemption Date
be, deposited in the Defeasance/Redemption Account. Each notice in respect of
a Redemption given pursuant to this Section 3.10(c) shall state (i) the
applicable Redemption Date, (ii) the Trustee's arrangements for making payments
in respect of such Redemption, (iii) the Redemption Price of the AerCo Group
A-D Notes to be redeemed, (iv) in the case of Redemption in whole, that AerCo
Group A-D Notes of the subclass to be redeemed must be surrendered to the
Trustee to collect the Redemption Price plus accrued and unpaid interest on
such AerCo Group A-D Notes and (v) in the case of Redemption in whole, that,
unless the Issuer defaults in the payment of the Redemption Price and any
accrued and unpaid interest thereon, interest on the subclass of AerCo Group
A-D Notes called for Redemption shall cease to accrue on and after the
Redemption Date.
(d) Deposit of Redemption Amount. On or before any Redemption Date in
respect of a Redemption under Section 3.10(a) or 3.10(b), the Issuer shall, to
the extent an amount equal to the Redemption Price of the AerCo Group A-D Notes
to be redeemed and all accrued and unpaid interest in respect of such
subclass(es) of AerCo Group A-D Notes to be redeemed and each subclass of AerCo
Group A-D Notes ranking pari passu therewith or prior thereto as of the
Redemption Date is not then held by the Issuer, deposit or cause such amounts
in immediately available funds to be deposited in the Defeasance/Redemption
Account.
(e) AerCo Group A-D Notes Payable on Redemption Date. After notice has
been given under Section 3.10(c) hereof, the Outstanding Principal Balance of
the AerCo Group A-D Notes to be redeemed on such Redemption Date shall become
due and payable at the Corporate Trust Office of the Trustee, and the
Redemption Price of such AerCo Group A-D Note, together with accrued and unpaid
interest thereon shall be paid as provided for in this Article III. From and
after such Redemption Date (unless there shall be a default in the payment of
the applicable amount to be redeemed) such principal amount shall cease to bear
interest. If any AerCo Group A-D Note to be redeemed shall not be so paid upon
surrender thereof for redemption, the Outstanding Principal Balance thereof
shall continue to bear interest until paid from the Redemption Date at the
interest rate applicable to such AerCo Group A-D Note.
Section 3.11. Adjustment of Class Percentages and Target Principal
Balances. Upon each acquisition of any Additional Aircraft, subject to Sections
5.02(f)(iv) and 5.02(h) hereof, each of the Class Percentages for the AerCo
Group Class A Notes and the AerCo Group Class B Notes and each of the Target
Principal Balances for the AerCo Group Class C Notes and the AerCo Group Class D
Notes shall be adjusted to take into account such Permitted Additional Aircraft
Acquisition in the manner determined by the Board; provided,
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that no Pool Factor or Extended Pool Factor for any subclass of AerCo Group
Notes may be adjusted. The Administrative Agent shall include such adjusted
Class Percentages and Target Principal Balances in each Quarterly Report.
ARTICLE IV
DEFAULT AND REMEDIES
Section 4.01. Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder with respect to any class of Notes,
and each such Event of Default shall be deemed to exist and continue so long as,
but only so long as, it shall not have been remedied:
(a) failure to pay when due interest (other than any Step-Up
Interest) on any Note of such class or subclass thereof, and the
continuance of such default unremedied for a period of five Business Days
or more after the same shall have become due and payable;
(b) failure to pay when due principal of any Note of such class or
subclass thereof on or prior to the applicable Final Maturity Date;
(c) failure to pay any amount (other than interest) when due and
payable in connection with any Note of such class or subclass thereof, to
the extent that there are, at such time, funds available for such payment
in the Collection Account, and the continuance of such default for a
period of five Business Days or more;
(d) failure by the Issuer to comply with any of the covenants,
obligations, conditions or provisions binding on it under this Indenture
or any of the Notes (other than a payment default for which provision is
made in clause (a), (b) or (c) of this Section 4.01), if such failure or
such breach materially adversely affects the Holders of such class of
Notes and continues for a period of 30 days or more after written notice
thereof has been given to the Issuer by the Senior Trustee or by the
Holders of at least 25% of the aggregate Outstanding Principal Balance of
the Notes of the Senior Class;
(e) an "Event of Default" under and as defined in any Guarantor
Indenture;
(f) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Issuer or any Significant
Subsidiary of the Issuer under any Applicable Law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization,
examination, relief of debtors or other similar law now or hereafter in
effect; (ii) appointment of a receiver, liquidator, examiner, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or any
Significant
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Subsidiary of the Issuer; or (iii) the winding up or liquidation of the
affairs of the Issuer or any Significant Subsidiary of the Issuer and, in
each case, such decree or order shall remain unstayed or such writ or
other process shall not have been stayed or dismissed within 90 days from
entry thereof;
(g) the Issuer or any Significant Subsidiary of the Issuer (i)
commences a voluntary case under any Applicable Law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, examination, relief of debtors or other similar law now
or hereafter in effect, or consents to the entry of an order for relief
in any involuntary case under any such law; (ii) consents to the
appointment of or taking possession by a receiver, liquidator, examiner,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or any Significant Subsidiary of the Issuer or for all or
substantially all of the property and assets of the Issuer or any
Significant Subsidiary of the Issuer; or (iii) effects any general
assignment for the benefit of creditors;
(h) any judgment or order for the payment of money in excess of 5%
of the aggregate Adjusted Portfolio Value shall be rendered against the
Issuer or any Issuer Subsidiary or any other member of the AerCo Group
and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of
10 consecutive days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect; provided, however, that any such judgment or order shall not be
an Event of Default under this Section 4.01(h) if and for so long as (i)
the amount of such judgment or order is covered by a valid and binding
policy of insurance between the defendant and the insurer covering
payment thereof and (ii) such insurer, which shall be rated at least "A"
by A.M. Best Company or any similar successor entity, has been notified
of, and has not disputed the claim made for payment of, the amount of
such judgment or order; or
(i) the constitutional documents creating the Issuer cease to be in
full force and effect without replacement documents having the same terms
being in full force and effect.
Section 4.02. Acceleration, Rescission and Annulment. (a) If an Event of
Default with respect to the Senior Class of Notes then Outstanding (other than
an Event of Default under clause (f) or (g) of Section 4.01) occurs and is
continuing, the Senior Trustee may, and, upon the direction of Holders of at
least 25% of the aggregate Outstanding Principal Balance of the Senior Class of
Notes, shall, give a Default Notice to the Issuer, the Cash Manager, the
Administrative Agent and the Trustee declaring the Outstanding Principal Balance
of the Notes and all accrued and unpaid interest thereon to be due and payable.
Upon delivery of a Default Notice, such Outstanding Principal Balance and all
accrued and unpaid interest thereon shall be due and payable. At any time after
the Senior Trustee has declared the Outstanding Principal Balance of the Notes
to be due and payable and prior to the exercise of any other remedies pursuant
to this Article IV, Holders of a majority of the
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aggregate Outstanding Principal Balance of the Senior Class of Notes, by
written notice to the Issuer, the Senior Trustee and the Cash Manager, may,
subject to Section 4.05(a), rescind and annul such declaration and thereby
annul its consequences if: (i) there has been paid to or deposited with the
Senior Trustee an amount sufficient to pay all overdue installments of interest
on the AerCo Group Notes, and the principal of and Premium, if any, on the
AerCo Group Notes that would have become due otherwise than by such declaration
of acceleration, (ii) the rescission would not conflict with any judgment or
decree and (iii) all other Defaults and Events of Default, other than
nonpayment of interest and principal on the AerCo Group Notes that have become
due solely because of such acceleration, have been cured or waived. If an
Event of Default under clause (f) or (g) of Section 4.01 occurs, the
Outstanding Principal Balance of the Notes and all accrued and unpaid interest
thereon shall automatically become due and payable without any further action
by any party.
(b) Notwithstanding Sections 4.02 and 4.03 hereof, after the occurrence
and during the continuation of an Event of Default, (i) the Class B Noteholders
shall not be permitted to give or direct the giving of a Default Notice or to
exercise any remedy in respect of such Event of Default until all interest and
principal on the Class A Notes have been paid in full, (ii) the Class C
Noteholders shall not be permitted to give a Default Notice or to exercise any
remedy in respect of such Event of Default until all interest and principal on
the Class A Notes and the Class B Notes have been paid in full, (iii) the Class
D Noteholders shall not be permitted to give a Default Notice or to exercise
any remedy in respect of such Event of Default until all interest and principal
on the Class A Notes, the Class B Notes and the Class C Notes have been paid in
full and (iv) the Class E Noteholders shall not be permitted to give a Default
Notice or to exercise any remedy in respect of such Event of Default until all
interest and principal on the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes have been paid in full.
(c) The Trustee shall provide each Rating Agency with a copy of any
Default Notice it receives pursuant to this Indenture.
Section 4.03. Other Remedies. If an Event of Default occurs and is
continuing, the Senior Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, Premium, if any, or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Senior Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding.
Section 4.04. Limitation on Suits. Without limiting the provisions of
Section 4.09 and the final sentence of Section 13.04, no Holder shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, the Security Trust Agreement or the Notes, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
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(a) such Holder holds Notes of the Senior Class and has previously
given written notice to the Senior Trustee of a continuing Event of
Default;
(b) the Holders of at least 25% of the aggregate Outstanding
Principal Balance of the Senior Class of Notes make a written request to
the Senior Trustee to pursue a remedy hereunder;
(c) such Holder or Holders offer to the Senior Trustee an indemnity
reasonably satisfactory to the Senior Trustee against any costs, expenses
and liabilities to be incurred in complying with such request;
(d) the Senior Trustee does not comply with such request within 60
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period, Holders of a majority of the
Outstanding Principal Balance of the Senior Class of Notes do not give
the Senior Trustee a direction inconsistent with such request.
No one or more Noteholders may use this Indenture to affect, disturb or
prejudice the rights of another Holder or to obtain or seek to obtain any
preference or priority not otherwise created by this Indenture and the terms of
the Notes over any other Holder or to enforce any right under this Indenture,
except in the manner herein provided.
Section 4.05. Waiver of Existing Defaults. (a) The Senior Trustee or a
majority of the Outstanding Principal Balance of the Senior Class of Notes by
notice to the Senior Trustee may waive any existing Default hereunder and its
consequences, except a Default: (i) in the deposit or distribution of any
payment required to be made on any Notes, (ii) in the payment of the interest
on, principal of or Premium, if any, on any Note or (iii) in respect of a
covenant or provision hereof which under Article IX hereof cannot be modified or
amended without the consent of the Holder of each Note affected thereby. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon. Each such notice of waiver shall also be
notified to each Rating Agency.
(b) Any written waiver of a Default or an Event of Default given by
Holders of the Notes to the Trustee and the Issuer in accordance with the terms
of this Indenture shall be binding upon the Trustee and the other parties
hereto. Unless such writing expressly provides to the contrary, any waiver so
granted shall extend only to the specific event or occurrence which gave rise
to the Default or Event of Default so waived and not to any other similar event
or occurrence which occurs subsequent to the date of such waiver.
Section 4.06. Restoration of Rights and Remedies. If the Trustee or any
Holder of Notes of the Senior Class has instituted any proceeding to enforce any
right or remedy under this Indenture, and such proceeding has been discontinued
or abandoned for
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any reason, or has been determined adversely to the Trustee or such Holder,
then in every such case the Issuer, the Trustee and the Noteholders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
proceeding has been instituted.
Section 4.07. Remedies Cumulative. Each and every right, power and remedy
herein given to the Trustee specifically or otherwise in this Indenture shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by the Trustee, and the exercise or the
beginning of the exercise of any power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any other right,
power or remedy. No delay or omission by the Trustee in the exercise of any
right, remedy or power or in the pursuance of any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any Default on the part
of the Issuer or to be an acquiescence therein.
Section 4.08. Authority of Courts Not Required. The parties hereto agree
that, to the greatest extent permitted by law, the Trustee shall not be obliged
or required to seek or obtain the authority of, or any judgment or order of, the
courts of any jurisdiction in order to exercise any of its rights, powers and
remedies under this Indenture, and the parties hereby waive any such requirement
to the greatest extent permitted by law.
Section 4.09. Rights of Noteholders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Noteholder to receive
payment of interest on, principal of and Redemption Premium, if any, on its Note
on or after the respective due dates therefor expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Noteholder.
Section 4.10. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of any Noteholder allowed in any
judicial proceedings relating to any obligor on the Notes, its creditors or its
property.
Section 4.11. Undertaking for Costs. All parties to this Indenture agree,
and each Noteholder by its acceptance thereof shall be deemed to have agreed,
that in any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and the court in
its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defense made by the party litigant. This
Section 4.11 does not apply to a suit instituted by the Trustee, a suit
instituted by any Noteholder for the enforcement of the payment of interest,
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principal or Premium, if any, on his Note on or after the respective due dates
expressed in such Note, or a suit by a Noteholder or Noteholders of more than
10% of the Outstanding Principal Balance of any class or subclass of the Notes.
Section 4.12. Control by Noteholders. Subject to Section 4.04 hereof, the
Noteholders holding Notes of any class or subclass of not less than 25% of the
Outstanding Principal Balance of Notes of such class or subclass shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee under this Indenture; provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture and would not involve the Trustee in personal
liability or expense;
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Noteholders of such class or
subclass not taking part in such direction; and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. Representations and Warranties. The Issuer represents and
warrants to the Trustee as follows:
(i) Due Organization. Each of the Issuer and Issuer Subsidiaries is
a corporation duly incorporated in its respective jurisdiction of
incorporation, in each case with full power and authority to conduct its
business; and none of the Issuer or any Issuer Subsidiary is in
liquidation, bankruptcy or suspension of payments.
(ii) Special Purpose Status. The Issuer has not engaged in any
activities since its incorporation (other than those incidental to its
incorporation and other appropriate steps and arrangements for the
payment of fees to, and director's and officer's insurance for, the
members of the Board of the Issuer, the issue of shares, the purchase of
the Transferring Companies and ALPS 94-1, the authorization and the
issuance of the Initial Notes, the granting of certain guarantees in
connection with the Initial Leases, the execution of the Related
Documents and the documents and the activities referred to in or
contemplated by such agreements), and the Issuer has not paid any
dividends or other distributions since its incorporation.
(iii) Non-Contravention. The purchase of the Transferring Companies
and ALPS 94-1 pursuant to the Acquisition Agreements, the creation of the
Initial Notes
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and the issuance, execution and delivery of, and the compliance by the
Issuer and each Issuer Subsidiary with the terms of each of the Related
Documents and the Initial Notes:
(A) do not and will not at the Initial Closing Date or any
Payment Date conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, the
constitutional documents of the Issuer or the constituent documents
of any Issuer Subsidiary or with any existing law, rule or
regulation applying to or affecting the Issuer or any Issuer
Subsidiary or any judgment, order or decree of any government,
governmental body or court having jurisdiction over the Issuer or
any Issuer Subsidiary; and
(B) do not and will not at the Initial Closing Date or any
Payment Date infringe the terms of, or constitute a default under,
any deed, indenture, agreement or other instrument or obligation to
which the Issuer or any Issuer Subsidiary is a party or by which
any of them or any part of their undertaking, assets, property or
revenues are bound.
(iv) Due Authorization. The purchase of the Transferring Companies
and ALPS 94-1, the creation, execution and issuance of the Initial Notes,
the execution and issue or delivery by the Issuer and each Issuer
Subsidiary of the Related Documents executed by it and the performance by
each of them of their obligations to be assumed hereunder and thereunder
and the arrangements contemplated hereby and thereby to be performed by
each of them have been duly authorized by each of them.
(v) Validity and Enforceability. This Indenture constitutes, and
the Related Documents, when executed and delivered and, in the case of
the Initial Notes, when issued and authenticated, will constitute valid,
legally binding and (subject to general equitable principles, insolvency,
liquidation, reorganization and other laws of general application
relating to creditors' rights or claims or to laws of prescription or the
concepts of materiality, reasonableness, good faith and fair dealing)
enforceable obligations of the Issuer and each Issuer Subsidiary
executing the same.
(vi) No Defaults. There exists no Event of Default or any event
which, had the Initial Notes already been issued, would constitute a
Default or an Event of Default.
(vii) No Encumbrances. Subject to the Security Interests created in
favor of the Security Trustee, the Issuer, ALPS 94-1 and AerCo Ireland II
and except for Permitted Encumbrances, there exists no Encumbrance over
the assets or undertaking of the Issuer or any Issuer Subsidiary which
ranks prior to or pari passu with the obligation to make payments on the
Initial Notes.
(viii) No Consents. All consents, approvals, authorizations or
other orders of all regulatory authorities required (excluding any
required by the other parties to
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the Related Documents) for or in connection with the execution and
performance of the Related Documents by the Issuer and each Issuer
Subsidiary and the issue and performance of the Initial Notes and the
offering of the Initial Notes by the Issuer have been obtained and are in
full force and effect and not contingent upon fulfillment of any
condition.
(ix) No Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Issuer, threatened
against or affecting, the Issuer or any Issuer Subsidiary before any
court or arbitrator or any governmental body, agency or official which in
any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Indenture (including the
Exhibits and Schedules attached hereto) and the Related Documents.
(x) Employees, Subsidiaries. The Issuer and each Issuer Subsidiary
have no employees. Set forth in Schedule B hereto is a true and complete
list, as of the date hereof, of all Issuer Subsidiaries, together with
their jurisdictions of organization.
(xi) Ownership. The Issuer or an Issuer Subsidiary is the
beneficial owner of the Pledged Stock, the Pledged Debt and the
Non-Trustee Accounts, free from all Encumbrances and claims whatsoever
other than Permitted Encumbrances.
(xii) No Filings. Under the laws of Jersey and New York (including
U.S. federal law) in force at the date hereof, it is not necessary or
desirable that this Indenture or any Related Document to which an Issuer
Subsidiary is a party (other than evidences of the Security Interests) be
filed, recorded or enrolled (other than the filing of the Memorandum and
Articles of Association of the Issuer and this Indenture in Jersey) with
any court or other authority in any such jurisdictions or that any stamp,
registration or similar tax be paid on or in relation to this Indenture
or any of the other Related Documents.
(xiii) Other Representations. The representations and warranties
made by the Issuer and each Issuer Subsidiary in any of the other Related
Documents are true and accurate.
Section 5.02. General Covenants. The Issuer covenants with the Trustee as
follows:
(a) No Release of Obligations. The Issuer shall not take, or
knowingly permit any Issuer Subsidiary to take, any action which would
amend, terminate (other than any termination in connection with the
replacement of such agreement with an agreement on terms substantially no
less favorable to AerCo Group than the agreement being terminated) or
discharge or prejudice the validity or effectiveness of this Indenture
(other than as permitted herein), the Security Documents, the
Intercompany Loan Agreements, the Cash Management Agreement, the
Administrative Agency Agreement, the Deposit Agreement, the Servicing
Agreement
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or any Additional Servicing Agreement or permit any party to any such
document to be released from such obligations, except, in each case, as
permitted or contemplated by the terms of such document, and provided
that such actions may be taken or permitted, and such releases may be
permitted, if the Issuer shall have first obtained an authorizing
resolution of the Board of the Issuer determining that such action,
permitted action or release does not materially adversely affect the
interests of the Noteholders and having given notice thereof to the
Rating Agencies; and provided further that, in any case (i) the Issuer
shall not take any action which would result in any amendment or
modification to the conflicts standard or duty of care in such agreements
and (ii) there must be at all times an administrative agent, a cash
manager and a servicer (provided that, if the Servicer or any Additional
Servicer resigns prior to the appointment of a replacement servicer as a
result of any failure to pay amounts due and owing to it, this Section
5.02(a) shall not be violated; provided, however, that notice of such
termination shall have been given to the Rating Agencies).
(b) Limitation on Encumbrances. The Issuer shall not, and shall not
permit any Issuer Subsidiary to, create, incur, assume or suffer to exist
any mortgage, pledge, lien, encumbrance, charge or security interest (in
each case, an "Encumbrance"), including, without limitation, any
conditional sale, any sale with recourse against the seller or any
affiliate of the seller, or any agreement to give any security interest
over or with respect to any of the Issuer's or any Issuer Subsidiary's
assets (other than the segregation of the Segregated Funds) including,
without limitation, all shares of capital stock, all beneficial interests
in trusts, all ordinary shares and preferred shares and any options,
warrants and other rights to acquire such shares or interests ("Stock")
and any Indebtedness of any Issuer Subsidiary held by the Issuer or any
Issuer Subsidiary.
Notwithstanding the foregoing, the Issuer may create, incur, assume
or suffer to exist (i) any Permitted Encumbrance, (ii) any security
interest created or required to be created under the Security Documents,
(iii) Encumbrances over rights in or derived from Leases, upon Rating
Agency Confirmation (provided that any transaction or series of
transactions resulting in such Encumbrance, taken as a whole, does not
materially adversely affect the amount of Collections that would have
been received by any AerCo Group Member from such Lease had such
Encumbrance not been created), (iv) Encumbrances over Aircraft, Leases or
funds on deposit in the Tax Defeasance Account or investments in respect
thereof pursuant to any Permitted Tax-Related Disposition or (v) any
other Encumbrance the validity or applicability of which is being
contested in good faith in appropriate proceedings by the Issuer or any
Issuer Subsidiary.
For the purposes of this Indenture, "affiliate" means, with respect
to any Person, any other Person that, directly or indirectly, controls,
is controlled by or is under common control with, such Person or is a
director or officer of such Person; "control" of a Person means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through
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the ownership of voting Stock, by contract or otherwise. For the
purposes of this Indenture, "Permitted Encumbrance" means (i) any lien
for taxes, assessments and governmental charges or levies not yet due and
payable or which are being contested in good faith by appropriate
proceedings; (ii) in respect of any Aircraft, any lien of a repairer,
carrier or hangar keeper arising in the ordinary course of business by
operation of law or any engine or parts-pooling arrangements or other
similar lien; (iii) any permitted lien or encumbrances on any Aircraft,
Engines or Parts as defined under any Lease thereof (other than liens or
encumbrances created by the relevant lessor); (iv) any lien created by or
through or arising from debt or liabilities or any act or omission of any
Lessee in each case either in contravention of the relevant Lease
(whether or not such Lease has been terminated) or without the consent of
the relevant lessor (provided that if such lessor becomes aware of any
such lien, it shall use commercially reasonable efforts to have any such
lien lifted); (v) any head lease, lease or any Conditional Sale Agreement
(as defined in the Servicing Agreement) or Purchase Option (as defined in
the Servicing Agreement) existing on the relevant Closing Date or any
Aircraft Agreement meeting the requirements of clause (iii), (v) or (vi)
of the second paragraph of Section 5.02(g) hereof; (vi) any lien for air
navigation authority, airport tending, gate or handling (or similar)
charges or levies; (vii) any lien created in favor of the Issuer, any
Issuer Subsidiary or the Security Trustee and (viii) any other lien not
referred to in clauses (i) through (vii) of this paragraph which would
not adversely affect the owner's rights and does not exceed the greater
of 1% of the aggregate Initial Appraised Value of the Portfolio and
$250,000 per Aircraft.
(c) Limitation on Restricted Payments. The Issuer shall not, and
shall not permit any Issuer Subsidiary to (i) declare or pay any dividend
or make any distribution on its Stock held by Persons other than the
Issuer or any Issuer Subsidiary; (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Stock of the Issuer or any
Issuer Subsidiary held by or on behalf of Persons other than the Issuer,
any Issuer Subsidiary and other Persons permitted under Section
5.02(l)(ii)(B) hereof; (iii) make any payment of principal, interest or
Redemption Premium, if any, on the Notes or make any voluntary or
optional repurchase, defeasance or other acquisition or retirement for
value of Indebtedness of the Issuer or such Issuer Subsidiary that is not
owed to the Issuer or such Issuer Subsidiary other than in accordance
with Section 3.10 hereof or (iv) make any investments (other than
Permitted Account Investments, Allowed Restructurings, investments
permitted under Section 5.02(e) hereof and investments in any Aircraft
Owning Subsidiaries pursuant to a Permitted Aircraft Acquisition;
provided that written notification of the organization or acquisition of
each such Aircraft Owning Subsidiary shall have been given to each Rating
Agency).
The term "investment" for purposes of the above restriction shall
mean any loan or advance to a Person, any purchase or other acquisition
of any beneficial interest, capital stock, warrants, rights, options,
obligations or other securities of such Person, any capital contribution
to such Person or any other investment in such
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Person. For the avoidance of doubt, "investment" shall not include any
obligation of a purchaser of an Aircraft to make deferred or installment
payments pursuant to any Aircraft Agreement specified in (iii), (v) or
(vi) of the second paragraph of Section 5.02(g) hereof so long as AerCo
Group retains a security interest in the relevant Aircraft until all such
obligations are discharged.
(d) Limitation on Dividends and Other Payment Restrictions. The
Issuer shall not, and shall not permit any Issuer Subsidiary to, create
or otherwise suffer to exist any consensual encumbrance or restriction of
any kind on the ability of any Issuer Subsidiary to (i) declare or pay
dividends or make any other distributions permitted by applicable law, or
purchase, redeem or otherwise acquire for value, the Stock of the Issuer
or such Issuer Subsidiary, as the case may be; (ii) pay any Indebtedness
owed to the Issuer or such Issuer Subsidiary; (iii) make loans or
advances to the Issuer or such Issuer Subsidiary; or (iv) transfer any of
its property or assets to the Issuer or any other Issuer Subsidiary.
The foregoing provisions shall not restrict any consensual
encumbrances or other restrictions: (i) existing on the Initial Closing
Date or, in the case of any Issuer Additional Aircraft, the date of
acquisition of such Aircraft, under any Related Document, and any
amendments, extensions, refinancings, renewals or replacements of such
documents; provided that such consensual encumbrances and restrictions in
any such amendments, extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the Holders of the AerCo
Group Notes than those previously in effect and being amended, extended,
refinanced, renewed or replaced; or (ii) in the case of clause (iv) of
the preceding paragraph, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset or
(B) existing by virtue of any transfer of, agreement to transfer, option
or right with respect to, or consensual encumbrance on, any property or
assets of the Issuer or any Issuer Subsidiary not otherwise prohibited by
this Indenture. Nothing contained in this covenant shall prevent the
Issuer or any Issuer Subsidiary from creating, incurring, assuming or
suffering to exist any Encumbrances not otherwise prohibited under this
Indenture.
(e) Limitation on Engaging in Business Activities. The Issuer shall
not, and shall not permit any Issuer Subsidiary to, engage in any
business or activity other than:
(i) (A) purchasing or otherwise acquiring aircraft assets both
directly and indirectly through the acquisition of aircraft-owning
entities (subject to Section 5.02(h) hereof), (B) owning
(including, subject to Section 5.02(h) hereof, acquiring Additional
Aircraft), holding, converting, maintaining, modifying, managing,
operating, leasing, re-leasing and, subject to the limitations set
forth in Section 5.02(g) hereof, selling or otherwise disposing of
the Aircraft (including Permitted Tax-Related Dispositions) and
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(C) in the case of AerCo Ireland II, entering into the AerFi Share
Purchase Agreement and entering into all contracts and engaging in
all related activities incidental thereto, including from time to
time accepting, exchanging, holding or permitting any Issuer
Subsidiary to accept, exchange or hold (an "Allowed Restructuring")
promissory notes, contingent payment obligations or equity
interests, of Lessees or their affiliates issued in connection with
the bankruptcy, reorganization or other similar process, or in
settlement of delinquent obligations or obligations anticipated to
be delinquent, of such Lessees or their respective affiliates in
the ordinary course of business;
(ii) providing loans to, guaranteeing or otherwise supporting
the obligations and liabilities of any AerCo Group Member, in each
case on such terms and in such manner as the Board of the Issuer
or, in the case of any Issuer Subsidiary, the relevant Board, sees
fit and (whether or not the Issuer or any Issuer Subsidiary derives
a benefit therefrom) so long as such loans, guarantees or other
supports are provided in connection with the purposes set forth in
clause (i) of this Section 5.02(e);
(iii) financing or refinancing the business activities
described in clause (i) of this Section 5.02(e) through the offer,
sale and issuance of any securities of the Issuer or any Guarantor,
upon such terms and conditions as the Board of the Issuer sees fit,
for cash or in payment or in partial payment for any property
purchased or otherwise acquired by any AerCo Group Member;
(iv) engaging in currency and interest rate exchange
transactions for the purposes of avoiding, reducing, minimizing,
hedging against or otherwise managing the risk of any loss, cost,
expense or liability arising, or which may arise, directly or
indirectly, from any change or changes in any interest rate or
currency exchange rate or in the price or value of any of the
Issuer's or any Issuer Subsidiary's property or assets, within
limits determined by the Board of the Issuer from time to time and
submitted to the Rating Agencies, including but not limited to
dealings, whether involving purchases, sales or otherwise, in
foreign currency, spot and forward interest rate exchange
contracts, forward interest rate agreements, caps, floors and
collars, futures, options, swaps and any other currency, interest
rate and other similar hedging arrangements and such other
instruments as are similar to, or derivatives of, any of the
foregoing provided however that the Issuer shall not, and shall not
permit any Issuer Subsidiary to, enter into any such hedging
arrangements or other instruments (x) that are primarily entered
into for speculative purposes or (y) that are not U.S.
dollar-denominated interest rate swaps, swaptions, caps or floors
without Rating Agency Confirmation;
(v) (A) establishing, promoting and aiding in promoting,
constituting, forming or organizing companies, syndicates or
partnerships of all kinds in any part of the world for the purposes
set forth in clause (i) above;
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provided that written notification shall have been given to each
Rating Agency that such company, trust, syndicate or partnership is
set up in compliance with this Indenture, (B) acquiring, holding
and disposing of shares, securities and other interests in any such
company, syndicate or partnership and (C) disposing of shares,
securities and other interests in, or causing the dissolution of,
any existing subsidiary; provided that any such disposition which
results in the disposition of an Aircraft meets the requirements
set forth in Section 5.02(g) hereof; and
(vi) taking out, acquiring, surrendering and assigning
policies of insurance and assurances with any insurance company or
companies which the Issuer or any Issuer Subsidiary may think fit
and to pay the premiums thereon.
(f) Limitation on Indebtedness. The Issuer shall not, and shall
not permit any Issuer Subsidiary to, incur, create, issue, assume,
guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, whether
present or future (in any such case, to "incur"), Indebtedness.
For the purposes of this Indenture, "Indebtedness" means, with
respect to any Person at any date of determination (without duplication),
(i) all indebtedness of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including reimbursement
obligations with respect thereto), (iv) all the obligations of such
Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date
of purchasing such property or service or taking delivery and title
thereto or the completion of such services, and payment deferrals
arranged primarily as a method of raising finance or financing the
acquisition of such property or service, (v) all obligations of such
Person under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under U.S.
GAAP, (vi) all Indebtedness (as defined in clauses (i) through (v) of
this paragraph) of other Persons secured by a lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, and
(vii) all Indebtedness (as defined in clauses (i) through (v) of this
paragraph) of other Persons guaranteed by such Person.
Notwithstanding the foregoing, the Issuer and any Issuer Subsidiary
may incur each and all of the following:
(i) Indebtedness in respect of any Initial Notes issued on the
Initial Closing Date and Indebtedness in respect of any Remaining
Subclass D-1 and Remaining Subclass E-1 Notes issued to finance the
purchase of the Remaining Aircraft or Substitute Aircraft;
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(ii) Indebtedness in respect of any Refinancing Notes or other
Indebtedness issued in connection with the repurchase, acquisition,
defeasance or retirement for value of AerCo Notes other than the
Class E Notes; provided that (A) such Refinancing Notes or other
Indebtedness receive ratings from the Rating Agencies at the close
of such Refinancing or issuance equal to or higher than those of
the subclass being refinanced or repurchased, acquired, defeased or
retired (determined at the date of incurrence), (B) taking into
account such Refinancing or repurchase, the Issuer receives Rating
Agency Confirmation prior to such Refinancing or issuance with
respect to each subclass of AerCo Group Notes Outstanding at such
time and (C) the net proceeds of any such Refinancing or other
issuance shall be used only to repay the Outstanding Principal
Balance of the subclass of Notes being so refinanced or
repurchased, acquired, defeased or retired plus any Redemption
Premium and transaction expenses relating thereto;
(iii) Indebtedness in respect of guarantees by the Issuer or
any Issuer Subsidiary of any other AerCo Group Member (other than
the Guarantee described in (v) below), provided that no such
Indebtedness in respect of any AerCo Group Member other than AerCo
or any subsidiary of AerCo shall be incurred if it would materially
adversely affect the Noteholders;
(iv) Indebtedness in respect of any Issuer Additional Notes
the proceeds of which are applied to finance a Permitted Additional
Aircraft Acquisition; provided that (A) the Issuer receives Rating
Agency Confirmation prior to the incurrence of such Indebtedness
with respect to all of the AerCo Group Notes Outstanding at such
time and (B) the net proceeds of such Indebtedness shall be used
only to finance such Permitted Additional Aircraft Acquisition and
(c) such Issuer Additional Notes will be cross-collateralized with
all Outstanding Notes by the Collateral under the Security Trust
Agreement;
(v) Indebtedness in respect of the Guarantee set forth in
Article XII of this Indenture (the "Guarantee"); provided that (A)
the Indebtedness guaranteed thereby is incurred by a Guarantor that
has guaranteed the Notes, (B) the Indebtedness being guaranteed
would be permitted pursuant to clause (ii) or (iv) if such
Indebtedness were incurred directly by the Issuer and (C) the
Indebtedness being guaranteed was issued by the Guarantor under an
indenture the terms of which (including the covenants and other
obligations of the Guarantor thereunder) are substantially
identical to those of this Indenture;
(vi) obligations to each Seller under each Acquisition
Agreement and any related lease assignment and assumption
agreements and the documents related thereto;
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(vii) Indebtedness under the Intercompany Loan Agreements and
any other Indebtedness under any agreements between the Issuer or
any Issuer Subsidiary and any other AerCo Group Members (each, an
"Intercompany Loan"); provided that the agreements or promissory
notes evidencing such Indebtedness shall be pledged to the Security
Trustee and written notification shall have been given to each
Rating Agency of the incurrence of such Indebtedness;
(viii) Indebtedness of AerCo Group under any Credit Facility,
provided that the Issuer shall receive Rating Agency Confirmation
prior to entering into any Primary Eligible Credit Facility; and
(ix) obligations to each investor or other person in respect
of the funds on deposit in the Tax Defeasance Account and any
Subordinated Tax-Related Disposition Payments pursuant to the
related Permitted Tax-Related Disposition and any related
assignment and assumption agreements and documents.
For the purposes of this Indenture, "guarantee" means any
obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation
of such other Person or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided
that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"guarantee" when used as a verb has a corresponding meaning.
(g) Limitation on Aircraft Sales. The Issuer shall not, and shall
not permit any Issuer Subsidiary to, sell, transfer or otherwise dispose
of any Aircraft or any interest therein.
Notwithstanding the foregoing, the Issuer and any Issuer Subsidiary
shall be permitted to sell, transfer or otherwise dispose of, directly or
indirectly, (a) any Engine or Part owned on the Initial Closing Date or,
with respect to any Remaining Aircraft, Substitute Aircraft or Issuer
Additional Aircraft, on the date such Aircraft is acquired or any
replacement thereof or (b) one or more Aircraft or an interest therein
(i) pursuant to a Purchase Option or other agreements of a similar
character existing on the Initial Closing Date or, with respect to any
Remaining Aircraft, Substitute Aircraft or Issuer Additional Aircraft, on
the Closing Date therefor, (ii) within or among the Issuer and the Issuer
Subsidiaries without limitation, and among the Issuer and/or any Issuer
Subsidiary and any other AerCo Group Member; provided that no
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such sale, transfer or disposition shall be made other than to the Issuer
or any Issuer Subsidiary if such sale, transfer or other disposition
would materially adversely affect the Noteholders; provided, further,
that written notification shall have been given to each Rating Agency of
such sale, transfer or disposition, (iii) pursuant to any Aircraft
Agreement; provided that such sale does not result in a Concentration
Default and the net present value of the cash Net Sale Proceeds is not
less than the Note Target Price; (iv) pursuant to receipt of insurance
proceeds in connection with an event of loss, (v) pursuant to an Aircraft
Agreement that is designed to allow a person unrelated to the Issuer or
any Issuer Subsidiary to realize tax benefits associated with the
Aircraft or other assets being sold (any such sale, transfer or other
disposition, a "Permitted Tax-Related Disposition"); provided that (A)
the Issuer receives Rating Agency Confirmation and (B) any obligations of
AerCo Group (other than any obligation to transfer the proceeds out of
the Tax Defeasance Account to such person pursuant to such Permitted
Tax-Related Disposition) under such Aircraft Agreement or to any person
providing credit support for such obligations under such Aircraft
Agreement are limited to payments under the priority of repayment under
Subordinated Tax-Related Disposition Amounts under Section 3.08 hereof or
the funds on deposit in the Tax Defeasance Account or (vi) pursuant to an
Aircraft Agreement and, in any one calendar year, not exceeding 10% of
the Adjusted Portfolio Value as determined by the most recent Appraisal
obtained for such calendar year; provided that the Board of the Issuer
unanimously confirms that each such sale would not materially adversely
affect the Issuer and the Noteholders and such sale does not result in a
Concentration Default.
For the purpose of this Section 5.02(g), the net present value of
the cash Net Sale Proceeds of any sale, transfer or other disposition of
any Aircraft shall mean the present value of all payments received or to
be received by the Issuer or any Issuer Subsidiary in respect of such
Aircraft from the date of execution or option granting date, as the case
may be, of the relevant Aircraft Agreement through and including the date
of transfer of title to such Aircraft, discounted back to the date of
execution or option granting date, as the case may be, of such Aircraft
Agreement at the weighted average cost of funds of the AerCo Group (based
on the cost of funds on the Payment Date immediately preceding such date
(excluding for such purpose any interest paid or accrued on the Class E
Notes but taking into account any Swap Agreements).
The "Note Target Price" means, in respect of any Aircraft, an amount
equal to 103% of the aggregate Outstanding Principal Balance of the AerCo
Group A-D Notes, together with any accrued but unpaid interest thereon
and any related Swap Breakage Costs, allocable to such Aircraft on the
date of the sale agreement or purchase option granting date, as the case
may be. On any date, the Outstanding Principal Balance of AerCo Group
A-D Notes allocable to an Aircraft shall equal the product of (i) (A) the
Adjusted Base Value of such Aircraft divided by (B) the Adjusted
Portfolio Value and (ii) the aggregate Outstanding Principal Balance of
AerCo Group A-D Notes, in each case on the most recent Payment Date.
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"Aircraft Agreement" means any lease, sublease, conditional sale
agreement, finance lease, hire purchase agreement or other agreement
(other than an agreement relating to maintenance, modification or
repairs) or any purchase option granted to a Person other than any AerCo
Group Member to purchase an Aircraft pursuant to a purchase option
agreement, in each case pursuant to which any Person acquires or is
entitled to acquire legal title, or the economic benefits of ownership
of, such Aircraft.
"Net Sale Proceeds" means, with respect to any sale or other
disposition of any assets, the aggregate amount of cash received or to be
received from time to time (whether as initial or deferred consideration)
by or on behalf of the seller in connection with such transaction after
deducting therefrom (without duplication) (a) reasonable and customary
brokerage commissions and other similar fees and commissions (including
fees received by the Servicer under the Servicing Agreement) and (b) the
amount of taxes payable in connection with or as a result of such
transaction, in each case to the extent, but only to the extent, that the
amounts so deducted are, at the time of receipt of such cash, actually
paid to a Person that is not an affiliate of the seller and are properly
attributable to such transaction or to the asset that is the subject
thereof.
"Concentration Default" means an Event of Default under Section
5.03(a), as such covenant may be adjusted from time to time upon approval
from the Rating Agencies, which would arise if effect were given to any
sale, transfer or other disposition or any purchase or other acquisition
pursuant to an Aircraft Agreement as of the date of such Aircraft
Agreement regardless of whether such sale, transfer or other disposition
or purchase or other acquisition is scheduled or expected to occur after
the date of such Aircraft Agreement.
(h) Limitation on Aircraft Acquisitions. The Issuer shall not, and
shall not permit any Issuer Subsidiary to, purchase or otherwise acquire
any Aircraft other than the Initial Aircraft or any interest therein.
Notwithstanding the foregoing, the Issuer may, and may permit any
Issuer Subsidiary to, (A) purchase or otherwise acquire, directly or
indirectly, Additional Aircraft from time to time (a "Permitted
Additional Aircraft Acquisition"); provided that (i) no Event of Default
shall have occurred and be continuing, (ii) all Scheduled Principal
Payment Amounts have been paid, (iii) the acquisition does not result in
a Concentration Default and (iv) after giving effect to such acquisition,
no more than 90% by appraised Base Value of the Portfolio consists of
Stage 3 narrowbody aircraft and regional jets, no more than 50% by
appraised Base Value of the Portfolio consists of Stage 3 widebody
aircraft and no more than 15% by appraised Base Value of the Portfolio
consists of Stage 2 aircraft and turboprop aircraft without the Board of
the Issuer having obtained Rating Agency Confirmation, (B) act as sponsor
of a Guarantor that would fund an acquisition of aircraft assets with
Indebtedness guaranteed by the Issuer pursuant to Section 12.01 hereof;
provided that, if such acquisition of aircraft assets had been
consummated indirectly by the Issuer, such
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acquisition would have been permitted pursuant to the preceding clause
(A), and (C) purchase or otherwise acquire, directly or indirectly,
Remaining Aircraft or Substitute Aircraft pursuant to the Acquisition
Agreements.
(i) Limitation on Modification Payments and Capital Expenditures.
The Issuer shall not, and shall not permit any Issuer Subsidiary to, make
any capital expenditures for the purpose of effecting any optional
improvement or modification of any Aircraft, for the optional conversion
of any Aircraft from a passenger aircraft to a freighter or mixed-use
aircraft, or for the purpose of purchasing or otherwise acquiring any
Engines or Parts outside of the ordinary course of business (each such
expenditure, a "Modification Payment").
Notwithstanding the foregoing, the Issuer may, and may permit any
Issuer Subsidiary to, make Modification Payments; provided that (i) each
Modification Payment, together with all other Modification Payments made
after the Initial Closing Date pursuant to this Section 5.02(i) with
respect to any single Aircraft, do not exceed the aggregate amount of
funds that would be necessary to perform one incidence of heavy
maintenance (as described in the applicable Servicing Agreement or
Additional Servicing Agreement) on such Aircraft, including the airframe
and the related Engines thereof; (ii) such Modification Payment is
included in the annual operating budget of the AerCo Group and approved
by the Board of the Issuer; (iii) the amount of funds necessary to make
such Modification Payment shall have been accrued in advance as a
Permitted Accrual in the Expense Account through transfers into the
Expense Account pursuant to Section 3.08(a)(xvi) hereof or otherwise
allowed to be paid under Section 5.02(f) hereof; and (iv) the aggregate
amount of all Modification Payments made by all AerCo Group Members,
taken as a whole, pursuant to this Section 5.02(i) and pursuant to any
Guarantor Indenture after the Initial Closing Date, including such
Modification Payment, shall not exceed 5% of the aggregate Initial
Appraised Value of all Aircraft acquired by AerCo Group.
(j) Limitation on Consolidation, Merger and Transfer of Assets. The
Issuer shall not, and shall not permit any Issuer Subsidiary to,
consolidate with, merge with or into, or sell, convey, transfer, lease
(other than in accordance with the Servicing Agreement) or otherwise
dispose of its property and assets (as an entirety or substantially an
entirety in one transaction or in a series of related transactions) to,
any other Person, or permit any other Person to merge with or into the
Issuer or any Issuer Subsidiary, unless (i) the resulting entity is a
special purpose corporation, the charter of which is substantially
similar to the Memorandum and Articles of Association of the Issuer or
the equivalent charter document of such Issuer Subsidiary, as the case
may be, and, after such consolidation, merger, sale, conveyance,
transfer, lease or other disposition, payments from such resulting entity
to the Noteholders do not give rise to any withholding tax payments less
favorable to the Noteholders than the amount of any withholding tax
payments which would have been required had such event not occurred, (ii)
in the case of any consolidation, merger or transfer by the Issuer, the
surviving successor or transferee entity shall expressly assume all of
the
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obligations of the Issuer under this Indenture, the Notes and each other
Related Document to which the Issuer is then a party, (iii) the Board of
the Issuer shall have obtained Rating Agency Confirmation with respect to
such merger, sale, conveyance, transfer, lease or disposition, (iv)
immediately after giving effect to such transaction, no Event of Default
shall have occurred and be continuing and (v) the Issuer delivers to the
Trustee an Officer's Certificate and an opinion of counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indenture comply with the above criteria and, if applicable, Section
5.02(g) hereof and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided that this
covenant shall not apply to any such consolidation, merger, sale,
conveyance, transfer, lease or disposition (a) within and among the
Issuer and any Issuer Subsidiary and any other AerCo Group Member if such
consolidation, merger, sale, conveyance, transfer, lease or disposition,
as the case may be, would not materially adversely affect the Noteholders
and notification is given to the Rating Agencies, (b) complying with the
terms of Section 5.02(g) hereof or (c) effected as part of a single
transaction providing for the redemption or defeasance of all AerCo Group
Notes in accordance with Section 3.10 or Article XI, respectively,
hereof.
(k) Limitation on Transactions with GPA and Affiliates. The Issuer
shall not, and shall not permit any Issuer Subsidiary, directly or
indirectly, to enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with GPA or its affiliates or
any affiliate of the Issuer or any Issuer Subsidiary, except upon fair
and reasonable terms no less favorable to the Issuer or such Issuer
Subsidiary than could be obtained, at the time of such transaction or at
the time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not such an
affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) any transaction in connection with the establishment of AerCo Group,
its acquisition of the Initial Aircraft or the Issuer Subsidiaries set
forth on Schedule B hereto or pursuant to the terms of the Related
Documents; (ii) any transaction within and among the Issuer or any Issuer
Subsidiary and any other AerCo Group Member; provided that no such
transaction, other than among the Issuer and any Issuer Subsidiary, shall
be consummated if such transaction would materially adversely affect any
Noteholders; (iii) the payment of reasonable and customary regular fees
to, and the provision of reasonable and customary liability insurance in
respect of, the Board of the Issuer; (iv) any Permitted Additional
Aircraft Acquisition or any transaction complying with Section 5.02(g)
hereof; (v) any payments of the types referred to in clause (i) or (ii)
of Section 5.02(c) hereof and not prohibited thereunder or (vi) sale of
Aircraft or any Issuer Subsidiaries as part of a single transaction
providing for the redemption or defeasance of all AerCo Group Notes in
accordance with Section 3.10 or Article XI, respectively, hereof.
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(l) Limitation on the Issuance, Delivery and Sale of Capital Stock.
The Issuer shall not (i) issue, deliver or sell any shares, interests,
participations or other equivalents (however designated, whether voting
or non-voting, other than such shares, interests, participations or other
equivalents existing on the Closing Date) in equity, or (ii) sell, or
permit any Issuer Subsidiary, directly or indirectly, to issue, deliver
or sell, any shares, interests, participations or other equivalents in
equity (however designated, whether voting or non-voting in equity, other
than such shares, interests, participations or other equivalents existing
on the Closing Date), except (A) to the Charitable Trustee (or its
nominees), (B) issuances or sales of shares of Stock of foreign Issuer
Subsidiaries to nationals in the jurisdiction of incorporation or
organization of such Issuer Subsidiary, as the case may be, to the extent
required by applicable law or necessary in the determination of the Board
of the Issuer to avoid adverse tax consequences in any such jurisdiction,
(C) the pledge of the Pledged Stock pursuant to the Security Documents,
(D) the sale, delivery or transfer of any Stock of any AerCo Group Member
as part of a single transaction providing for the redemption or
defeasance of all the AerCo Group Notes in accordance with Section 3.10
or Article XI, respectively, hereof and pursuant to a Guarantor
Indenture, (E) the sale of any Stock of an Issuer Subsidiary in order to
effect the sale of all Aircraft owned by such Issuer Subsidiary in
compliance with Section 5.02(g) hereof and (F) the issue, sale, delivery,
transfer, mortgage or pledge of any stock of any AerCo Group Member to or
for the benefit of any other AerCo Group Member; provided that
notification is given to the Rating Agencies.
(m) Bankruptcy and Insolvency; Corporate Governance. The Issuer (i)
shall promptly provide the Trustee and the Rating Agencies with notice of
the institution of any proceeding by or against the Issuer or any Issuer
Subsidiary, as the case may be, seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of their debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee or other
similar official for either or for any substantial part of their property
and (ii) shall not, without an affirmative unanimous written resolution
of the Board of the Issuer, take any action to waive, repeal, amend,
vary, supplement or otherwise modify the provisions of its charter
documents.
(n) Payment of Principal, Redemption Premium, if any, and Interest.
The Issuer shall duly and punctually pay the principal, Redemption
Premium, if any, and interest on the Notes in accordance with the terms
of this Indenture and the Notes.
(o) Limitation on Employees. The Issuer shall not, and shall not
permit any Issuer Subsidiary to, employ or maintain any employees;
provided that trustees and directors shall not be deemed to be employees
for purposes of this Section 5.02(o).
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Section 5.03. Operating Covenants. The Issuer covenants with the Trustee
as follows:
(a) Concentration Limits; Prohibited Countries. Unless the Board of
the Issuer obtains Rating Agency Confirmation, the Issuer shall not
permit any Issuer Subsidiary to lease or re-lease any Aircraft if
entering into such proposed Lease would cause the Portfolio (excluding
any Aircraft then subject to an Aircraft Agreement and expected to be
disposed of within one year from the date of effectiveness of such Lease
pursuant to Section 5.02(g)(iii) and (vi) but as to which the Issuer or
any Issuer Subsidiary retains an interest including a right to lease
rentals or other payments, finance lease payments, instalment purchase
agreements or any other payments with respect to such Aircraft, but
including any Aircraft with respect to which AerCo Group has entered into
a binding agreement to acquire and which the Board of the Issuer
reasonably expects to acquire within 180 days from the date of such
agreement) to exceed any of the Concentration Limits set forth in Exhibit
F hereto (as such limits may be adjusted by the Issuer from time to time,
subject to Rating Agency Confirmation, the "Concentration Limits");
provided that the Issuer and any Issuer Subsidiary shall be entitled to
renew or extend any Lease to the existing Lessee thereunder irrespective
of the effect of such renewal or extension on the Concentration Limits.
The Issuer shall not permit any Issuer Subsidiary to lease or re-lease
any Aircraft operated or to be operated by a Lessee domiciled in a
jurisdiction set forth in clause (a) of the PRI Guidelines as set forth
on Exhibit F hereto and as amended from time to time upon the approval of
the Rating Agencies (the "PRI Guidelines") as "Prohibited Countries".
On each Payment Date commencing on the first quarter from the date
hereof; the Issuer shall certify to the Rating Agencies its compliance of
this Section 5.03(a).
(b) Compliance with Law, Maintenance of Permits. The Issuer shall
(i) comply, and cause each Issuer Subsidiary to comply, in all material
respects with all Applicable Laws, (ii) obtain, and cause each Issuer
Subsidiary to obtain, all material governmental (including regulatory)
registrations, certificates, licenses, permits and authorizations
required for the use and operation of the Aircraft owned by it,
including, without limitation, a current certificate of airworthiness for
each such Aircraft (issued by the Applicable Aviation Authority and in
the appropriate category for the nature of the operations of such
Aircraft), except that (A) no certificate of airworthiness shall be
required for any Aircraft (x) during any period when such Aircraft is
undergoing maintenance, modification or repair, (y) following the
withdrawal or suspension by such Applicable Aviation Authority of
certificates of airworthiness in respect of all aircraft of the same
model or period of manufacture as such Aircraft (in which case the Issuer
shall comply, and cause each Issuer Subsidiary to comply, with all
directions of such Applicable Aviation Authority in connection with such
withdrawal or suspension), (B) no registrations, certificates, licenses,
permits or authorizations required for the use or operation of any
Aircraft need be obtained with respect to any period when such Aircraft
is not being operated and (C)
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no such registrations, certificates, licenses, permits or authorizations
shall be required to be maintained for any Aircraft that is not the
subject of a Lease, except to the extent required under Applicable Laws,
(iii) not cause or knowingly permit, directly or indirectly, through any
Issuer Subsidiary, any Lessee to operate any Aircraft under any Lease in
any material respect contrary to any Applicable Law and (iv) not
knowingly permit, directly or indirectly, through any Issuer Subsidiary,
any Lessee not to obtain all material governmental (including regulatory)
registrations, certificates, licenses, permits and authorizations
required for such Lessee's use and operation of any Aircraft under any
operating Lease except as provided, mutatis mutandis, in clauses (ii)(A)
and (ii)(B) above.
Notwithstanding the foregoing, no breach of this Section 5.03(b)
shall be deemed to have occurred by virtue of any act or omission of a
Lessee or sub-lessee, or of any Person which has possession of the
Aircraft or any Engine for the purpose of repairs, maintenance,
modification or storage, or by virtue of any requisition, seizure, or
confiscation of the Aircraft (other than seizure or confiscation arising
from a breach by the Issuer or an Issuer Subsidiary of this Section
5.03(b)) (each, a "Third Party Event"); provided that (i) neither the
Issuer nor any Issuer Subsidiary consents or has consented to such Third
Party Event; and (ii) the Issuer or Issuer Subsidiary which is the lessor
or owner of such Aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor
would reasonably take in respect of such Third Party Event, including, as
deemed appropriate (taking into account, inter alia, the laws of the
jurisdictions in which the Aircraft are located), seeking to compel such
Lessee or other relevant Person to remedy such Third Party Event or
seeking to repossess the relevant Aircraft or Engine.
(c) Appraisal of Aircraft. The Issuer shall, at least once each
year and in any case no earlier than 90 nor later than 30 days prior to
March 31 of each year, commencing in 1999, deliver to the Trustee and
each Rating Agency appraisals of the Base Value of each of the Initial
Aircraft and Issuer Additional Aircraft then owned from at least three
independent appraisers that are members of the International Society of
Transport Aircraft Trading or any similar organization (each, an
"Appraiser"), each such appraisal to be dated within 30 days prior to its
delivery to the Trustee.
(d) Maintenance of Assets. The Issuer shall (i) with respect to
each Initial Aircraft or Issuer Additional Aircraft, as the case may be,
and Engine that is subject to a Lease, require, directly or indirectly,
through any Issuer Subsidiary, in such Lease that such Aircraft and
Engine be maintained in accordance with provisions for maintenance
consistent with the reasonable commercial practice of leading
international aircraft operating lessors with respect to similar aircraft
under lease, taking into consideration, among other things, the identity
of the relevant Lessee (including the credit standing and operating
experience thereof), the age and condition of the Aircraft and the
jurisdiction in which such Aircraft will be operated or
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registered under such Lease and (ii) with respect to each Aircraft that
is not subject to a Lease, maintain, and cause each Issuer Subsidiary to
maintain, such Aircraft in a state of repair and condition consistent
with the reasonable commercial practice of leading international aircraft
operating lessors with respect to aircraft not under lease.
Notwithstanding the foregoing, no breach of this Section 5.03(d) shall be
deemed to have occurred by virtue of any Third Party Event; provided that
(i) neither the Issuer nor any Issuer Subsidiary consents or has
consented to such Third Party Event; and (ii) the Issuer or such Issuer
Subsidiary which is the lessor or owner of such Aircraft promptly and
diligently takes such commercially reasonable actions as a leading
international aircraft operating lessor would reasonably take in respect
of such Third Party Event, including as deemed appropriate, seeking to
compel such Lessee or other relevant Person to remedy such Third Party
Event or seeking to repossess the relevant Aircraft or Engine.
(e) Notification of Trustee, Cash Manager and Administrative Agent.
The Issuer shall notify the Trustee, Cash Manager and Administrative
Agent in writing as soon as the Issuer or any Issuer Subsidiary becomes
aware of any loss, theft, damage or destruction to any Initial Aircraft,
Issuer Additional Aircraft or Engine if the potential cost of repair or
replacement of such asset (without regard to any insurance claim related
thereto) may exceed $2,000,000 and the Issuer shall notify the Trustee of
any breach of the Share Purchase Agreement by GPA Group.
(f) Leases. The Issuer shall adopt and shall cause the Servicer and
any Additional Servicer to utilize the pro forma lease agreement or
agreements then used by the Servicer or such Additional Servicer in
connection with its aircraft operating leasing services business
generally, as such pro forma lease agreement or agreements may be revised
for purposes of AerCo Group specifically or generally from time to time
by the Servicer or the Additional Servicer, as the case may be (the
"Servicer's Pro Forma Lease"), for use by the Servicer or such Additional
Servicer, as the case may be, on behalf of the Issuer or any Issuer
Subsidiary as a starting point in the negotiation of Future Leases with
Persons who are not AerCo Group Members; provided, however, that with
respect to any Future Lease entered into in connection with (x) the
renewal or extension of a Lease, (y) the leasing of an Aircraft to a
Person that is or was a Lessee under an Initial Lease or (z) the leasing
of an Aircraft to a Person that is or was the lessee under an operating
lease of an aircraft that is being managed or serviced by the Servicer or
the Additional Servicer, as the case may be (such Future Lease, a
"Renewal Lease"), a form of lease substantially similar to such Initial
Lease or operating lease (a "Precedent Lease"), as the case may be, may
be used by the Servicer or the Additional Servicer, as the case may be,
in lieu of the Servicer's Pro Forma Lease on behalf of the Issuer or any
Issuer Subsidiary as a starting point in the negotiation of such Future
Lease with Persons who are not AerCo Group Members and provided further,
however, that if the Board of the Issuer determines, in an annual review
of the Servicer's Pro Forma Lease on or before each anniversary of the
relevant Closing Date, that any revision to the Servicer's Pro Forma
Lease made from time to time since the preceding review by the Board of
the Issuer (or, with
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respect to the first anniversary of the Initial Closing Date, since the
Initial Closing Date) is substantially inconsistent with the core lease
provisions of the Issuer set forth in Exhibit K to this Indenture (as
such provisions may be amended from time to time, the "Core Lease
Provisions") in a manner and to such a degree as to have a material
adverse effect on the Noteholders, taking into consideration, inter alia,
such revision and any risk that the Aircraft might not be able to be
leased on terms inconsistent with the provisions of the Servicer's Pro
Forma Lease, then the Board of the Issuer shall direct the Servicer not
to include such revision in the Servicer's Pro Forma Lease to be used
thereafter as the starting point in the negotiation of any Future Lease
with respect to the Aircraft. If the Board of the Issuer determines that
any such revision to the Servicer's Pro Forma Lease will not have a
material adverse effect on the Noteholders, then the Board of the Issuer
shall amend the applicable Core Lease Provisions and notify the Rating
Agencies of any Future Lease entered into the terms of which are
materially less favorable from the point of view of the lessor than any
of the Leases to Lessees with similar credit ratings then in effect,
including without limitation, such changes to the Core Lease Provisions.
The Issuer shall not enter into, and shall not permit any Issuer
Subsidiary to enter into, any Future Lease the rental payments under
which are denominated in a currency other than U.S. dollars without
Rating Agency Confirmation.
(g) Opinions. The Issuer shall not enter into, and shall not permit
any Issuer Subsidiary to enter into, any Future Lease with any Person
that is not an AerCo Group Member or change the jurisdiction of
registration of any Aircraft that is subject to a Lease, unless, upon
entering into such Future Lease or changing the jurisdiction of
registration of such Aircraft (or within a commercially reasonable period
thereafter), the Servicer or Additional Servicer, as the case may be,
obtains such legal opinions, if any, with regard to compliance with the
registration requirements of the relevant jurisdiction, enforceability of
the Future Lease and such other matters customary for such transactions
to the extent that receiving such legal opinions is consistent with the
reasonable commercial practice of leading international aircraft
operating lessors.
(h) Insurance. The Issuer shall maintain or cause, directly or
indirectly through the Issuer Subsidiaries, to be maintained with
reputable and responsible insurers or with insurers that maintain
relevant reinsurance with reputable and responsible reinsurers (i)
airline hull insurance for each Initial Aircraft and Issuer Additional
Aircraft in an amount at least equal to the Note Target Price for such
Aircraft (or the equivalent thereof from time to time if such insurance
is denominated in a currency other than U.S. dollars) and (ii) airline
liability insurance for each Aircraft and occurrence in an amount at
least equal to the relevant amount set forth on Exhibit H hereto for each
model of aircraft and as amended from time to time with the approval of
the Rating Agencies and (iii) airline political risk insurance ("PRI")
for each Aircraft subject to a Lease and habitually based in a
jurisdiction determined in accordance with clause (b) of the PRI
Guidelines, which may be amended from time to time only with the approval
of the Rating Agencies, in an amount at least equal to
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the Note Target Price (or the equivalent thereof from time to time if
such insurance is denominated in a currency other than U.S. dollars) for
such Aircraft; provided further that for a period commencing sixty days
after the Initial Closing Date to one year from the Initial Closing Date
(any period may be extended for up to one year if so requested in writing
by any Rating Agency), the Issuer shall, upon request from any Rating
Agency, obtain PRI with respect to Aircraft leased to Lessees habitually
based in certain countries other than Developed Markets specified by each
such Rating Agency; provided, however, that with respect to any such
insurance for any Aircraft subject to a Lease, such insurance may be
subject to commercially reasonable deductible and self-insurance
arrangements (taking into account, inter alia, the creditworthiness and
experience of the Lessee, if any, the type of aircraft and market
practices in the aircraft insurance industry generally). The coverage
and terms (including endorsements, deductibles and self-insurance
arrangements) of any insurance maintained with respect to any Aircraft
not subject to a Lease shall be substantially consistent with the
commercial practices of leading international aircraft operating lessors
regarding similar aircraft.
In determining the amount of insurance required to be maintained by
this Section 5.03(h), the Issuer may take into account any
indemnification from, or insurance provided by, any governmental,
supranational or inter-governmental authority or agency (other than, with
respect to PRI, any governmental authority or agency of any jurisdiction
for which PRI must be obtained, the sovereign foreign currency debt of
which is rated AA, or the equivalent, by at least one of the Rating
Agencies, against any risk with respect to an Aircraft at least in an
amount which, when added to the amount of insurance against such risk
maintained by the Issuer (or which the Issuer has caused to be
maintained), shall be at least equal to the amount of insurance against
such risk otherwise required by this Section 5.03(h) (taking into account
self-insurance permitted by this Section 5.03(h)). Any such
indemnification or insurance provided by such government shall provide
substantially similar protection as the insurance required by this
Section 5.03(h). The Issuer shall not be required to maintain (or to
cause to be maintained) any insurance otherwise required hereunder to the
extent that such insurance is not generally available in the relevant
insurance market at commercially reasonable rates from time to time.
(i) Indemnity. The Issuer shall, and shall cause each Issuer
Subsidiary to, include in each Lease between the Issuer or such Issuer
Subsidiary and a Person who is not an AerCo Group Member an indemnity
from such Person in respect of any losses or liabilities arising from the
use or operation of the Aircraft during the term of such Lease, subject
to such exceptions, limitations and qualifications as are consistent with
the reasonable commercial practice of leading international aircraft
operating lessors.
(j) Independent Directors. The Issuer shall notify the Trustee and
the Rating Agencies of any appointment of an independent director of the
Issuer after the date hereof.
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ARTICLE VI
THE TRUSTEE
Section 6.01. Acceptance of Trusts and Duties. The duties and
responsibilities of the Trustee shall be as provided by the TIA and as set forth
herein. The Trustee accepts the trusts hereby created and applicable to it and
agrees to perform the same but only upon the terms of this Indenture and the TIA
and agrees to receive and disburse all moneys received by it in accordance with
the terms hereof. The Trustee in its individual capacity shall not be
answerable or accountable under any circumstances, except for its own willful
misconduct or negligence or breach of any of its representations or warranties
set forth herein and the Trustee shall not be liable for any action or inaction
of the Issuer or any other parties to any of the Related Documents. Any amounts
received by the Trustee under this Indenture, including, without limitation, the
fees and out-of-pocket expenses of the Trustee shall be Expenses of the Issuer.
Section 6.02. Absence of Duties. Except in accordance with written
instructions or requests furnished pursuant to Sections 5.02 and 5.03 hereof,
the Trustee shall have no duty to ascertain or inquire as to the performance or
observance of any covenants, conditions or agreements on the part of any Lessee.
Notwithstanding the foregoing, the Trustee, upon written request, shall furnish
to any Noteholder, promptly upon receipt thereof, duplicates or copies of all
reports, Notices, requests, demands, certificates, financial statements and
other instruments furnished to the Trustee under this Indenture.
Section 6.03. Representations or Warranties. The Trustee does not make
and shall not be deemed to have made any representation or warranty as to the
validity, legality or enforceability of this Indenture, the Notes or any other
document or instrument or as to the correctness of any statement contained in
any thereof, except that the Trustee in its individual capacity hereby
represents and warrants (i) that each such specified document to which it is a
party has been or will be duly executed and delivered by one of its officers who
is and will be duly authorized to execute and deliver such document on its
behalf, and (ii) the Indenture is the legal, valid and binding obligation of
Bankers Trust, enforceable against Bankers Trust in accordance with its terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally.
Section 6.04. Reliance; Agents; Advice of Counsel. The Trustee shall
incur no liability to anyone acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Trustee may accept a copy of a resolution
of, in the case of the Issuer, the Board and, in the case of any other party to
any Related Document, the governing body of such Person, certified in an
accompanying Officer's Certificate as duly adopted and in full force and effect,
as conclusive evidence that such resolution has been duly adopted and that the
same is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Trustee shall
be entitled to receive and may for all purposes hereof
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conclusively rely on a certificate, signed by an officer of any duly authorized
Person, as to such fact or matter, and such certificate shall constitute full
protection to the Trustee for any action taken or omitted to be taken by it in
good faith in reliance thereon. The Trustee shall furnish to the Cash Manager
or the Administrative Agent upon written request such information and copies of
such documents as the Trustee may have and as are necessary for the Cash
Manager or the Administrative Agent to perform its duties under Article II
hereof. The Trustee shall assume, and shall be fully protected in assuming,
that the Issuer is authorized by its constitutional documents to enter into
this Indenture and to take all action permitted to be taken by it pursuant to
the provisions hereof, and shall not inquire into the authorization of the
Issuer with respect thereto.
The Trustee shall not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within its rights or powers
or for any action it takes or omits to take in accordance with the direction of
the Holders in accordance with Section 4.12 hereof relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture.
The Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a
custodian or nominee, and the Trustee shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of, any such
agent, attorney, custodian or nominee appointed with due care by it hereunder.
The Trustee may consult with counsel as to any matter relating to this
Indenture and any Opinion of Counsel or any advice of such counsel shall be
full and complete authorization and protection in respect of any action taken
or suffered or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel.
The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Holders, pursuant to the provisions of this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which may be
incurred therein or thereby.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Indenture shall in any event require
the Trustee to perform, or be responsible or liable for the manner of
performance of, any obligations of the Issuer or the Cash Manager under this
Indenture or any of the Related Documents.
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The Trustee shall not be liable for any Losses or Taxes (except for Taxes
relating to any compensation, fees or commissions of any entity acting in its
capacity as Trustee hereunder) or in connection with the selection of Permitted
Account Investments or for any investment losses resulting from Permitted
Account Investments.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 4.01(f) or 4.01(g) hereof, such expenses
(including the fees and expenses of its counsel) and the compensation for such
services are intended to constitute expenses of administration under any
bankruptcy law or law relating to creditors' rights generally.
The Trustee shall not be charged with knowledge of an Event of Default
unless a Responsible Officer of the Trustee obtains actual knowledge of such
event or the Trustee receives written notice of such event from the Issuer, the
Cash Manager or Noteholders owning Notes aggregating not less than 10% of the
outstanding principal amount of the Notes.
The Trustee shall have no duty to monitor the performance of the Issuer,
the Cash Manager or any other party to the Related Documents, nor shall it have
any liability in connection with the malfeasance or nonfeasance by such
parties. The Trustee shall have no liability in connection with compliance by
the Issuer, the Cash Manager or any lessee under a Lease with statutory or
regulatory requirements related to any Aircraft or any Lease. The Trustee
shall not make or be deemed to have made any representations or warranties with
respect to any Aircraft or any Lease or the validity or sufficiency of any
assignment or other disposition of any Aircraft or any Lease.
Section 6.05. Not Acting in Individual Capacity. The Trustee acts
hereunder solely as trustee unless otherwise expressly provided; and all
Persons, other than the Noteholders to the extent expressly provided in this
Indenture, having any claim against the Trustee by reason of the transactions
contemplated hereby shall look, subject to the lien and priorities of payment as
herein provided, only to the property of the Issuer for payment or satisfaction
thereof.
Section 6.06. No Compensation from Noteholders. The Trustee agrees that
it shall have no right against the Noteholders or, except as provided in Article
III hereof, the property of the Issuer, for any fee as compensation for its
services hereunder.
Section 6.07. Notice of Defaults. As promptly as practicable after, and
in any event within 30 days after, the occurrence of any Default hereunder, the
Trustee shall transmit by mail to the Issuer and the Noteholders holding Notes
of the related subclass in accordance with Section 313(c) of the TIA, notice of
such Default hereunder actually known to a Responsible Officer of the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default on the payment of the interest, principal, or
Premium, if any, on any Note, the Trustee shall be fully protected in
withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good
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faith determines that the withholding of such notice is in the interests of the
Noteholders of the related class.
Section 6.08. May Hold Notes. The Trustee, any Paying Agent, the
Registrar or any of their affiliates or any other agent in their respective
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Issuer with the same rights it would have if it were not Trustee,
Paying Agent, Registrar or such other agent.
Section 6.09. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee which shall be eligible to act as a trustee under Section
310(a) of the Trust Indenture Act and shall meet the Eligibility Requirements.
If such corporation publishes reports of conditions at least annually, pursuant
to law or to the requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section 6.09, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of conditions so published.
In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.09 to act as Trustee, the Trustee shall
resign immediately as Trustee in the manner and with the effect specified in
Section 7.01 hereof.
Section 6.10. Reports by Trustee. Within 60 days after February 28 of each
year commencing with the first full year following the issuance of any subclass
of Notes, the Trustee shall transmit to the Noteholders of each subclass, as
provided in Section 313(c) of the TIA, a brief report describing, among other
things, any changes in eligibility and qualifications of the Trustee and any
issuance of Additional Notes, if required by Section 313(a) of the TIA.
Section 6.11. Reports by the Issuer. The Issuer shall:
(a) file with the Trustee, within 30 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Issuer is required to
file with the Commission pursuant to section 13 or section 15(d) of the
Exchange Act; or, if the Issuer is not required to file information,
documents or reports pursuant to either of such sections, then to file
with the Trustee all Monthly Reports;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed by the Commission, such additional
information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants provided for in this Indenture,
as may be required by such rules and
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regulations, including, in the case of annual reports, if required by such
rules and regulations, certificates or opinions of independent public
accountants;
(c) transmit to all Noteholders, in the manner and to the extent
provided in Section 313(c) of the Trust Indenture Act such summaries of
any information, documents and reports required to be filed by the Issuer
pursuant to subsections (a) and (b) of this Section 6.11 as may be
required by rules and regulations prescribed by the Commission; and
(d) furnish to the Trustee, within 120 days after the end of each
fiscal year of the Issuer, a brief certificate from the principal
executive officer, principal accounting officer or principal financial
officer of the Issuer, as applicable, as to his or her knowledge of the
Issuer's compliance with all conditions and covenants under this
Indenture (it being understood that for purposes of this paragraph (d),
such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture).
ARTICLE VII
SUCCESSOR TRUSTEES
Section 7.01. Resignation and Removal of Trustee. The Trustee may resign
as to all or any of the subclasses of the Notes at any time without cause by
giving at least 90 days' prior written notice to the Issuer, the Cash Manager,
the Administrative Agent and the Holders. Holders of a majority of the
Outstanding Principal Balance of any subclass of the Notes may at any time
remove the Trustee as to such subclass without cause by an instrument in writing
delivered to the Issuer, the Cash Manager, the Administrative Agent, the
Security Trustee, the Senior Trustee and the Trustee being removed. In
addition, the Issuer may remove the Trustee as to any of the subclasses of the
Notes if: (i) such Trustee fails to comply with Section 310 of the TIA after
written request therefor by the Issuer or the Noteholder of the related subclass
who has been a bona fide Noteholder for at least six months, (ii) such Trustee
fails to comply with Section 7.02(c) hereof, (iii) such Trustee is adjudged a
bankrupt or an insolvent, (iv) a receiver or public officer takes charge of such
Trustee or its property or (v) such Trustee becomes incapable of acting.
References to the Trustee in this Indenture include any successor Trustee as to
all or any of the subclasses of the Notes appointed in accordance with this
Article VII.
Section 7.02. Appointment of Successor. (a) In the case of the
resignation or removal of the Trustee as to any subclass of the Notes under
Section 7.01 hereof, the Issuer shall promptly appoint a successor Trustee as to
such subclass; provided that a majority of the Outstanding Principal Balance of
such subclass of the Notes may appoint, within one year after such resignation
or removal, a successor Trustee as to such subclass which may be other than the
successor Trustee appointed by the Issuer, and such successor Trustee appointed
by the Issuer shall be superseded by the successor Trustee so appointed by the
Noteholders. If a
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successor Trustee as to any subclass of the Notes shall not have been appointed
and accepted its appointment hereunder within 60 days after the Trustee gives
notice of resignation as to such subclass, the retiring Trustee, the Issuer,
the Administrative Agent, the Cash Manager or a majority of the Outstanding
Principal Balance of such subclass of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee as to such
subclass. Any successor Trustee so appointed by such court shall immediately
and without further act be superseded by any successor Trustee appointed as
provided in the first sentence of this paragraph within one year from the date
of the appointment by such court.
(b) Any successor Trustee as to any subclass of the Notes, however
appointed, shall execute and deliver to the Issuer, the Cash Manager, the
Administrative Agent and the predecessor Trustee as to such subclass an
instrument accepting such appointment, and thereupon such successor Trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties and trusts of such predecessor Trustee hereunder in the
trusts hereunder applicable to it with like effect as if originally named the
Trustee as to such subclass herein; provided that, upon the written request of
such successor Trustee, such predecessor Trustee shall, upon payment of all
amounts due and owing to it, execute and deliver an instrument transferring to
such successor Trustee, upon the trusts herein expressed applicable to it, all
the estates, properties, rights, powers and trusts of such predecessor Trustee,
and such predecessor Trustee shall duly assign, transfer, deliver and pay over
to such successor Trustee all moneys or other property then held by such
predecessor Trustee hereunder solely for the benefit of such subclass of the
Notes.
(c) If a successor Trustee is appointed with respect to one or more (but
not all) subclasses of the Notes, the Issuer, the predecessor Trustee and each
successor Trustee with respect to each subclass of Notes shall execute and
deliver an indenture supplemental hereto which shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the predecessor Trustee with respect to the subclasses of
Notes as to which the predecessor Trustee is not retiring shall continue to be
vested in the predecessor Trustee, and shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the Notes hereunder by more than one Trustee.
(d) Each Trustee shall be an Eligible Institution and shall meet the
Eligibility Requirements, if there be such an institution willing, able and
legally qualified to perform the duties of a Trustee hereunder; provided that
the Rating Agencies shall receive notice of any replacement Trustee.
(e) Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation to which substantially all the business of the Trustee may be
transferred, shall, subject to the terms of paragraph (c) of this Section, be
the Trustee under this Indenture without further act.
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ARTICLE VIII
INDEMNITY
Section 8.01. Indemnity. The Issuer shall indemnify the Trustee (and its
officers, directors, employees and agents) for, and hold it harmless against,
any loss, liability or expense incurred by it without negligence or bad faith on
its part in connection with the acceptance or administration of this Indenture
and the Related Documents and its duties under this Indenture and the Related
Documents and the Notes as Trustee, including the costs and expenses of
defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties and hold it harmless against, any
loss, liability or reasonable expense incurred without negligence or bad faith
on its part, arising out of or in connection with actions taken or omitted to be
taken in reliance on any Officer's Certificate furnished hereunder, or the
failure to furnish any such Officers' Certificate required to be furnished
hereunder. The Trustee shall notify the Issuer and the Rating Agencies promptly
of any claim asserted against the Trustee for which it may seek indemnity;
provided, however, that failure to provide such notice shall not invalidate any
right to indemnity hereunder. The Issuer shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Issuer shall pay reasonable fees and expenses of such counsel. The Issuer need
not pay for any settlements made without its consent; provided that such consent
shall not be unreasonably withheld. The Issuer need not reimburse any expense
or indemnity against any loss or liability incurred by the Trustee through
negligence or bad faith.
Section 8.02. Noteholders' Indemnity. The Trustee shall be entitled,
subject to such Trustee's duty during a default to act with the required
standard of care, to be indemnified by the Holders of any subclass of the Notes
before proceeding to exercise any right or power under this Indenture or the
Cash Management Agreement at the request or direction of such Holders.
The provisions of Sections 8.01 and 8.02 hereof shall survive the
termination of this Indenture or the earlier resignation or removal of the
Trustee.
ARTICLE IX
MODIFICATION
Section 9.01. Modification with Consent of Holders. With the consent of
Holders of a majority of the Outstanding Principal Balance of the Notes on the
date of any vote of such Holders (voting as a single class), the Issuer, when
authorized by resolution of the Board, may amend or modify this Indenture or the
Notes; provided that, without the consent of each Swap Provider and each Holder
of any Notes affected thereby, no such amendment may modify the provisions of
this Indenture or the Notes setting forth the frequency or the currency of
payment of, the maturity of, or the method of calculation of the
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amount of, any interest, principal and Premium, if any, payable in respect of
any subclass of Notes, or reduce the percentage of the aggregate Outstanding
Principal Balance of any subclass of Notes required to approve any amendment or
waiver of this Section 9.01 or alter the manner or priority of payment of such
subclass of Notes (each, a "Basic Terms Modification").
It shall not be necessary for the consent of the Holders under this
Section 9.01 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof. Any such modification approved by the required Holders of any class
or subclass of Notes will be binding on the Holders of the relevant class or
subclass of Notes and each party to the Indenture.
The Issuer shall give each Rating Agency prior notice of any amendment
under this Section 9.01 and any amendments of its constitutive documents by the
Issuer or any Issuer Subsidiaries, and, after an amendment under this Section
9.01 becomes effective, the Issuer shall mail to the Holders and the Rating
Agencies a notice briefly describing such amendment. Any failure of the Issuer
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amendment.
After an amendment under this Section 9.01 becomes effective, it shall
bind every Holder, whether or not notation thereof is made on any Note held by
such Holder.
Section 9.02. Modification Without Consent of Holders. Subject to Section
9.01 hereof, the Trustee may agree, without the consent of any Noteholder, (a)
to any modification (other than a Basic Terms Modification) of, or the waiver or
authorization of any breach or prospective breach of, any provision of any
Related Document or of the relevant Notes to correct a manifest error or an
error which is of a formal, minor or technical nature, (b) to modify the
provisions of this Indenture or the Cash Management Agreement relating to the
timing of movement of Rental Payments or other monies received or Expenses
incurred among the Accounts by the Cash Manager or (c) to comply with the
requirements of the Commission in connection with the qualification of this
Indenture under the TIA. Any such modification shall be notified to the Holders
as soon as practicable thereafter and shall be binding on all the Holders.
Section 9.03. Subordination and Priority of Payments. The subordination
provisions contained in Section 3.08, Section 3.09 and Article X hereof may not
be amended or modified without the consent of each Swap Provider, each provider
of a Credit Facility, each Noteholder of the subclass affected thereby and each
Noteholder of any subclass of Notes ranking senior thereto. In no event shall
the provisions set forth in Section 3.08 relating to the priority of the
Expenses, Swap Payments and payments under all Credit Facilities be amended or
modified.
Section 9.04. Execution of Amendments by Trustee. In executing, or
accepting the additional trusts created by, any amendment or modification to
this Indenture permitted by this Article or the modifications thereby of the
trusts created by this Indenture,
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the Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Indenture.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Section 9.05. Swap Providers. (a) The Issuer may enter into one or more
Swap Agreements from time to time; provided, that counterparties to all Swap
Agreements shall be subject to the prior approval of the Board and the Rating
Agencies and shall have credit ratings or provide collateralization arrangements
consistent with maintaining the ratings of the Notes.
(b) Notification to Trustee. The Issuer shall promptly notify the Trustee
in writing of the execution of any Swap Agreement or Swap Guarantee.
(c) Third Party Beneficiary. Each Swap Provider and each provider of a
Credit Facility shall be a third party beneficiary of Sections 3.08 and 9.03
hereof.
Section 9.06. Conformity with Trust Indenture Act. Every indenture
supplemental hereto pursuant to this Article IX shall conform to the
requirements of the TIA as then in effect.
ARTICLE X
SUBORDINATION
Section 10.01. Subordination of the Notes. (a) Each of the Issuer and
the Trustee (on behalf of the Holders of each class of Notes) covenants and
agrees, and each Holder, by its acceptance of a Note, covenants and agrees, that
the Notes of each class will be issued subject to the provisions of this Article
X; and each Holder, by its acceptance of a Note, agrees that all amounts payable
on any Note will, to the extent and in the manner set forth in this Article X,
Section 3.08 and, if applicable, Section 3.09 hereof, be subordinated in right
of payment to the prior payment in full of all Expenses payable to the Service
Providers pursuant to this Indenture and the Related Documents. In addition,
each Holder, by its acceptance of a Note, agrees that (i) all amounts payable on
any Class A Note will, to the extent and in the manner set forth in this Article
X and Section 3.08 hereof, be subordinated in right of payment to all payments
under any Primary Eligible Credit Facilities; (ii) all amounts payable on any
Class B Note will, to the extent and in the manner set forth in this Article X
and Section 3.08 hereof, be subordinated in right of payment to all payments
under any Primary Eligible Credit Facilities, the payment in full of the Class A
Notes and all Swap Payments (other than Subordinated Swap Payments) payable to
any Swap Provider pursuant to any Swap Agreement; (iii) all amounts payable on
any Class C Note will, to the extent and in the manner set forth in this Article
X and Section 3.08 hereof, be subordinated in right of payment to all payments
under any Primary Eligible Credit Facilities, the payment in full of
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the Class A Notes, all Swap Payments (other than Subordinated Swap Payments)
payable to any Swap Provider pursuant to any Swap Agreement and the Class B
Notes, (iv) all amounts payable on any Class D Note will, to the extent and in
the manner set forth in this Article X and Section 3.08, be subordinated in
right of payment to the payment in full of all payments under any Primary
Eligible Credit Facilities, the payment in full of the Class A Notes, all Swap
Payments (other than Subordinated Swap Payments) payable to any Swap Provider
pursuant to any Swap Agreement, the Class B Notes and the Class C Notes and
(v) all amounts payable on any Class E Note will, to the extent and in the
manner set forth in this Article X and Section 3.08, be subordinated in right
of payment to the payment in full of all payments under any Primary Eligible
Credit Facilities, the payment in full of the Class A Notes, all Swap Payments
(other than Subordinated Swap Payments) payable to any Swap Provider pursuant
to any Swap Agreement, the Class B Notes, the Class C Notes and the Class D
Notes, all payments under any other Eligible Credit Facilities, all
Subordinated Swap Payments and all Subordinated Tax-Related Disposition
Payments. Any claim to payment so stated to be subordinated is referred to as
a "Subordinated Claim"; each claim to payment to which another claim to payment
is a Subordinated Claim is referred to as a "Senior Claim" with respect to such
Subordinated Claim.
(b) If prior to the payment in full of all Senior Claims then due and
payable, the Trustee or any Holder of a Subordinated Claim shall have received
any payment or distribution in respect of such Subordinated Claim in excess of
the amount to which such Holder was then entitled under Section 3.08 hereof,
then such payment or distribution shall be received and held in trust by such
Person and paid over or delivered to the Trustee for application as provided in
such Section 3.08.
(c) If any Service Provider, the Trustee or Holder of any Senior Claim
receives any payment in respect of any Senior Claim which is subsequently
invalidated, declared preferential, set aside and/or required to be repaid to a
trustee, receiver or other party, then, to the extent such payment is so
invalidated, declared preferential, set aside and/or required to be repaid,
such Senior Claim shall be revived and continue in full force and effect, and
shall be entitled to the benefits of this Article X, all as if such payment had
not been received.
(d) Subject to Section 10.01(i) below, the Trustee (on its own behalf and
on behalf of the Holders) and the Issuer each confirm that the payment
priorities specified in Section 3.08 hereof shall apply in all circumstances.
(e) Each Holder, by its acceptance of a Note, authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article X, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding up, liquidation or reorganization of the
Issuer (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) any actions tending towards liquidation of the property and assets
of the Issuer or
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the filing of a claim for the unpaid balance of its Notes in the form required
in those proceedings.
(f) If payment on the AerCo Group Notes is accelerated as a result of an
Event of Default, the Issuer shall promptly notify the holders of the Senior
Claims of such acceleration.
(g) After all Senior Claims are paid in full and until the Subordinated
Claims are paid in full, the holders of Subordinated Claims shall be subrogated
to the rights of holders of Senior Claims to receive payments applicable to
Senior Claims. A payment made under this Article X to holders of Senior Claims
which otherwise would have been made to the holders of Subordinated Claims is
not, as between the Issuer and the holders of Subordinated Claims, a payment by
the Issuer.
(h) No right of any holder of any Senior Claim to enforce the
subordination of any Subordinated Claim shall be impaired by an act or failure
to act by the Issuer or the Trustee or by any failure by either the Issuer or
the Trustee to comply with this Indenture.
(i) Notwithstanding anything contained herein to the contrary, payments
from property (or proceeds thereof) deposited in the Defeasance/Redemption
Account pursuant to Article XI, which property shall be for the benefit of the
applicable Holders, shall not be subordinated to the prior payment of any
Senior Claims or subject to the restrictions set forth in this Article X,
Section 3.08 and Section 3.09 hereof, and none of the Holders shall be
obligated to pay over any payments from any such property to the Trustee or any
holder of Senior Claims or any other creditor of the Issuer or any Issuer
Subsidiary.
(j) Each Holder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Claim, whether such Senior
Claim was created or acquired before or after the issuance of such Holder's
claim, to acquire and continue to hold such Senior Claim and such holder of any
Senior Claim shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold such Senior Claim.
ARTICLE XI
DISCHARGE OF INDENTURE; DEFEASANCE
Section 11.01. Discharge of Liability on the Notes; Defeasance. (a) When
(i) the Issuer delivers to the Trustee all Outstanding Notes (other than Notes
replaced pursuant to Section 2.08 hereof) for cancellation or (ii) all
Outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Section 3.10(c)
hereof and the Issuer irrevocably deposits in the
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Defeasance/Redemption Account funds sufficient to pay at maturity or upon
redemption all Outstanding Notes, including interest thereon to maturity or the
Redemption Date (other than Notes replaced pursuant to Section 2.08), and if in
either case the Issuer pays all other sums payable hereunder by the Issuer,
then this Indenture shall, subject to Section 11.01(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Issuer accompanied by an Officers' Certificate and
an Opinion of counsel, at the cost and expense of the Issuer, to the effect
that any conditions precedent to a discharge of this Indenture have been met.
(b) Subject to Sections 11.01(c) and 11.02, the Issuer at any time may
terminate (i) all its obligations under the Notes or any class or subclass of
Notes and this Indenture ("legal defeasance" option) or (ii) its obligations
under Sections 5.02, 5.03 and 4.01 (other than with respect to a failure to
comply with Sections 4.01(a)), 4.01(b), 4.01(c), 4.01(f) (only with respect to
the Issuer) and 4.01(g) (only with respect to the Issuer) ("covenant
defeasance" option); provided that no "legal defeasance" option or "covenant
defeasance" option may be exercised unless such option is exercised
contemporaneously by a Guarantor with respect to all Outstanding Guarantor
Additional Notes. The Issuer may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Issuer exercises its legal defeasance option, payment of any Notes
subject to such legal defeasance may not be accelerated because of an Event of
Default. If the Issuer exercises its covenant defeasance option, payment of
the Notes may not be accelerated because of an Event of Default (other than
with respect to a failure to comply with Section 5.02(n)), 4.01(a), 4.01(b),
4.01(c), 4.01(f) (other than with respect to the Issuer) and 4.01(g) (other
than with respect to the Issuer).
Upon satisfaction of the conditions set forth herein and upon request of
the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's obligations in
Sections 2.01, 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 5.02(n), Article
VI, Sections 8.01, 11.04, 11.05 and 11.06 shall survive until all the Notes
have been paid in full. Thereafter, the Issuer's obligations in Sections 8.01,
11.04 and 11.05 shall survive.
Section 11.02. Conditions to Defeasance. The Issuer may exercise its legal
defeasance option or its covenant defeasance option only if:
(1) the Issuer irrevocably deposits in trust in the
Defeasance/Redemption Account any one or any combination of (A) money,
(B) obligations of, and supported by the full faith and credit of, the
U.S. Government ("U.S. Government Obligations") or (C) obligations of
corporate issuers ("Corporate Obligations") (provided that any such
Corporate Obligations are rated AA+, or the equivalent, or higher, by the
Rating Agencies at such time and shall not have a maturity of longer than
three years from the date of defeasance) for the payment of all
principal, Premium, if any, and interest
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(i) on the Notes or any class or subclass of Notes being defeased, in the
case of legal defeasance, or (ii) on all of the Notes in the case of
covenant defeasance, in either case, to maturity or redemption, as the
case may be;
(2) the Issuer delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations or the
Corporate Obligations plus any deposited money without investment will
provide cash at such times and in such amounts as will be sufficient to
pay principal and interest when due (i) on the Notes or any class or
subclass of Notes being defeased, in the case of legal defeasance, or
(ii) on all of the Notes in the case of covenant defeasance, in either
case, to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit described in clause (1) above is
made and during the 91-day period no Event of Default specified in
Section 4.01(f) or (g) with respect to the Issuer occurs which is
continuing at the end of the period;
(4) the deposit described in clause (1) above does not constitute a
default under any other agreement binding on the Issuer;
(5) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit described in clause (1)
does not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended;
(6) in the case of the legal defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Issuer has received from, or there has been published by, the U.S.
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Noteholders will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such
legal defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such legal defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that
the Noteholders will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred;
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(8) if the related Notes are then listed on any securities exchange,
the Issuer delivers to the Trustee an Opinion of Counsel to the effect
that such deposit, defeasance and discharge will not cause such Notes to
be delisted;
(9) the Issuer has obtained a Rating Agency Confirmation relating to
the defeasance contemplated by this Section 11.02; and
(10) the Issuer delivers to the Trustee an Officer's Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes as contemplated by this Article XI
have been complied with.
Section 11.03. Application of Trust Money. The Trustee shall hold in
trust in the Defeasance/Redemption Account money, U.S. Government Obligations or
Corporate Obligations deposited with it pursuant to this Article XI. It shall
apply the deposited money and the money from U.S. Government Obligations or
Corporate Obligations in accordance with this Indenture to the payment of
principal, Premium, if any, and interest on the class or subclass of Notes.
Money and securities so held in trust are not subject to Article X hereof.
Section 11.04. Repayment to Issuer. The Trustee shall promptly turn over
to the Issuer upon request any excess money or securities held by it at any
time.
Subject to any applicable abandoned property law, the Trustee shall pay to
the Issuer upon request any money held by it for the payment of principal or
interest that remains unclaimed for two years and, thereafter, Noteholders
entitled to the money must look to the Issuer for payment as general creditors.
Section 11.05. Indemnity for Government Obligations and Corporate
Obligations. The Issuer shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or Corporate Obligations, or the principal and interest
received on such U.S. Government Obligations or Corporate Obligations.
Section 11.06. Reinstatement. If the Trustee is unable to apply any money
or U.S. Government Obligations or Corporate Obligations in accordance with this
Article XI by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article XI until such time as the Trustee is permitted
to apply all such money, U.S. Government Obligations or Corporate Obligations in
accordance with this Article XI; provided, however, that, if the Issuer has made
any payment of interest on or principal of any Notes because of the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money, U.S.
Government Obligations or Corporate Obligations held by the Trustee.
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ARTICLE XII
GUARANTEE
Section 12.01. Guarantee. Subject to Section 12.02 hereof,
(a) the Issuer hereby fully and unconditionally guarantees to each holder
of any Guarantor Additional Notes and to each Guarantor Trustee on behalf of
any such holder, in each case: (A) the due and punctual payment of principal,
accrued and unpaid interest and Premium (as defined in the Guarantor Indenture
pursuant to which such Guarantor Additional Notes have been issued), if any, on
such Guarantor Additional Notes, when and as the same shall become due and
payable, whether at the applicable Final Maturity Date (as defined in such
Guarantor Indenture) of such Guarantor Additional Notes, by acceleration or
otherwise, the due and punctual payment of interest on any overdue principal,
to the extent lawful, and the due and punctual performance of all other
obligations of the Guarantor to the holders of such Guarantor Additional Notes
or under such Guarantor Indenture, and (B) in the case of any extension of time
of payment or renewal of such Guarantor Additional Notes or any of such other
obligations, that the same shall be promptly paid in full when due or
otherwise. The liability of the Issuer under this Guarantee is limited to the
maximum amount that will result in the obligations of the Issuer not
constituting a fraudulent conveyance or fraudulent transfer under applicable
law;
(b) the Issuer hereby waives diligence, presentment, filing of claims with
a court in the event of merger or bankruptcy of the Guarantor, any right to
acquire a proceeding first against the Guarantor, the benefit of discussion,
protest or notice with respect to any Guarantor Additional Note of any subclass
or the debt evidenced thereby and all demands whatsoever (except as specified
above), and covenants that this Guarantee shall not be discharged as to any
such Guarantor Additional Note except by payment in full of the principal,
accrued and unpaid interest and Premium, if any, thereon. The maturity of the
obligations guaranteed hereby may be accelerated as provided in Article IV of
the Guarantor Indenture for the purposes of this Guarantee. In the event of
any declaration of acceleration of such obligations as provided in Article IV
of such Guarantor Indenture, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Issuer for the purpose of this
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article IV of such Guarantor Indenture,
the Guarantor Trustee shall be entitled to make a demand for payment on such
Guarantor Additional Notes under this Guarantee;
(c) the Issuer hereby waives any claim or other rights which it may now or
hereafter acquire against the Guarantor that arise from the existence, payment,
performance or enforcement of the Issuer's obligations under such Guarantor
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the holder of any Guarantor Additional
Note against the Guarantor, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law, including, without
limitation, the
<PAGE> 122
115
right to take or receive from the Guarantor, directly or indirectly, in cash or
other property or in any other manner, payment or security on account of such
claim or other rights, until all of the Issuer's obligations under the
Guarantor Indenture have been satisfied. If any payment shall be paid to the
Issuer in violation of the preceding sentence and the principal, accrued
interest and Premium, if any, on any Guarantor Additional Notes shall not have
been paid in full, such amount shall be deemed to have been paid to the Issuer
for the benefit of, and held in trust for the benefit of, the holders of such
Guarantor Additional Notes, and shall forthwith be paid to the Guarantor
Trustee for the benefit of such holders to be credited and applied upon the
principal, accrued interest and Premium, if any, on such Guarantor Additional
Notes;
(d) the Issuer hereby agrees that this Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time, payment, or any
part thereof, of any obligations guaranteed or interest thereon is rescinded or
must otherwise be restored by a holder to the Guarantor upon the bankruptcy or
insolvency of the Guarantor or the Issuer or otherwise;
(e) Any right which at any time the Issuer has under the existing or
future laws of Jersey, whether by virtue of the droit de discussion or
otherwise to require that recourse be had to the assets of the Guarantor before
any claim is enforced against the Issuer in respect of the obligations hereby
assumed by the Issuer, is hereby abandoned and waived and the Issuer undertakes
that if at any time the Trustee or the Noteholders sue the Issuer in respect of
any such obligations and the Guarantor is not sued also, the Issuer shall not
claim that the Guarantor be made a party to the proceedings and the Issuer
agrees to be bound by this Guarantee whether or not the Issuer is made party to
legal proceedings for the recovery of the amount due or owing to the
Noteholders as aforesaid by the Guarantor and whether the formalities required
by any law of Jersey whether existing or future in regard to the rights or
obligations of sureties shall or shall not have been observed.
(f) Any right which the Issuer may have under the existing or future laws
of Jersey, whether by virtue of the droit de division or otherwise, to require
that any liability under this Indenture be divided or apportioned with any
other person or reduced in any manner whatsoever is hereby abandoned and
waived.
(g) the Issuer hereby agrees that its obligations under this Guarantee
shall be irrevocable and unconditional, irrespective of the validity,
regularity or enforceability of the Guarantor Additional Notes against the
Guarantor, the absence of any action to enforce the Guarantor's obligations
under the Guarantor Additional Notes, any waiver or consent by a holder with
respect to any provisions thereof, any amendment to the terms under which the
Guarantor Additional Notes are issued, any release of collateral related to the
Guarantor Additional Notes, the bankruptcy of the Guarantor or any circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor; provided, however, that the Issuer shall be entitled to exercise any
right that the Guarantor could have exercised under the Guarantor Indenture to
cure any default in respect of its obligations under the Guarantor Indenture or
the Guarantor Additional Notes, if any, but only to the extent such
<PAGE> 123
116
right, if any, is provided to the Guarantor under such Guarantor Indenture or
the Guarantor Additional Notes.
Section 12.02. Conditions to Effectiveness of Guarantee. The Guarantee
set forth in Section 12.01 shall become valid and effective only upon the
fulfillment of each of the following conditions:
(i) the Guarantor shall have entered into an indenture, the terms of
which (including the covenants and other obligations of such Guarantor
thereunder) are substantially identical to those of this Indenture (the
"Guarantor Indenture" and the notes issued thereunder, the "Guarantor
Additional Notes");
(ii) the Guarantor shall have entered into all related documents,
the terms of which are substantially similar to those of the
corresponding Related Documents (including cross-collateralizing the
Notes by naming the Noteholders as secured parties to any security
agreements);
(iii) all amounts received by such Guarantor or any Guarantor
Subsidiary pursuant to any Lease or AerCo Group Related Collateral
Document shall have been deposited into the Collection Account;
(iv) the certificate of authentication on the Guarantor Additional
Notes shall have been signed by or on behalf of the Guarantor Trustee;
and
(v) the Issuer shall have received Rating Agency Confirmation prior
to the issuance of the Guarantor Additional Notes.
Section 12.03. Ranking and Subordination of the Guarantees. The Guarantee
of the Guarantor Class A Additional Notes (the "Guarantor Class A Additional
Note Guarantee") shall rank pari passu with the Issuer's obligation to make
payments on or otherwise perform in accordance with the terms of the Class A
Notes and shall rank senior to its obligation to make payments on or otherwise
perform in accordance with the terms of the Class B Notes, its Guarantee of the
Guarantor Class B Additional Notes (the "Guarantor Class B Additional Note
Guarantee"), the Class C Notes, its Guarantee of the Guarantor Class C
Additional Notes (the "Guarantor Class C Additional Note Guarantee"), the Class
D Notes, its Guarantee of the Guarantor Class D Additional Notes (the "Guarantor
Class D Additional Note Guarantee"), the Class E Notes and its Guarantee of the
Guarantor Class E Additional Notes (the "Guarantor Class E Additional Note
Guarantee"). The Guarantor Class B Additional Note Guarantee shall rank junior
to the Issuer's obligation to make payments on or otherwise perform in
accordance with the terms of the Class A Notes and the Guarantor Class A
Additional Note Guarantee, shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Class B
Notes and shall rank senior to its obligation to make payments on or otherwise
perform in accordance with the terms of the Class C Notes, the Guarantor Class C
Additional Note Guarantee, the Class D Notes, the Guarantor Class D Additional
Note Guarantee, the Class E Notes and the Guarantor Class E
<PAGE> 124
117
Additional Note Guarantee. The Guarantor Class C Additional Note Guarantee
shall rank junior to the Issuer's obligation to make payments on or otherwise
perform in accordance with the terms of the Class A Notes, the Guarantor Class
A Additional Note Guarantee, the Class B Notes and the Guarantor Class B
Additional Note Guarantee, shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Class C
Notes and shall rank senior to its obligation to make payments on or otherwise
perform in accordance with the terms of the Class D Notes, the Guarantor Class
D Additional Note Guarantee, the Class E Notes and the Guarantor Class E
Additional Note Guarantee. The Guarantor Class D Additional Note Guarantee
shall rank junior to the Issuer's obligation to make payments on or otherwise
perform in accordance with the terms of the Class A Notes, the Guarantor Class
A Additional Note Guarantee, the Class B Notes, the Guarantor Class B
Additional Note Guarantee, the Class C Notes and the Guarantor Class C
Additional Note Guarantee shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Class D
Notes and shall rank senior to its obligation to make payments on or otherwise
perform in accordance with the terms of the Class E Notes and the Guarantor
Class E Additional Note Guarantee. The Guarantor Class E Additional Note
Guarantee shall rank junior to the Issuer's obligation to make payments on or
otherwise perform in accordance with the terms of the Class A Notes, the
Guarantor Class A Additional Note Guarantee, the Class B Notes, the Guarantor
Class B Additional Note Guarantee, the Class C Notes, the Guarantor Class C
Additional Note Guarantee, the Class D Notes and the Guarantor Class D
Additional Note Guarantee and shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Class E
Notes.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Right of Trustee to Perform. If the Issuer for any reason
fails to observe or punctually to perform any of its obligations to the Trustee,
whether under this Indenture or any of the other Related Documents or otherwise,
the Trustee shall have power (but shall have no obligation), on behalf of or in
the name of the Issuer or otherwise, to perform such obligations and to take any
steps which the Trustee may, in its absolute discretion, consider appropriate
with a view to remedying, or mitigating the consequences of, such failure by the
Issuer; provided that no exercise or failure to exercise this power by the
Trustee shall in any way prejudice the Trustee's other rights under this
Indenture or any of the other Related Documents.
Section 13.02. Waiver. Any waiver by any party of any provision of this
Indenture or any right, remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this
<PAGE> 125
118
Indenture by any party hereto or the partial exercise of any right, remedy or
option hereunder shall not be construed as a waiver or relinquishment of any
such term or provision, but the same shall continue in full force and effect.
No failure on the part of the Trustee to exercise, and no delay on its part in
exercising, any right or remedy under this Indenture will operate as a waiver
thereof, nor will any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy. The rights and remedies provided in this Indenture are
cumulative and not exclusive of any rights or remedies provided by law.
Section 13.03. Severability. In the event that any provision of this
Indenture or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Indenture shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Indenture, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of this Indenture. The parties hereto further agree
that the holding by any court of competent jurisdiction that any remedy pursued
by the Trustee hereunder is unavailable or unenforceable shall not affect in any
way the ability of the Trustee to pursue any other remedy available to it.
Section 13.04. Restrictions on Exercise of Certain Rights. The Trustee
and, during the continuance of a payment Default with respect to the Senior
Class of Notes, the Senior Trustee, in its capacity as trustee of such class and
except as otherwise provided in Section 4.04, may sue for recovery or take any
other steps for the purpose of recovering any of the obligations hereunder or
any other debts or liabilities whatsoever owing to it by the Issuer. Each of
the Noteholders shall at all times be deemed to have agreed by virtue of the
acceptance of the Notes that only the Trustee and, during the continuance of a
payment Default with respect to the Senior Class of Notes, the Senior Trustee,
in its capacity as trustee of such class and except as provided in Section 4.04,
may take any steps for the purpose of procuring the appointment of an
administrative receiver, examiner, receiver or similar officer or the making of
an administration order or for instituting any bankruptcy, reorganization,
arrangement, insolvency, winding up, liquidation, composition, examination or
any like proceedings under the laws of Jersey.
Section 13.05. Notices. All notices, demands, certificates, requests,
directions, instructions and communications hereunder ("Notices") shall be in
writing and shall be effective (a) upon receipt when sent through the mails,
registered or certified mail, return receipt requested, postage prepaid, with
such receipt to be effective the date of delivery indicated on the return
receipt, or (b) one Business Day after delivery to an overnight courier, or (c)
on the date personally delivered to an authorized officer of the party to which
sent, or (d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:
<PAGE> 126
119
if to the Issuer, to:
AerCo Limited
22 Grenville Street
St. Helier
Jersey, JE4 8PX
Channel Islands
Facsimile: (+44 1534) 609333
Attention: Mourant & Co. Secretaries Limited - Company Secretary
and
GPA Administrative Services Limited
GPA House
Shannon, County Clare
Ireland
Attention: Company Secretary
Facsimile: (+353-61) 360503
with copies to:
Davis Polk & Wardwell
1 Frederick's Place
London
EC2R 8AB
Attention: Mr. Tom Reid
Facsimile: (+44-171) 418-1400
for so long as Bankers Trust Company shall act as Book-Entry Depositary pursuant
to the Deposit Agreement, if to any Holder of a Global Note, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
Facsimile: (+212) 250-6439
Telephone: (+212) 250-6137
if to any Holder of a Definitive Registered Note, to such Holder at its address
set forth in the Register as of the applicable Record Date;
<PAGE> 127
120
if to the Administrative Agent, to:
GPA Administrative Services Limited
GPA House
Shannon, County Clare
Ireland
Attention: Company Secretary
Facsimile: (+353-61) 360503
if to the Trustee or the Registrar, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
Facsimile: (+212) 250-6439
Telephone: (+212) 250-6137
if to the Cash Manager, to:
GPA Cash Manager II Limited
GPA House
Shannon, County Clare
Ireland
Attention: Company Secretary
Facsimile: (+353-61) 360 503
for so long as the Notes are listed on the Luxembourg Stock Exchange, if to the
Listing Agent, Luxembourg Paying Agent and Registrar, to:
Banque Internationale a Luxembourg S.A.
69, route d'Esch
L-1470 Luxembourg
Attention: Sabrina Deisges
Facsimile: (+352) 4590-4227
<PAGE> 128
121
if to the Servicer, to:
Babcock & Brown Limited
Oracle House
Herbert Street
Dublin 2
Ireland
Attention: Managing Director
Facsimile: (+353-1) 661-6506
with a copy to:
Babcock & Brown Inc.
2 Harrison Street
San Francisco
California 94105
Attention: General Counsel
Facsimile: (+415) 267-1500
A copy of each notice given hereunder to any party hereto shall also be given
to each of the other parties hereto. Each party hereto may, by notice given in
accordance herewith to each of the other parties hereto, designate any further
or different address to which subsequent Notices shall be sent.
Section 13.06. Assignments. This Indenture shall be a continuing
obligation of the Issuer and shall (i) be binding upon the Issuer and its
successors and assigns and (ii) inure to the benefit of and be enforceable by
the Trustee, and by its successors, transferees and assigns. The Issuer may not
assign any of its obligations under the Indenture, or delegate any of its duties
hereunder.
Section 13.07. Currency Conversion. (a) If any amount is received or
recovered by the Cash Manager or the Trustee in respect of this Indenture or any
part thereof (whether as a result of the enforcement of the security created
under the Security Trust Agreement or pursuant to this Indenture or any judgment
or order of any court or in the liquidation or dissolution of the Issuer or by
way of damages for any breach of any obligation to make any payment under or in
respect of the Issuer's obligations hereunder or any part thereof or otherwise)
in a currency (the "Received Currency") other than the currency in which such
amount was expressed to be payable (the "Agreed Currency"), then the amount in
the Received Currency actually received or recovered by the Trustee shall, to
the fullest extent permitted by Applicable Law, only constitute a discharge to
the Issuer to the extent of the amount of the Agreed Currency which the Cash
Manager or the Trustee was or would have been able in accordance with its normal
procedures to purchase on the date of actual receipt or recovery (or, if that is
not practicable, on the next date on which it is so practicable), and, if the
amount of the Agreed Currency which the Cash Manager or Trustee is or would have
been so able to purchase is less than the amount of the Agreed Currency which
<PAGE> 129
122
was originally payable by the Issuer, the Issuer shall pay to the Cash Manager
such amount as the Cash Manager shall determine to be necessary to indemnify
the Trustee against any Loss sustained by it as a result (including the cost of
making any such purchase and any premiums, commissions or other charges paid or
incurred in connection therewith) and so that such indemnity, to the fullest
extent permitted by Applicable Law, (i) shall constitute a separate and
independent obligation of the Issuer distinct from its obligation to discharge
the amount which was originally payable by the Issuer and (ii) shall give rise
to a separate and independent cause of action and apply irrespective of any
indulgence granted by the Cash Manager or the Trustee and continue in full
force and effect notwithstanding any judgment, order, claim or proof for a
liquidated amount in respect of the amount originally payable by the Issuer or
any judgment or order and no proof or evidence of any actual loss shall be
required.
(b) For the purpose of or pending the discharge of any of the moneys and
liabilities hereby secured the Cash Manager may convert any moneys received,
recovered or realized by the Cash Manager under this Indenture (including the
proceeds of any previous conversion under this Section 13.07) from their
existing currency of denomination into the currency of denomination (if
different) of such moneys and liabilities and any conversion from one currency
to another for the purposes of any of the foregoing shall be made at the
Trustee's then prevailing spot selling rate at its office by which such
conversion is made. If not otherwise required to be applied in the Received
Currency, the Cash Manager, acting on behalf of the Security Trustee, shall
promptly convert any moneys in such Received Currency other than U.S. dollars
into U.S. dollars. Each previous reference in this section to a currency
extends to funds of that currency and funds of one currency may be converted
into different funds of the same currency.
Section 13.08. Application to Court. The Security Trustee may at any time
after the service of a Default Notice apply to any court of competent
jurisdiction for an order that the terms of this Indenture be carried into
execution under the direction of such court and for the appointment of a
Receiver of the Collateral or any part thereof and for any other order in
relation to the administration of this Indenture as the Senior Trustee shall
deem fit and it may assent to or approve any application to any court of
competent jurisdiction made at the instigation of any of the Noteholders and
shall be indemnified by the Issuer against all costs, charges and expenses
incurred by it in relation to any such application or proceedings.
Section 13.09. Governing Law. THIS INDENTURE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 13.10. Jurisdiction. (a) Each of the parties hereto agrees that
the United States federal and New York State courts located in The City of New
York shall have jurisdiction to hear and determine any suit, action or
proceeding, and to settle any disputes, which may arise out of or in connection
with this Indenture and, for such purposes, submits to the jurisdiction of such
courts. Each of the parties hereto waives any objection which it might
<PAGE> 130
123
now or hereafter have to the United States federal or New York State courts
located in The City of New York being nominated as the forum to hear and
determine any suit, action or proceeding, and to settle any disputes, which may
arise out of or in connection with this Indenture and agrees not to claim that
any such court is not a convenient or appropriate forum. Each of the parties
hereto agrees that the process by which any suit, action or proceeding is begun
may be served on it by being delivered in connection with any suit, action or
proceeding in The City of New York to the Person named as the process agent of
such party in Exhibit G at the address set out therein or at the principal New
York City office of such process agent, if not the same.
(b) The submission to the jurisdiction of the courts referred to in
Section 13.10(a) shall not (and shall not be construed so as to) limit the
right of the Trustee to take proceedings against the Issuer in any other court
of competent jurisdiction nor shall the taking of proceedings in any one or
more jurisdictions preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.
(c) Each of the parties hereto hereby consents generally in respect of any
legal action or proceeding arising out of or in connection with this Indenture
to the giving of any relief or the issue of any process in connection with such
action or proceeding, including the making, enforcement or execution against
any property whatsoever (irrespective of its use or intended use) of any order
or judgment which may be made or given in such action or proceeding.
Section 13.11. Counterparts. This Indenture may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 13.12. Table of Contents, Headings, Etc. The Table of Contents
and headings of the Articles and Sections of this Indenture have been inserted
for convenience of
<PAGE> 131
124
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms and provisions hereof.
Section 13.13. Trust Indenture Act. Prior to the effectiveness of the
Registration Statement, this Indenture shall be incorporated and be governed by
the provisions of the Trust Indenture Act that are required to be part of and to
govern indentures qualified under the Trust Indenture Act. After the
effectiveness of the Registration Statement, this Indenture shall be subject to
the provisions of the Trust Indenture Act that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
AERCO LIMITED, as Issuer
By /s/ FREDERICK W. BRADLEY
________________________________
Name: Frederick W. Bradley, Jr.
Title: Director
BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By ________________________________
Name:
Title:
<PAGE> 132
124
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms and provisions hereof.
Section 13.13. Trust Indenture Act. Prior to the effectiveness of the
Registration Statement, this Indenture shall be incorporated and be governed by
the provisions of the Trust Indenture Act that are required to be part of and to
govern indentures qualified under the Trust Indenture Act. After the
effectiveness of the Registration Statement, this Indenture shall be subject to
the provisions of the Trust Indenture Act that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
AERCO LIMITED, as Issuer
By ________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By /s/ CRAIG M. KANTOR
________________________________
Name: Craig M. Kantor
Title: Vice President
<PAGE> 133
SCHEDULE A
INITIAL APPRAISED VALUE OF THE INITIAL AIRCRAFT
<TABLE>
<CAPTION>
INITIAL APPRAISAL VALUE AT
MARCH 1, 1998
SERIAL NUMBER ($000'S)
- ------------- --------------------------
<S> <C>
26153 42.373
26068 25.683
240 13.317
24465 21.953
24677 21.943
25764 27.353
25765 27.500
49952 22.920
85 26.777
24685 25.710
11258 14.207
11342 16.343
24999 63.130
49627 21.283
49790 20.820
26158 43.097
299 31.290
362 31.527
23868 24.214
391 32.883
24909 24.157
23979 24.667
24908 24.367
24904 26.430
26066 28.143
11341 16.163
11350 16.710
11351 16.313
24947 62.470
26152 41.680
403 32.083
46064 16.020
46040 15.997
22496 31.270
26067 21.180
</TABLE>
<PAGE> 134
SCHEDULE B
ISSUER SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Incorporation
<S> <C>
Aircraft Lease Portfolio
Securitization 94-1 Limited Jersey
AerCo Ireland Limited Ireland
AerCo Ireland II Limited Ireland
AerCoUSA Inc. Delaware
AerFi Belgium N.V. Belgium
Pergola Limited Ireland
ALPS 94-1 (Belgium) N.V. Belgium
ALPS 94-1 (France) S.A.R.L. France
</TABLE>
<PAGE> 135
EXHIBIT A-1
FORM OF SUBCLASS A-1 FLOATING RATE NOTE
AERCO LIMITED
SUBCLASS A-1 NOTE, due July 15, 2023
No.____ [CUSIP][ISIN][CCN]
$ ______
BEARER GLOBAL NOTE
AERCO LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promises to pay to the BEARER, upon surrender hereof, the
principal sum set forth on the grid schedule attached hereto and made a part
hereof (provided, however that the aggregate principal amount hereof and of all
other Subclass A-1 Notes outstanding, collectively, shall not exceed THREE
HUNDRED AND FORTY MILLION DOLLARS ($340,000,000)) on July 15, 2023 (the "Final
Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof at a fluctuating interest rate per annum equal to the
sum of LIBOR plus 0.19% per annum (the "Stated Interest Rate") from the date
hereof until the Outstanding Principal Balance hereof is paid or duly provided
for, payable on each Payment Date. Interest on this Subclass A-1 Note in each
Interest Accrual Period shall be calculated on the basis of a 360-day year and
the actual number of days elapsed in such Interest Accrual period.
This Subclass A-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its "Subclass A-1 Notes, due July 15, 2023", issued under
the Trust Indenture dated as of July 15, 1998 (as amended or supplemented from
time to time, the "Indenture"), between the Issuer and Bankers Trust Company, as
trustee (the "Trustee"). This Subclass A-1 Note is freely negotiable and
transfer of this Subclass A-1 Note shall be by delivery hereof. The Indenture
also provides for the issuance of Subclass A-2 Notes, Subclass B-1 Notes,
Subclass C-1 Notes, Subclass D-1 Notes and Subclass E-1 Notes (collectively, the
"Initial Notes"). All capitalized terms used in this Subclass A-1 Note and not
defined herein shall have the respective meanings assigned to such terms in the
Indenture. Reference is made to the Indenture and all indentures supplemental
thereto for a statement for the respective rights and obligations thereunder of
the Issuer, the Trustee and the Subclass A-1 Noteholders. This Subclass A-1 Note
is subject to all terms of the Indenture.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass A-1 Note prior to the Final Maturity Date on the Payment dates and in
the amounts specified in the Indenture, subject to the availability of the
Available Collections Amount therefor after making payments entitled to priority
under Sections 3.08 and 3.09 of the Indenture.
<PAGE> 136
A-1-2
The Issuer may redeem all or part of the Outstanding Principal Balance of
this Subclass A-1 Note prior to the Final Maturity Date on the Payment Dates, in
the amounts and under the circumstances specified in the Indenture.
Other than in the case of a redemption for taxation reasons specified in
the Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this Subclass A-1 Note (i) with the application of funds other than
the Available Collections Amount (including proceeds from Refinancing Notes and
proceeds from third parties), such amount shall be redeemed at a Redemption
Price equal to the product of the applicable Redemption Premium applicable
thereto and the Outstanding Principal Balance thereof and (ii) with the
application of the Available Collections Amount, such amount shall be redeemed
at a Redemption Price equal to the Outstanding Principal Balance thereof.
Following the Expected Final Payment Date of this Subclass A-1 Note and
until the Outstanding Principal Balance hereof is paid or duly provided for, the
Outstanding Principal Balance hereof shall bear additional interest ("Step-Up
Interest") at the rate of 0.5% per annum, payable on each Payment Date, subject
to the availability of the Available Collections Amount therefor after making
payments entitled to priority under Sections 3.08 and 3.09 of the Indenture.
Any amount of Redemption Premium or interest (including Step-Up Interest)
on this Subclass A-1 Note that is not paid when due shall, to the fullest extent
permitted by applicable law, bear interest at a fluctuating rate per annum equal
to the Stated Interest Rate plus, following the Expected Final Payment date of
this Subclass A-1 Note, 0.5% per annum from the date when due until such amount
is paid or duly provided for, payable on the next succeeding Payment Date,
subject, in the case of Step-Up Interest, to the availability of the Available
Collections Amount therefor after making payments entitled to priority under
Sections 3.08 and 3.09 of the Indenture.
If an exchange offer (the "Exchange Offer") registered under the Securities
Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Initial Notes other than the Subclass D-1 and Subclass E-1 Notes is not declared
effective by the Commission, on or before April 12, 1999 in accordance with the
terms of the Registration Rights Agreement dated as of July 15, 1998 between the
Issuer and Morgan Stanley & Co. International Limited, thereafter an additional
incremental interest amount will accrue on each subclass of Notes other than the
Subclass D-1 and Subclass E-1 Notes, at an annual rate of 0.5%. Such additional
incremental interest amounts on the Notes other than the Subclass D-1 and
Subclass E-1 Notes will be payable in cash on each Payment Date until the
Exchange Offer is consummated or the Shelf Registration Statement is declared
effective. The Holder of this Note is entitled to the benefits of such
Registration Rights Agreement.
The indebtedness evidenced by the Subclass A-1 Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims, and this Subclass A-1
Note is issued subject to such
<PAGE> 137
A-1-3
provisions. Each Holder of this Subclass A-1 Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee his attorney-in-fact for such purpose.
The maturity of this Subclass A-1 Note is subject to acceleration upon the
occurrence and during the continuance of the Events of Default specified in the
Indenture.
This Subclass A-1 Note is and will be secured, on a subordinate basis, by
the collateral pledged as security therefor as provided in the Security
Documents.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly on each Payment Date commencing on August 17, 1998, to the
Holder hereof, in the manner specified in Section 3.08 of the Indenture, such
Holder's pro rata share (based on the aggregate percentage of the Outstanding
Principal Balance of the Subclass A-1 Notes held by such Holder) of the
aggregate amount distributable to all Holders of Subclass A-1 Notes on such
Payment Date.
All amounts payable in respect of this Subclass A-1 Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof. The final payment with respect to this Subclass
A-1 Note, however, shall be made only upon presentation and surrender of this
Note by the Noteholder or its agent at the Corporate Trust office or agency of
the Trustee or Paying Agent specified in the notice given by the Trustee or
Paying Agent with respect to such final payment. At such time, if any, as this
Subclass A-1 Note is issued in the form of one or more Definitive Registered
Notes, payments on a Payment Date shall be made by check mailed to each
Noteholder of such a Definitive Registered Note on the applicable Record Date at
its address appearing on the Register maintained with respect to Subclass A-1
Notes. Alternatively, upon application in writing to the Trustee, not later than
the applicable Record Date, by a Noteholder of one of more Definitive Registered
Notes of Subclass A-1 having an aggregate principal amount of not less than
$1,000,000, any such payments shall be made by wire transfer to an account
designated by such Noteholder at a financial institution in New York, New York.
The final payment with respect to any such Definitive Registered Note, however,
shall be made only upon presentation and surrender of such Definitive Registered
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice of such final payment given
by the Trustee or Paying Agent. Any reduction in the principal amount of this
Subclass A-1 Note (or any one or more predecessor Subclass A-1 Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Subclass A-1 Note and of any Subclass A-1 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass A-1 Note,
whether or not noted hereon.
The Holder of this Subclass A-1 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass A-1 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority
<PAGE> 138
A-1-4
of payment provisions of the Indenture or as a result of any other mistake of
fact or law on the part of the Cash Manager in making such payment.
The Indenture permits the amendment or modification of the Indenture and
the Subclass A-1 Notes by the Issuer with the consent of the Holders of a
majority of the Outstanding Principal Balance of all Notes on the date of any
vote of such Holders (voting as a single class); provided that, without the
consent of each Swap Provider and each Holder of any Notes affected thereby, no
such amendment may (i) modify the provisions of the Indenture or the Notes
setting forth the frequency or the currency of payment of, the maturity of, or
the method of calculation of the amount of, any interest, principal and
Redemption Premium, if any, payable in respect of any subclass of Notes, (ii)
reduce the percentage of the aggregate Outstanding Principal Balance of such
subclass of Notes required to approve any amendment or waiver of Section 9.01
of the Indenture or (iii) alter the manner or priority of payment of such
subclass of Notes (each, a "Basic Terms Modification"). Any such amendment or
modification shall be binding on every Holder hereof, whether or not notation
thereof is made upon this Subclass A-1 Note. The Indenture also permits the
Trustee to agree, without the consent of any Noteholder, (a) to any modification
(other than a Basic Terms Modification) of, or the waiver or authorization of
any breach or prospective breach of, any provision of any Related Document or of
the relevant Notes to correct a manifest error or an error which is of a formal,
minor or technical nature or (b) to modify the provisions of the Indenture or
the Cash Management Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses incurred among the Accounts by the
Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent of
each Swap Provider, each provider of a Credit Facility, each Noteholder of the
subclass affected thereby and each Noteholder of any subclass of Notes ranking
senior thereto. In no event shall the provisions set forth in Section 3.08 of
the Indenture relating to the priority of the Expenses, Swap Payments and
payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior
Class of Notes, on behalf of the Holders of all of the Subclass A-1 Notes, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon all present and future
Holders of this Subclass A-1 Note and of any Subclass A-1 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass A-1 Note,
whether or not notation of such consent or waiver is made upon this Subclass A-1
Note.
The term "Issuer" as used in this Subclass A-1 Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Subclass A-1 Notes under the Indenture.
<PAGE> 139
A-1-5
The Subclass A-1 Notes are issuable only in bearer form in denominations
as provided in the Indenture, subject to certain limitations therein set forth.
This Subclass A-1 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this
Subclass A-1 Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Subclass A-1 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass A-1 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 140
A-1-6
SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS
EVIDENCED BY THIS SUBCLASS A-1 NOTE
The initial principal amount of indebtedness evidenced by this Subclass A-1
Note shall be $_________. The following decreases/increases in the principal
amount evidenced by this Subclass A-1 Note have been made:
Decrease in Increase in Total Principal
Principal Principal Amount of this Notation Made
Date of Amount of Amount of Subclass A-1 Note by or on
Decrease/ this Subclass this Subclass Following such Behalf of
Increase A-1 Note A-1 Note Decrease/Increase Trustee
- --------- ------------- ------------- ------------------ -------------
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
<PAGE> 141
EXHIBIT A-2
FORM OF SUBCLASS A-2 FLOATING RATE NOTE
AERCO LIMITED
SUBCLASS A-2 NOTE, due July 15, 2023
No._______
$_________
[CUSIP][ISIN][CCN]
GLOBAL BEARER CERTIFICATE
AERCO LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promises to pay to the BEARER, upon surrender hereof, the
principal sum set forth on the grid schedule attached hereto and made a part
hereof (provided, however that the aggregate principal amount hereof and of all
other Subclass A-2 Notes outstanding, collectively, shall not exceed TWO HUNDRED
AND NINETY MILLION DOLLARS ($290,000,000)) on July 15, 2023 (the "Final Maturity
Date") and to pay interest monthly in arrears on the Outstanding Principal
Balance hereof at a fluctuating interest rate per annum equal to the sum of
LIBOR plus 0.32% per annum (the "Stated Interest Rate") from the date hereof
until the Outstanding Principal Balance hereof is paid or duly provided for,
payable on each Payment Date. Interest on this Subclass A-2 Note in each
Interest Accrual Period shall be calculated on the basis of a 360-day year and
the actual number of days elapsed in such Interest Accrual Period.
This Subclass A-2 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its "Subclass A-2 Notes, due July 15, 2023", issued under
the Trust Indenture dated as of July 15, 1998 (as amended or supplemented from
time to time, the "Indenture"), between the Issuer and Bankers Trust Company, as
trustee (the "Trustee"). This Subclass A-2 Note is freely negotiable and
transfer of this Subclass A-2 Note shall be by delivery hereof. The Indenture
also provides for the issuance of Subclass A-1 Notes, Subclass B-1 Notes,
Subclass C-1 Notes, Subclass D-1 Notes and Subclass E-1 Notes (collectively, the
"Initial Notes"). All capitalized terms used in this Subclass A-2 Note and not
defined herein shall have the respective meanings assigned to such terms in the
Indenture. Reference is made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights and obligations thereunder of
the Issuer, the Trustee and the Subclass A-2 Noteholders. This Subclass A-2 Note
is subject to all terms of the Indenture.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass A-2 Note prior to the Final Maturity Date on the Payment Dates and in
the amounts specified in the Indenture, subject to the availability of the
Available Collections Amount therefor after making payments entitled to priority
under Sections 3.08 and 3.09 of the Indenture.
<PAGE> 142
A-2-2
The Issuer may redeem all or part of the Outstanding Principal Balance of
this Subclass A-2 Note prior to the Final Maturity Date on the Payment Dates, in
the amounts and under the circumstances specified in the Indenture.
Other than in the case of a redemption for taxation reasons specified in
the Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this subclass A-2 Note (i) with the application of funds other than
the Available Collections Amount (including proceeds from Refinancing Notes and
proceeds from third parties), such amount shall be redeemed at a Redemption
Price equal to the product of the applicable Redemption Premium applicable
thereto and the outstanding Principal Balance thereof and (ii) with the
application of the Available Collections Amount, such amount shall be redeemed
at a Redemption Price equal to the Outstanding Principal Balance thereof.
Any amount of Redemption Premium or interest on this Subclass A-2 Note that
is not paid when due shall, to the fullest extent permitted by applicable law,
bear interest at a fluctuating interest rate per annum equal to the Stated
Interest Rate from the date when due until such amount is paid or duly provided
for, payable on the next succeeding Payment Date, subject to the availability of
the Available Collections Amount therefor after making payments entitled to
priority under Section 3.08 of the Indenture.
If an exchange offer (the "Exchange Offer") registered under the Securities
Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Initial Notes other than the Subclass D-1 and Subclass E-1 Notes is not declared
effective by the Commission, on or before April 12, 1999 in accordance with the
terms of the Registration Rights Agreement dated as of July 15, 1998 between the
Issuer and Morgan Stanley & Co. International Limited, thereafter an additional
incremental interest amount will accrue on each subclass of Notes other than the
Subclass D-1 and Subclass E-1 Notes, at an annual rate of 0.5%. Such additional
incremental interest amounts on the Notes other than the Subclass D-1 and
Subclass E-1 Notes will be payable in cash on each Payment Date until the
Exchange Offer is consummated or the Shelf Registration Statement is declared
effective. The Holder of this Note is entitled to the benefits of such
Registration Rights Agreement.
The indebtedness evidenced by the Subclass A-2 Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims and this Subclass A-2
Note is issued subject to such provisions. Each Holder of this Subclass A-2
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose.
The maturity of this Subclass A-2 Note is subject to acceleration upon the
occurrence and during the continuance of the Events of Default specified in the
Indenture.
<PAGE> 143
A-2-3
This Subclass A-2 Note is and will be secured, on a subordinated basis, by
the collateral pledged as security therefor as provided in the Security
Documents.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly on each Payment Date commencing on August 17, 1998, to the
Holder hereof, in the manner specified in Section 3.08 of the Indenture, such
Holder's pro rata share (based on the aggregate percentage of the Outstanding
Principal Balance of the Subclass A-2 Notes held by such Holder) of the
aggregate amount distributable to all Holders of Subclass A-2 Notes on such
Payment Date.
All amounts payable in respect of this Subclass A-2 Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof. The final payment with respect to this Subclass
A-2 Note, however, shall be made only upon presentation and surrender of this
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice given by the Trustee or
Paying Agent with respect to such final payment. At such time, if any, as this
Subclass A-2 Note is issued in the form of one or more Definitive Registered
Notes, payments on a Payment Date shall be made by check mailed to each
Noteholder of such a Definitive Registered Note on the applicable Record Date at
its address appearing on the Register maintained with respect to Subclass A-2
Notes. Alternatively, upon application in writing to the Trustee, not later than
the applicable Record Date, by a Noteholder of one or more Definitive Registered
Notes of Subclass A-2 having an aggregate principal amount of not less than
$1,000,000, any such payments shall be made by wire transfer to an account
designated by such Noteholder at a financial institution in New York, New York.
The final payment with respect to any such Definitive Registered Note, however,
shall be made only upon presentation and surrender of such Definitive Registered
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice of such final payment given
by the Trustee or Paying Agent. Any reduction in the principal amount of this
Subclass A-2 Note (or any one or more predecessor Subclass A-2 Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Subclass A-2 Note and of any Subclass A-2 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass A-2 Note,
whether or not noted hereon.
The Holder of this Subclass A-2 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass A-2 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority of payment provisions of the
Indenture or as a result of any other mistake of fact or law on the part of the
Cash Manager in making such payment.
The Indenture permits the amendment or modification of the Indenture and
the Subclass A-2 Notes by the Issuer with the consent of the Holders of a
majority of the Outstanding Principal Balance of all Notes on the date of any
vote of such Holder (voting as a single class); provided that, without the
consent of each Swap Provider and each Holder of any Notes affected thereby, no
such amendment may (i) modify the provisions of the Indenture
<PAGE> 144
A-2-4
or the Notes setting forth the frequency or the currency of payment of, the
maturity of, or the method of calculation of the amount of, any interest,
principal and Redemption Premium, if any, payable in respect of any subclass of
Notes, (ii) reduce the percentage of the aggregate Outstanding Principal Balance
of such subclass of Notes required to approve any amendment or waiver of Section
9.01 of the Indenture or (iii) alter the manner or priority of payment of such
subclass of Notes (each, a "Basic Terms Modification"). Any such amendment or
modification shall be binding on every Holder hereof, whether or not notation
thereof is made upon this Subclass A-2 Note. The Indenture also permits the
Trustee to agree, without the consent of any Noteholder, (a) to any modification
(other than a Basic Terms Modification) of, or the waiver or authorization of
any breach or prospective breach of, any provision of any Related Document or of
the relevant Notes to correct a manifest error or an error which is of a formal,
minor or technical nature or (b) to modify the provisions of the Indenture or
the Cash Management Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses incurred among the Accounts by the
Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent of
each Swap Provider, each provider of a Credit Facility, each Noteholder of the
subclass affected thereby and each Noteholder of any subclass of Notes ranking
senior thereto. In no event shall the provisions set forth in Section 3.08 of
the Indenture relating to the priority of the Expenses, Swap Payments and
payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior Class
of Notes, on behalf of the Holders of all of the Subclass A-2 Notes, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon all present and future Holders of
this Subclass A-2 Note and of any Subclass A-2 Note issued upon the exchange or
in lieu of or upon the refinancing of this Subclass A-2 Note, whether or not
notation of such constant or waiver is made upon this Subclass A-2 Note.
The term "Issuer" as used in this Subclass A-2 Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Subclass A-2 Notes under the Indenture.
The Subclass A-2 Notes are issuable only in bearer form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Subclass A-2 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
<PAGE> 145
A-2-5
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this
Subclass A-2 Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Subclass A-2 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass A-2 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 146
A-2-6
SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS
EVIDENCED BY THIS SUBCLASS A-2 NOTE
The initial principal amount of indebtedness evidenced by this Subclass A-2
Note shall be $_________. The following decreases/increases in the principal
amount evidenced by this Subclass A-2 Note have been made:
Decrease in Increase in Total Principal
Principal Principal Amount of this Notation Made
Date of Amount of Amount of Subclass A-2 Note by or on
Decrease/ this Subclass this Subclass Following such Behalf of
Increase A-2 Note A-2 Note Decrease/Increase Trustee
- --------- ------------- ------------- ------------------ -------------
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
<PAGE> 147
EXHIBIT
FORM OF SUBCLASS B-1 FLOATING RATE NOTE
AERCO LIMITED
SUBCLASS B-1 NOTE, due July 15, 2023
No.______ [CUSIP][ISIN][CCN]
$________
GLOBAL BEARER CERTIFICATE
AERCO LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promises to pay to the BEARER, upon surrender hereof, the
principal sum set forth on the grid schedule attached hereto and made a part
hereof (provided, however that the aggregate principal amount hereof and of
all other Subclass B-1 Notes outstanding, collectively, shall not exceed
EIGHTY-FIVE MILLION DOLLARS ($85,000,000)) on July 15, 2023 (the "Final
Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof at a fluctuating interest rate per annum equal to
the sum of LIBOR plus 0.60% per annum (the "Stated Interest Rate") from the
date hereof until the Outstanding Principal Balance hereof is paid or duly
provided for, payable on each Payment Date. Interest on this Subclass B-1
Note in each Interest Accrual Period shall be calculated on the basis of a
360-day year and the actual number of days elapsed in such Interest Accrual
Period.
This Subclass B-1 Note is one of a duly authorized issue of Notes of
the Issuer, designated as its "Subclass B-1 Notes, due July 15, 2023",
issued under the Trust Indenture dated as of July 15, 1998 (as amended or
supplemented from time to time, the "Indenture"), between the Issuer and
Bankers Trust Company, as trustee (the "Trustee"). This Subclass B-1 Note is
freely negotiable and transfer of this Subclass B-1 Note shall be by
delivery hereof. The Indenture also provides for the issuance of Subclass
A-1 and A-2 Notes, Subclass C-1 Notes, Subclass D-1 Notes and Subclass E-1
Notes (collectively, the "Initial Notes"). All capitalized terms used in
this Subclass B-1 Note and not defined herein shall have the respective
meanings assigned to such terms in the Indenture. Reference is made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights and obligations thereunder of the Issuer, the Guarantor,
the Trustee and the Subclass B-1 Noteholders. This Subclass B-1 Note is
subject to all terms of the Indenture.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass B-1 Note prior to the Final Maturity Date on the Payment Dates and
in the amounts specified in the Indenture, subject to the availability of
the Available Collections Amount therefor after making payments entitled to
priority under Sections 3.08 and 3.09 of the Indenture.
<PAGE> 148
B-1-2
The Issuer may redeem all or part of the Outstanding Principal Balance
of this Subclass B-1 Note prior to the Final Maturity Date on the Payment
Dates, in the amounts and under the circumstances specified in the
Indenture.
Other than in the case of a redemption for taxation reasons specified
in the Indenture, upon any redemption of any amount of the Outstanding
Principal Balance of this Subclass B-1 Note (i) with the application of
funds other than the Available Collections Amount (including proceeds from
Refinancing Notes and proceeds from third parties), such amount shall be
redeemed at a Redemption Price equal to the product of the applicable
Redemption Premium applicable thereto and the Outstanding Principal Balance
thereof and (ii) with the application of the Available Collections Amount,
such amount shall be redeemed at a Redemption Price equal to the Outstanding
Principal Balance thereof.
Any amount of Redemption Premium or interest on this Subclass B-1 Note
that is not paid when due shall, to the fullest extent permitted by
applicable law, bear interest at a fluctuating interest rate per annum equal
to the Stated Interest Rate form the date when due until such amount is paid
or duly provided for, payable on the next succeeding Payment Date, subject
to the availability of the Available Collections Amount therefor after
making payments entitled to priority under section 3.08 of the Indenture.
If an exchange offer (the "Exchange Offer") registered under the
Securities Act is not consummated and a shelf registration statement (the
"Shelf Registration Statement") under the Securities Act with respect to
resales of the Initial Notes other than the Subclass D-1 and Subclass E-1
Notes is not declared effective by the Commission, on or before April 12,
1999 in accordance with the terms of the Registration Rights Agreement dated
as of July 15, 1998 between the Issuer and Morgan Stanley & Co.
International Limited, thereafter an additional incremental interest amount
will accrue on each subclass of Notes other than the Subclass D-1 and
Subclass E-1 Notes, at an annual rate of 0.5%. Such additional incremental
interest amounts on the Notes other than the Subclass D-1 and Subclass E-1
Notes will be payable in cash on each Payment Date until the Exchange Offer
is consummated or the Shelf Registration Statement is declared effective.
The Holder of this Note is entitled to the benefits of such Registration
Rights Agreement.
The indebtedness evidenced by the Subclass B-1 Notes is, to the extent
and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of all Senior Claims, and this
Subclass B-1 Note is issued subject to such provisions. Each Holder of this
Subclass B-1 Note, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes an directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee his
attorney-in-fact for such purpose.
The maturity of this Subclass B-1 Note is subject to acceleration upon
the occurrence and during the continuance of the Events of Default specified
in the Indenture. The Subclass B-1 Noteholders shall not be permitted to
deliver a Default Notice or to exercise any
<PAGE> 149
B-1-3
remedy in respect of any such Event of Default until all interest and principal
on the Class A Notes have been paid in full.
This Subclass B-1 Note is and will be secured, on a subordinated basis, by
the collateral pledged as security therefor as provided in the Security
Documents.
Subject to and in accordance with the terms of the Indenture, there will
be distributed monthly on each Payment Date commencing on August 17, 1998, to
the Holder hereof, in the manner specified in Section 3.08 of the Indenture,
such Holder's pro rata share (based on the aggregate percentage of the
Outstanding Principal Balance of the Subclass B-1 Notes held by such Holder) of
the aggregate amount distributable to all Holders of Subclass B-1 Notes on such
Payment Date.
All amounts payable in respect of this Subclass B-1 Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof. The final payment with respect to this Subclass
B-1 Note, however, shall be made only upon presentation and surrender of this
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice given by the Trustee or
Paying Agent with respect to such final payment. At such time, if any, as this
Subclass B-1 Note is issued in the form of one or more Definitive Registered
Notes, payments on a Payment Date shall be made by check mailed to each
Noteholder of such a Definitive Registered Note on the applicable Record Date at
its address appearing on the Register maintained with respect to Subclass B-1
Notes. Alternatively, upon application in writing to the Trustee, not later than
the applicable Record Date, by a Noteholder of one or more Definitive Registered
Notes of Subclass B-1 having an aggregate principal amount of not less than
$1,000,000, any such payments shall be made by wire transfer to an account
designated by such Noteholder at a financial institution in New York, New York.
The final payment with respect to any such Definitive Registered Note, however,
shall be made only upon presentation and surrender of such Definitive Registered
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice of such final payment given
by the Trustee or Paying Agent. Any reduction in the principal amount of this
Subclass B-1 Note (or any one or more predecessor Subclass B-1 Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Subclass B-1 Note and of any Subclass B-1 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass B-1 Note,
whether or not noted hereon.
The Holder of this Subclass B-1 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass B-1 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority of payment provisions of the
Indenture or as a result of any other mistake of fact or law on the part of the
Cash Manager in making such payment.
The Indenture permits the amendment or modification of the Indenture and
the Subclass B-1 Notes by the Issuer with the consent of the Holders of a
majority of the
<PAGE> 150
B-1-4
Outstanding Principal Balance of all Notes on the date of any vote of
such Holders (voting as a single class); provided that, without the consent
of each Swap Provider and each Holder of any Notes affected thereby, no such
amendment may (i) modify the provisions of the Indenture or the Notes
setting forth the frequency or the currency of payment of, the maturity of,
or the method of calculation of the amount of, any interest, principal and
Redemption Premium, if any, payable in respect of such subclass of Notes,
(ii) reduce the percentage of the aggregate Outstanding Principal Balance of
such subclass of Notes required to approve any amendment or waiver of
Section 9.01 of the Indenture or (iii) alter the manner or priority of
payment of any subclass of Notes (each, a "Basic Terms Modification"). Any
such amendment or modification shall be binding on every Holder hereof,
whether or not notation thereof is made upon this Subclass B-1 Note. The
Indenture also permits the Trustee to agree, without the consent of any
Noteholder, (a) to any modification (other than a Basic Terms Modification)
of, or the waiver or authorization of any breach or prospective breach of,
any provision of any Related Document or of the relevant Notes to correct a
manifest error or an error which is of a formal, minor or technical nature
or (b) to modify the provisions of the Indenture or the Cash Management
Agreement relating to the timing of movement of Rental Payments or other
monies received or Expenses incurred among the Accounts by the Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent
of each Swap Provider, each provider of a Credit Facility, each Noteholder of
the subclass affected thereby and each Noteholder of any subclass of Notes
ranking senior thereto. In no event shall the provisions set forth in Section
3.08 of the Indenture relating to the priority of the Expenses, Swap Payments
and payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior
Class of Notes, on behalf of the Holders of all of the Subclass B-1 Notes,
to waive compliance by the Issuer with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any
such consent or waiver shall be conclusive and binding upon all present and
future Holders of this Subclass B-1 Note and of any Subclass B-1 Note issued
upon the exchange or in lieu of or upon the refinancing of this Subclass B-1
Note, whether or not notation of such consent or waiver is made upon this
Subclass B-1 Note.
The term "Issuer" as used in this Subclass B-1 Note includes any
successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Holders of Subclass B-1 Notes under the Indenture.
The Subclass B-1 Notes are issuable only in bearer form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
<PAGE> 151
B-1-5
This Subclass B-1 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this
Subclass B-1 Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Subclass B-1 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass B-1 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 152
B-1-6
SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS
EVIDENCED BY THIS SUBCLASS B-1 NOTE
The initial principal amount of indebtedness evidenced by this Subclass B-1
Note shall be $_________. The following decreases/increases in the principal
amount evidenced by this Subclass B-1 Note have been made:
Decrease in Increase in Total Principal
Principal Principal Amount of this Notation Made
Date of Amount of Amount of Subclass B-1 Note by or on
Decrease/ this Subclass this Subclass Following such Behalf of
Increase B-1 Note B-1 Note Decrease/Increase Trustee
- --------- ------------- ------------- ------------------ -------------
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
<PAGE> 153
EXHIBIT C
FORM OF SUBCLASS C-1 FLOATING RATE NOTE
AERCO LIMITED
SUBCLASS C-1 NOTE, due July 15, 2023
No. ____ [CUSP][ISIN][CCN]
$_________
GLOBAL BEARER CERTIFICATE
AERCO LIMITED, a limited liability company organized under laws of Jersey,
Channel Islands, (herein referred to as the "Issuer") for value received,
hereby promises to pay to the BEARER, upon surrender hereof, the principal sum
set forth on the grid schedule attached hereto and made a part hereof
(provided, however that the aggregate principal amount hereof and of all other
Subclass C-1 Notes outstanding, collectively, shall not exceed EIGHTY-FIVE
MILLION DOLLARS ($85,000,000)) on July 15, 2023 (the "Final Maturity Date") and
to pay interest monthly in arrears on the Outstanding Principal Balance hereof
at a fluctuating interest rate per annum equal to the sum of LIBOR plus 1.35%
per annum (the "Stated Interest Rate") from the date hereof until the
Outstanding Principal Balance hereof is paid or duly provided for, payable on
each Payment Date. Interest on this Subclass C-1 Note in each Interest Accrual
Period shall be calculated on the basis of a 360-day year and the actual number
of days elapsed in such Interest Accrual Period.
This Subclass C-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its "Subclass C-1 Notes, due July 15, 2023", issued under
the Trust Indenture dated as of July 15, 1998 (as amended or supplemented from
time to time, the "Indenture"), between the Issuer and Bankers Trust Company,
as trustee (the "Trustee"). This Subclass C-1 Note is freely negotiable and
transfer of this Subclass C-1 Note shall be by delivery hereof. The Indenture
also provides for the issuance of Subclass A-1 and A-2 Notes, Subclass B-1
Notes, Subclass D-1 Notes and Subclass E-1 Notes (collectively, the "Initial
Notes"). All capitalized terms used in this Subclass C-1 Note and not defined
herein shall have the respective meanings assigned to such terms in the
Indenture. Reference is made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights and obligations thereunder of
the Issuer, the Trustee and the Subclass C-1 Noteholders. This Subclass C-1
Note is subject to all terms of the Indenture.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass C-1 Note prior to the Final Maturity Date on the Payment Dates and in
the amounts specified in the Indenture, subject to the availability of the
Available Collections Amount therefor after making payments entitled to
priority under Sections 3.08 and 3.09 of the Indenture.
<PAGE> 154
C-1-2
The Issuer may redeem all or part of the Outstanding Principal Balance of
this Subclass C-1 Note prior to the Final Maturity Date on the Payment Dates, in
the amounts and under the circumstances specified in the Indenture.
Other than in the case of redemption for taxation reasons specified in the
Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this Subclass C-1 Note (i) with the application of funds other than
the Available Collections Amount (including proceeds from Refinancing Notes and
proceeds from third parties), such amount shall be redeemed at a Redemption
Price equal to the product of the applicable Redemption Premium applicable
thereto and the Outstanding Principal Balance thereof and (ii) with the
application of the Available Collections Amount, such amount shall be redeemed
at a Redemption price equal to the Outstanding Principal Balance thereof.
Any amount of Redemption Premium or interest on this Subclass C-1 Note that
is not paid when due shall, to the fullest extent permitted by applicable law,
bear interest at a fluctuating interest rate per annum equal to the Stated
Interest Rate from the date when due until such amount is paid or duly provided
for, payable on the next succeeding Payment Date, subject to the availability of
the Available Collections Amount therefor after making payments entitled to
priority under Section 3.08 of the Indenture.
If an exchange offer (the "Exchange Offer") registered under the Securities
Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Initial Notes other than the Subclass D-1 and Subclass E-1 Notes is not declared
effective by the Commission, on or before April 12, 1999 in accordance with the
terms of the Registration Rights Agreement dated as of July 15, 1998 between the
Issuer and Morgan Stanley & Co. International Limited, thereafter an additional
incremental interest amount will accrue on each subclass of Notes other than the
Subclass D-1 and Subclass E-1 Notes, at an annual rate of 0.5%. Such additional
incremental interest amounts on the Notes other than the Subclass D-1 and
Subclass E-1 Notes will be payable in cash on each Payment Date until the
Exchange Offer is consummated or the Shelf Registration Statement is declared
effective. The Holder of this Note is entitled to the benefits of such
Registration Rights Agreement.
The indebtedness evidenced by the Subclass C-1 Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims and this Subclass C-1
Note is issued subject to such provisions. Each Holder of this Subclass C-1
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose.
The maturity of this Subclass C-1 Note is subject to acceleration upon the
occurrence and during the continuance of the Events of Default specified in the
Indenture. The Subclass C-1 Noteholders shall not be permitted to deliver a
Default Notice or to exercise any
<PAGE> 155
C-1-3
remedy in respect of any such Event of Default until all interest and
principal on the Class A Notes and the Class B Notes have been paid in full.
This Subclass C-1 Note is and will be secured, on a subordinated basis, by
the collateral pledged as security therefor as provided in the Security
Documents.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly on each Payment Date commencing on August 17, 1998, to the
Holder hereof, in the manner specified in Section 3.08 of the Indenture, such
Holder's pro rata share (based on the aggregate percentage of the Outstanding
Principal Balance of the Subclass C-1 Notes held by such Holder) of the
aggregate amount distributable to all Holders of Subclass C-1 Notes on such
Payment Date.
All amounts payable in respect of this Subclass C-1 Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof. The final payment with respect to this Subclass
C-1 Note, however, shall be made only upon presentation and surrender of this
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice given by the Trustee or
Paying Agent with respect to such final payment. At such time, if any, as this
Subclass C-1 Note is issued in the form of one or more Definitive Registered
Notes, payments on a Payment Date shall be made by check mailed to each
Noteholder of such a Definitive Registered Note on the applicable Record Date at
its address appearing on the Register maintained with respect to Subclass C-1
Notes. Alternatively, upon application in writing to the Trustee, not later than
the applicable Record Date, by a Noteholder of one or more Definitive Registered
Notes of Subclass C-1 having an aggregate principal amount of not less than
$1,000,000, any such payments shall be made by wire transfer to an account
designated by such Noteholder at a financial institution in New York, New York.
The final payment with respect to any such Definitive Registered Note, however,
shall be made only upon presentation and surrender of such Definitive Registered
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice of such final payment given
by the Trustee or Paying Agent. Any reduction in the principal amount of this
Subclass C-1 Note (or any one or more predecessor Subclass C-1 Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Subclass C-1 Note and of any Subclass C-1 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass C-1 Note,
whether or not noted hereon.
The Holder of this Subclass C-1 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass C-1 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority of payment provisions of the
Indenture or as a result of any other mistake of fact or law on the part of the
Cash Manager in making such payment.
The Indenture permits the amendment or modification of the Indenture and
the Subclass C-1 Notes by the Issued with the consent of the Holders of a
majority of the
<PAGE> 156
C-1.4
Outstanding Principal Balance of all Notes on the date of any vote of such
Holders (voting as a single class); provided that, without the consent of each
Swap Provider and each Holder of any Notes affected thereby, no such amendment
may (i) modify the provisions of the Indenture and the Notes setting forth the
frequency or the currency of payment of, the maturity of, or the method of
calculation of the amount of, any interest, principal and Redemption Premium, if
any, payable in respect of such subclass of Notes, (ii) reduce the percentage of
the aggregate Outstanding Principal Balance of such subclass of Notes required
to approve any amendment or waiver of Section 9.01 of the Indenture or (iii)
alter the manner or priority of payment of such subclass of Notes (each, a
"Basic Terms Modification"). Any such amendment or modification shall be binding
on every Holder hereof, whether or not notation thereof is made upon this
Subclass C-1 Note. The Indenture also permits the Trustee to agree, without the
consent of any Noteholder, (a) to any modification (other than a Basic Terms
Modification) of, or the waiver or authorization of any breach or prospective
breach of, any provision of any Related Document or of the relevant Notes to
correct a manifest error or an error which is of a formal, minor or technical
nature or (b) to modify the provisions of the Indenture or the Cash Management
Agreement relating to the timing of movement of Rental Payments or other monies
received or Expenses incurred among the Accounts by the Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent of
each Swap Provider, each provider of a Credit Facility, each Noteholder of the
subclass affected thereby and each Noteholder of any subclass of Notes ranking
senior thereto. In no event shall the provisions set forth in Section 3.08 of
the Indenture relating to the priority of the Expenses, Swap Payments and
payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior Class
of Notes, on behalf of the Holders of all of the Subclass C-1 Notes, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon all present and future Holders of
this Subclass C-1 Note and of any Subclass C-1 Note issued upon the exchange or
in lieu of or upon the refinancing of this Subclass C-1 Note, whether or not
notation of such consent or waiver is made upon this Subclass C-1 Note.
The term "Issuer" as used in this Subclass C-1 Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Subclass C-1 Notes under the Indenture.
The Subclass C-1 Notes are issuable only in bearer form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
<PAGE> 157
C-1-5
This Subclass C-1 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this
Subclass C-1 Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Subclass C-1 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass C-1 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 158
C-1-6
SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS
EVIDENCED BY THIS SUBCLASS C-1 NOTE
The initial principal amount of indebtedness evidenced by this Subclass C-1
Note shall be $_________. The following decreases/increases in the principal
amount evidenced by this Subclass C-1 Note have been made:
Decrease in Increase in Total Principal
Principal Principal Amount of this Notation Made
Date of Amount of Amount of Subclass C-1 Note by or on
Decrease/ this Subclass this Subclass Following such Behalf of
Increase C-1 Note C-1 Note Decrease/Increase Trustee
- --------- ------------- ------------- ------------------ -------------
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
_________ _____________ _____________ __________________ _____________
<PAGE> 159
EXHIBIT D
FORM OF SUBCLASS D-1 FIXED RATE NOTE
<PAGE> 160
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY IN
ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE
144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) IF APPLICABLE) UNDER
THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL
OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AERCO LIMITED OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN
EACH CASE (A) THROUGH (E) ABOVE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE IN THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE ATTACHED HERETO AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
<PAGE> 161
EXHIBIT D
FORM OF SUBCLASS D-1 FIXED RATE NOTE
AERCO LIMITED
8.50% SUBCLASS D-1 NOTE, due July 15, 2023
No. ____
$_________
AERCO LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promised to pay to GPA GROUP PLC, the principal sum of
________________________________________________________ DOLLARS ($_________)
on July 15, 2023 (the "Final Maturity Date") and to pay interest monthly in
arrears on the Outstanding Principal Balance hereof at the rate of 8.50% per
annum (the "Stated Interest Rate") from the date hereof until the Outstanding
Principal Balance hereof is paid or duly provided for, payable on each Payment
Date. Interest on this Subclass D-1 Note for each Interest Accrual Period shall
be calculated on the basis of a 360-day year and one-twelfth of an annual
interest payment and, in the case of a payment other than on an Interest
Payment Date, on the basis of a 360-day year consisting of twelve 30-day months.
This Subclass D-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its "Subclass D-1 Notes, due July 15, 2023", issued under
the Trust Indenture dated as of July 15, 1998 (as amended or supplemented from
time to time, the "Indenture"), between the Issuer and Bankers Trust Company,
as trustee (the "Trustee"). The Indenture also provides for the issuance of
Subclass A-1 and A-2 Notes, Subclass B-1 Notes, Subclass C-1 Notes and
Subclass E-1 Notes (collectively, the "Initial Notes"). All capitalized terms
used in this Subclass D-1 Note and not defined herein shall have the respective
meanings assigned to such terms in the Indenture. Reference is made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights and obligations thereunder of the Issuer, the Trustee and the
Subclass D-1 Noteholders. This Subclass D-1 Note is subject to all terms of the
Indenture.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass D-1 Note prior to the Final Maturity Date on the Payment Dates and in
the amounts specified in the Indenture, subject to the availability of the
Available Collections Amount therefor after making payments entitled to
priority under Sections 3.08 and 3.09 of the Indenture.
The Issuer may redeem all or part of the Outstanding Principal Balance of this
Subclass D-1 Note prior to the Final Maturity Date on the Payment Dates, in the
amounts and under the circumstances specified in the Indenture.
<PAGE> 162
D-1-3
Other than the case of a redemption for taxation reasons specified in the
Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this Subclass D-1 Note (i) prior to July 15, 2003, such amount shall
be redeemed at a Redemption Price equal to the higher of (A) the discounted
present value of the Scheduled Principal Payment Amounts allocable in accordance
with Section 3.09 of the Indenture in respect of, and interest from the
Redemption Date to, but not including, July 15, 2003, plus the product of the
Redemption Premium applicable thereto and the assumed Outstanding Principal
Balance thereof on July 15, 2003, discounted at a rate equal to the Treasury
Yield plus 1.00% and (B) the Outstanding Principal Balance thereof and (ii) on
or after July 15, 2003, such amount shall be redeemed at a Redemption Price
equal to the product of the Redemption Premium applicable thereto and the
Outstanding Principal Balance thereof.
Any amount of Redemption Premium or interest on this Subclass D-1 Note that
is not paid when due shall, to the fullest extent permitted by applicable law,
bear interest at a fluctuating interest rate per annum equal to the Stated
Interest Rate from the date when due until such amount is paid or duly provided
for, payable on the next succeeding Payment Date, subject to the availability of
the Available Collections Amount therefor after making payments entitled to
priority under Section 3.08 of the Indenture.
The indebtedness evidenced by the Subclass D-1 Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims, and this Subclass D-1
Note is issued subject to such provisions. Each Holder of this Subclass D-1
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose.
The maturity of this Subclass D-1 Note is subject to acceleration upon the
occurrence and during the continuance of the Events of Default specified in the
Indenture. The Subclass D-1 Noteholders shall not be permitted to deliver a
Default Notice or to exercise any remedy in respect of any such Event of Default
until all interest and principal on the Class A Notes, the Class B Notes and the
Class C Notes have been paid in full.
This Subclass D-1 Note is and will be secured, on a subordinated basis, by
the collateral pledged as security therefor as provided in the Security Trust
Agreement.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly on each Payment Date commencing on August 17, 1998, to the
Holder hereof, in the manner specified in Section 3.08 of the Indenture, such
Holder's pro rata share (based on the aggregate percentage of the Outstanding
Principal Balance of the Subclass D-1 Notes held by such Holder) of the
aggregate amount distributable to all Holders of Subclass D-1 Notes on such
Payment Date.
All amounts payable in respect of this Subclass D-1 Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the
<PAGE> 163
D-1-4
Holder hereof. The final payment with respect to this Subclass D-1 Note,
however, shall be made only upon presentation and surrender of this Note by the
Noteholder or its agent at the Corporate Trust Office or agency of the Trustee
or Paying Agent specified in the notice given by the Trustee or Paying Agent
with respect to such final payment. At such time, if any, as this subclass D-1
Note is issued in the form of one or more Definitive Registered Notes, payments
on a Payment Date shall be made by check mailed to each Noteholder of such a
Definitive Registered Note on the applicable Record Date at its address
appearing on the Register maintained with respect to Subclass D-1 Notes.
Alternatively, upon application in writing to the Trustee, not later than the
applicable Record Date, by a Noteholder of one or more Definitive Registered
Notes of Subclass D-1 having an aggregate principal amount of not less than
$1,000,000, any such payments shall be made by wire transfer to an account
designated by such Noteholder at a financial institution in New York, New York.
The final payment with respect to any such Definitive Registered Note, however,
shall be made only upon presentation and surrender of such Definitive Registered
Note by the Noteholder or its agent at the Corporate Trust Office or agency of
the Trustee or Paying Agent specified in the notice of such final payment given
by the Trustee or Paying Agent. Any reduction in the principal amount of this
Subclass D-1 Note (or any one or more predecessor Subclass D-1 Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Subclass D-1 Note and of any Subclass D-1 Note issued upon the
exchange or in lieu of or upon the refinancing of this Subclass D-1 Note,
whether or not noted hereon.
The Holder of this Subclass D-1 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass D-1 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority of payment provisions of the
Indenture or as a result of any other mistake of fact or law on the part of the
Cash Manager in making such payment.
This Subclass D-1 Note is issuable only in registered form. A Holder may
transfer this Note only by written application to the Registrar stating the name
of the proposed transferee and otherwise complying with the terms of the
Indenture. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Holder only upon, final acceptance and registration
of the transfer by the Registrar in the Register. When this Subclass D-1 Note is
presented to the Registrar with a request to register the transfer or to
exchange it for an equal principal amount of Subclass D-1 Notes of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met
(including, in the case of a transfer, that such Note is duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and Registrar duly executed by the Holder thereof or by an attorney who
is authorized in writing to act on behalf of the Holder). No service charge
shall be made for any registration of transfer or exchange of this Subclass D-1
Note, but the party requesting such new Note or Notes may be required to pay a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.
Prior to the registration of transfer of this Subclass D-1 Note, the Issuer
and the Trustee may deem and treat the Person in whose name this Subclass D-1
Note (as of the
<PAGE> 164
D-1-5
day of determination or as of such other date as may be specified in the
Indenture) is registered as the absolute owner and Holder hereof for the purpose
of receiving payment of all amounts payable with respect of this Subclass D-1
Note and for all other purposes, and neither the Issuer nor the Trustee shall be
affected by notice to the contrary.
The Indenture permits the amendment or modification of the Indenture and
the Subclass D-1 Notes by the Issuer with the consent of the Holders of a
majority of the Outstanding Principal Balance of all Notes on the date of any
vote of such Holders (voting as a single class); provided that, without the
consent of each Swap Provider and each Holder of any Notes affected thereby, no
such amendment may (i) modify the provisions of the Indenture or the Notes
setting forth the frequency or the currency of payment of, the maturity of, or
the method of calculation of the amount of, any interest, principal and
Redemption Premium, if any, payable in respect of such subclass of Notes, (ii)
reduce the percentage of the aggregate Outstanding Principal Balance of any
subclass of Notes required to approve any amendment or waiver of Section 9.01 of
the Indenture or (iii) alter the manner or priority of payment of any subclass
of Notes (each, a "Basic Terms Modification"). Any such amendment or
modification shall be binding on every Holder hereof, whether or not notation
thereof is made upon this Subclass D-1 Note. The Indenture also permits the
Trustee to agree, without the consent of any Noteholder, (a) to any modification
(other than a Basic Terms Modification) of, or the waiver or authorization of
any breach or prospective breach of, any provision of any Related Document or of
the relevant Notes to correct a manifest error or an error which is of a formal,
minor or technical nature or (b) to modify the provisions of the Indenture or
the Cash Management Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses incurred among the Accounts by the
Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent of
each Swap Provider, each provider of a Credit Facility, each Noteholder of the
subclass affected thereby and each Noteholder of any subclass of Notes ranking
senior thereto. In no event shall the provisions set forth in Section 3.08 of
the Indenture relating to the priority of the Expenses, Swap Payments and
payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holder of Notes
representing a majority of the Outstanding Principal Balance of the Senior Class
of Notes, on behalf of the Holders of all of the Subclass D-1 Notes, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon all present and future Holders of
this Subclass D-1 Note and of any Subclass D-1 Note issued upon the registration
of transfer of, in exchange or in lieu of or upon the refinancing of this
Subclass D-1 Note, whether or not notation of such consent or waiver is made
upon this Subclass D-1 Note.
The term "Issuer" as used in this Subclass D-1 Note includes any successor
to the Issuer under the Indenture.
<PAGE> 165
D-1-6
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Subclass D-1 Notes under the Indenture.
The Subclass D-1 Notes are issuable only in bearer form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Subclass D-1 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this
Subclass D-1 Note shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
<PAGE> 166
D-1-7
IN WITNESS WHEREOF, the Issuer has caused this Subclass D-1 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass D-1 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 167
D-1-8
[FORMS OF] TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s)
assign(s) and transfer(s) unto
Insert Taxpayer Identification No. ________________
______________________________________________________________________________
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________ attorney to transfer said Note on the
books of the Issuer with full power of substitution in the premises.
Date: ________________________________ ________________________________________
Signature of Transferor
NOTE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
<PAGE> 168
EXHIBIT E
FORM OF SUBCLASS E-1 FIXED RATE NOTE
<PAGE> 169
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY IN
ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE
144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) IF APPLICABLE) UNDER
THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE,
RESELL, OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AERCO LIMITED OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE (A) THROUGH (E) ABOVE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
TRANSFER NOTICE ATTACHED HERETO AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
<PAGE> 170
EXHIBIT E
FORM OF SUBCLASS E-1 FIXED RATE NOTE
AERCO LIMITED
20.00% SUBCLASS E-1 NOTE, due July 15, 2023
No._______
$______________________
July 15, 1998
AERCO LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promises to pay to GPA GROUP PLC, the principal sum of
__________________ DOLLARS ($________________) on July 15, 2023 (the "Final
Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof, initially at the rate of 20.00% per annum (subject to
adjustment as discussed below) from the date hereof until the Outstanding
Principal Balance is paid or duly provided for, payable on each Payment Date;
provided, however, that the obligation of the Issuer to pay interest hereon is
subject to the availability of Available Collections therefor after making
payments entitled to priority under Section 3.08 of the Indenture.
Interest on this Subclass E-1 Note in each Interest Accrual Period shall be
calculated on the basis of a 360-day year and one-twelfth of an annual interest
payment and, in the case of a payment other than on a Payment Date, on the basis
of a 360-day year consisting of twelve 30-day months.
This Subclass E-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its "20.00% Subclass E-1 Notes due July 15, 2023", issued
under the Indenture dated as of July 15, 1998 (as amended or supplemented from
time to time, the "Indenture"), among the Issuer and Bankers Trust Company, as
trustee (the "Trustee"). This Indenture also provides for the issuance of
Subclass A-1 Notes, Subclass A-2 Notes, Subclass B-1 Notes, Subclass C-1 Notes
and Subclass D-1 Notes (collectively with the Subclass E-1 Notes, the "Initial
Notes"). All capitalized terms used in this Subclass E-1 Note and note defined
herein shall have the respective meanings assigned to such terms in the
Indenture. Reference is made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights and obligations thereunder of
the Issuer, the Trustee and the Subclass E-1 Noteholders. This Subclass E-1 Note
is Subject to all terms of the Indenture.
<PAGE> 171
E-1-3
Subject as provided below, the amount of interest accruing in respect
of this Subclass E-1 Note on each Payment Date shall be the amount as
referred to above multiplied by the Index (as defined below) applicable to
the month in which such Payment Date falls divided by the Base Index and
calculated to four decimal places. If interest is required to be calculated
for a period not ending on a Payment Date such interest shall be multiplied
by the Index applicable to the month in which such interest accrues divided
by the Base Index and calculated to four decimal places.
"Index" means, subject as provided below, the United States Consumer
Price Index for all Urban Consumers published by the United States
Department of Labor (1982-84 = 100). Any reference to the Index
applicable to a particular month (the "relevant month") shall be
construed as a reference to the Index issued in the month prior to the
relevant month.
"Base Index" means 163 namely the Index issued in June 1998 or such other
value as shall be substituted for this as provided below.
If at any time and from time to time the Index shall be changed by the
substitution of a new base therefor (so that the base of 100 ceases to be
the base for 1982-84 or such other date or month as may already have been
substituted) then with effect from the date or month as from and including
which such substitution takes effect:
(a) the definition of Index shall be deemed to refer to the new date or
month in substitution for 1982-84 (or as the case may be for such
other date or month as may have been substituted); and
(b) the definition of "Base Index" shall be amended in such manner as in
the opinion of the Trustee after consultation with the Issuer is most
appropriate to implement such change.
The Issuer will pay or redeem the Outstanding Principal Balance of this
Subclass E-1 Note prior to the Final Maturity Date on the Payment Dates and in
the amounts specified in the Indenture, subject to the availability of the
Available Collections Amount therefor after making payments entitled to priority
under Sections 3.08 and 3.09 of the Indenture.
The Issuer may redeem all or part of the Outstanding Principal Balance of
this Subclass E-1 Note prior to the Final Maturity Date on the Payment Dates, in
the amounts and under the circumstances specified in the Indenture.
Upon any redemption of any amount of the Outstanding Principal Balance of
this Subclass E-1 Note, such amount shall be redeemed at a Redemption Price
equal to the Outstanding Principal Balance thereof, without premium or penalty.
Any amount of interest on this Subclass E-1 Note that is not paid when due
shall, to the fullest extent permitted by applicable law, accrue and bear
interest at an
<PAGE> 172
E-1-4
interest rate per annum as stated herein, payable on the next succeeding Payment
Date under priority (xxvii) under Section 3.08 of the Indenture, subject to the
availability of the Available Collections Amount therefor after making payments
entitled to priority thereunder.
The indebtedness evidenced by the Subclass E-1 Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims (as defined in the
Indenture), and this Subclass E-1 Note is issued subject to such provisions.
Each Holder of this Subclass E-1 Note, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee his
attorney-in-fact for such purpose.
The maturity of this Subclass E-1 Note is subject to acceleration upon the
occurrence and during the continuance of Events of Default specified in the
Indenture. The Class E Noteholders shall not be permitted to deliver a Default
Notice or to exercise any remedy in respect of any such Event of Default until
all interest and principal on the Subclass A-1 Notes, the Subclass A-2 Notes,
the Subclass B-1 Notes, the Subclass C-1 Notes and the Subclass D-1 Notes have
been paid in full.
This Subclass E-1 Note is and will be secured, on a subordinated basis, by
the collateral pledged as security therefor as provided in the Security
Documents.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly in arrears on each Payment Date commencing on August 17,
1998, to the Holder hereof, in the manner specified in Section 3.08 of the
Indenture, such Holder's pro rata share (based on the aggregate percentage of
the Outstanding Principal Balance of Subclass E-1 Notes held by such Holder) of
the aggregate amount distributable to all Holders of Subclass E-1 Notes on such
Payment Date.
All amounts payable in respect of this Subclass E-1 Note shall be payable
in U.S. dollars in immediately available funds at the Corporate Trust Office of
the Trustee or as otherwise directed in the manner provided in the Indenture to
the Holder hereof. Any reduction in the principal amount of this Subclass E-1
Note (or any one or more predecessor Subclass E-1 Notes) effected by any
payments made on any Payment Date shall be binding upon all future Holders of
this Subclass E-1 Note and of any Subclass E-1 Note issued upon the exchange or
in lieu of or upon the refinancing of this Subclass E-1 Note, whether or not
noted hereon.
The Holder of this Subclass E-1 Note agrees, by acceptance hereof, to pay
over to the Cash Manager any money (including principal, Redemption Premium and
interest) paid to it in respect of this Subclass E-1 Note in the event that the
Cash Manager, acting in good faith, determines subsequently that such monies
were not paid in accordance with the priority of payment provisions of the
Indenture or as a result of any other mistake of fact or law on the part of the
Cash Manager in making such payment.
<PAGE> 173
E-1-5
This Subclass E-1 Note is issuable only in registered form. A Holder may
transfer this Note only by written application to the Registrar stating the name
of the proposed transferee and otherwise complying with the terms of the
Indenture. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Holder only upon, final acceptance and registration
of the transfer by the Registrar in the Register. When this Subclass E-1 Note is
presented to the Registrar with a request to register the transfer or to
exchange it for an equal principal amount of Subclass E-1 Notes of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met
(including, in the case of a transfer, that such Note is duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and Registrar duly executed by the Holder thereof or by an attorney who
is authorized in writing to act on behalf of the Holder). No service charge
shall be made for any registration of transfer or exchange of this Subclass E-1
Note, but the party requesting such new Note or Notes may be required to pay a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.
Prior to the registration of transfer of this Subclass E-1 Note, the Issuer
and the Trustee may deem and treat the Person in whose name this Subclass E-1
Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the absolute owner and Holder
hereof for the purpose of receiving payment of all amounts payable with respect
of this Subclass E-1 Note and for all other purposes, and neither the Issuer nor
the Trustee shall be affected by notice to the contrary.
The Indenture permits the amendment or modification of the Indenture and
the Subclass E-1 Note by the Issuer with the consent of the Holders of a
majority of the Outstanding Principal Balance of all Notes on the date of any
vote of such Holders (voting as a single class); provided that, without the
consent of each Swap Provider and each Holder of any Notes affected thereby, no
such amendment may (i) modify the provisions of the Indenture or the Notes
setting forth the frequency or the currency of payment of, the maturity of, or
the method of calculation of the amount of, any interest, principal and
Redemption Premium, if any, payable in respect of any subclass of Notes,
(ii) reduce the percentage of the aggregate Outstanding Principal Balance of any
subclass of Notes required to approve any amendment or waiver of Section 9.01 of
the Indenture or (iii) alter the manner or priority of payment of such subclass
of Notes (each, a "Basic Terms Modification"). Any such amendment or
modification shall be binding on every Holder hereof, whether or not notation
thereof is made upon this Subclass E-1 Note. The Indenture also permits the
Trustee to agree, without the consent of any Noteholder, (a) to any modification
(other than a Basic Terms Modification) of, or the waiver or authorization of
any breach or prospective breach of, any provision of any Related Document or of
the relevant Notes to correct a manifest error or an error which is of a formal,
minor or technical nature or (b) to modify the provisions of the Indenture or
the Cash Management Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses incurred among the Accounts by the
Cash Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent
of each Noteholder of any subclass affected thereby and each Noteholder of any
subclass of Notes
<PAGE> 174
E-1-6
ranking senior thereto. In no event shall the provisions set forth in Section
3.08 of the Indenture relating to the priority of the Expenses, Swap Payments
and payments under all Credit Facilities be amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior
Class of Notes, on behalf of the Holders of all of the Subclass E-1 Notes, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon all present and future
Holders of this Subclass E-1 Note and of any Subclass E-1 Note issued upon the
registration of transfer of, in exchange or in lieu of or upon the refinancing
of this Subclass E-1 Note, whether or not notation of such consent or waiver is
made upon this Subclass E-1 Note.
Each Holder of this Subclass E-1 Note, by acceptance hereof, appoints and
authorizes GPA Group plc (together with its successors hereunder, the "Class E
Note Representative") to take such action on its behalf and to exercise such
powers and discretion under this Subclass E-1 Note, the Indenture and the other
Related Documents as are delegated to the Class E Note Representative by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Subclass E-1 Note or the Indenture, the Class E Note Representative shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Holders of Class
E Notes (the "Required Holders"), and each Holder of this Subclass E-1 Note, by
acceptance hereof, agrees that such instructions shall be binding upon it and
all Holders of Class E Notes; provided, however, that nothing contained in this
paragraph shall affect in any way the right of the Holder hereof to vote in
favor of taking or refraining from taking any action in respect of, or any
amendment or modification of, this Subclass E-1 Note or the Indenture which, by
the terms of this Subclass E-1 Note or the Indenture, requires the consent of
each Class E Noteholder.
The Class E Note Representative may resign at any time by giving written
notice thereof to each Class E Noteholder, the Trustee and the Security Trustee
and may be removed at any time with or without cause by the Required Holders.
Upon any such resignation or removal, the Required Holders shall have the right
to appoint a successor Class E Note Representative. If no successor Class E
Note Representative shall have been so appointed by the Required Holders, and
shall have accepted such appointment, within 30 days after the retiring Class E
Note Representative's giving of notice of resignation or the Required Holders'
removal of the retiring Class E Note Representative, then the retiring Class E
Note Representative may, on behalf of the Class E Noteholders, appoint a
successor Class E Note Representative, which shall be the Holder at such time
of the largest aggregate principal amount of Class E Notes the Outstanding.
Upon the acceptance of any appointment as Class E Note Representative hereunder
by a successor Class E Note Representative, such successor Class E Note
Representative shall so notify in
<PAGE> 175
E-1-7
writing each Class E Noteholder, the Trustee and the Security Trustee and
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Class E Note Representative hereunder and
under the other Related Documents, and the retiring Class E Note Representative
shall be discharged from its duties and obligations under this Subclass E-1
Note, the Indenture and the other Related Documents.
The Term "Issuer" as used in this Subclass E-1 Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Subclass E-1 Notes under the Indenture.
The Subclass E-1 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
The Subclass E-1 Note shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York including all matters of
construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Subclass E-1 Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
<PAGE> 176
E-1-8
IN WITNESS WHEREOF, the Issuer has caused this Subclass E-1 Note to be
signed manually or by facsimile by its Responsible Officer.
Date: __________ AERCO LIMITED
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass E-1 Notes due July 15, 2023 designated above
and referred to in the within-mentioned Indenture.
Date: ___________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: ________________________________
Authorized Signatory
<PAGE> 177
E-1-9
[FORMS OF] TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s)
assign(s) and transfer(s) unto
Insert Taxpayer Identification No. ________________
______________________________________________________________________________
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________ attorney to transfer said Note on the
books of the Issuer with full power of substitution in the premises.
Date: ________________________________ ________________________________________
Signature of Transferor
NOTE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
<PAGE> 178
FORM OF CERTIFICATE OF TRANSFER
AerCo Limited
22 Grenville Street
St. Helier
Jersey JE4 8PX
Channel Islands
Bankers Trust Company
Four Albany Street
Mail Shop 5091
New York, New York 10006
USA
RE: 20.00% SUBCLASS E-1 NOTES OF AERCO LIMITED
Reference is hereby made to the Indenture, dated as of July 15, 1998 (the
"Indenture"), between AerCo Limited, as issuer (the "Company"), and Bankers
Trust Company, as trustee. Capitalized terms used but not defined herein have
the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $______ in such Note[s] or interests (the "Transfer"), to
_____________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF DEFINITIVE REGISTERED NOTES
PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in
accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Definitive Registered Notes are being transferred to a
Person that the Transferor reasonably believes is purchasing the Definitive
Registered Notes for its own account, or for one or more accounts with respect
to which such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A and such
Transfer is in compliance with any applicable blue sky securities laws of any
state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred Definitive
Registered Notes will be subject to the restrictions on transfer enumerated in
the Private Placement Legend set forth
<PAGE> 179
in the Indenture and applicable to the 144A Global Note and/or printed on the
Definitive Registered Note and otherwise specified in the Indenture and the
Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF DEFINITIVE REGISTERED NOTES
PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to a
person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of Regulation
S under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred Definitive Registered Notes will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend set forth in
the Indenture and applicable to the Regulation S Global Note and/or printed on
the Definitive Registered Note and otherwise specified in the Indenture and the
Securities Act.
3. [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being
effected pursuant to and in accordance with Rule 144 under the Securities Act
and in compliance with the transfer restrictions contained in the Indenture and
any applicable blue sky securities laws of any state of the United States, and
(ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Definitive Registered Notes will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend set forth in the Indenture and applicable to the Global Notes,
on Definitive Registered Notes bearing the Private Placement Legend and in the
Indenture.
4. [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is
being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144 and in
compliance with the transfer restrictions contained in the Indenture and any
applicable blue sky securities laws of any State of the United States and (ii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Definitive Registered Notes will not
be subject to the restrictions on transfer enumerated in the Private Placement
Legend set forth in the Indenture and applicable to the Global Notes or
Definitive Registered Notes bearing the Private Placement Legend and in the
Indenture.
<PAGE> 180
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
1. ________________________________
[Insert Name of Transferor]
2. By: ___________________________
Name:
Title:
Dated: ________________________
<PAGE> 181
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the Definitive Registered
Notes.
2. that the Transferee will hold:
[CHECK ONE]
(a) [ ] Definitive Registered Notes bearing the Private Placement Legend;
(b) [ ] Definitive Registered Notes that do not bear the Private
Placement Legend;
in accordance with the terms of the Indenture.
<PAGE> 182
EXHIBIT F
CONCENTRATION LIMITS
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Value of Portfolio
Lessee Concentration Limits (2)
--------------------------- --------------------
<S> <C>
Single Lessee rated BBB/Baa2 (or the equivalent) or better 15%
Other single Lessees...................................... 10%
Five largest Lessees...................................... 35%
</TABLE>
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Value of Portfolio
Country Concentration Limits (2)
---------------------------- --------------------
<S> <C>
United States............................................. 25%
Countries rated BBB/Baa2 (or the equivalent) or better (1) 20%
Other..................................................... 15%
</TABLE>
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Value of Portfolio
Region Concentration Limits (2)
--------------------------- --------------------
<S> <C>
Developed Market Region (3)............................... 50%
Emerging Market Region (3)................................ 25%
Other (3)................................................. 20% (4)
Asia/Pacific (3).......................................... 55%
</TABLE>
(1) Based on the sovereign foreign currency debt rating assigned by the
Rating Agencies to the country in which a Lessee is habitually based at
the time the relevant Lease is executed.
(2) Percentage to be obtained by dividing the aggregate most recent Appraised
Values of all Aircraft operating or to be operated by Lessees habitually
based in the applicable country or region by the aggregate most recent
Appraised Values of all Aircraft then owned by AerCo Group.
(3) The designations of Emerging Markets and Developed Markets are as
determined and published by Capital International Perspective S.A. from
time to time based on, among other things, gross domestic product levels,
regulation of foreign ownership of assets, the regulatory environment,
exchange controls and perceived investment risk. The current designations
are as set out below:
<PAGE> 183
F-2
<TABLE>
<CAPTION>
Region Country
------ -------
<S> <C>
DEVELOPED MARKETS
Europe.................. European Union (except Greece and Luxembourg), Norway and
Switzerland
North America........... Canada and United States
Pacific................. Australia, Hong Kong, Japan, New Zealand and Singapore
EMERGING MARKETS
Asia.................... China, India, Indonesia, South Korea, Malaysia, Pakistan,
Philippines, Sri Lanka, Taiwan and Thailand
Europe and Middle East.. Czech Republic, Greece, Hungary, Israel, Jordan, Poland,
Russia and Turkey
Latin America........... Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela
OTHER
All other countries (generally those that have small or under-developed capital
markets, including Fiji)
</TABLE>
(4) In addition, within the Other designation, no more than 10% of the most
recent Appraised Value of the Portfolio shall be leased to Lessees
habitually based in "Other" countries rated below BBB/Baa2 (or the
equivalent) and no more than 5% of the most recent Appraised Value of the
Portfolio shall be leased to Lessees habitually based in "Other" countries
in Africa.
PRI Guidelines
(a) Prohibited Countries:
Burma
Cuba
Iran
Iraq
Libya
North Korea
Sudan
Syria
<PAGE> 184
F-3
(b) Countries with respect to which PRI must be procured:
<TABLE>
<S> <C> <C>
Angola Congo Mongolia
Armenia Equatorial Guinea Niger
Azerbaijan Eritrea Sao Tome & Principe
Belarus Ethiopia Somalia
Benin Grenada Sudan
Bhutan Kazakhstan Syria
Cameroon Kirilsati Turkmenistan
Cape Verde Islands Kyrgistan Uzbekistan
Chad Liberia
Comoros Moldova
</TABLE>
<PAGE> 185
EXHIBIT G
AGENTS FOR SERVICE OF PROCESS
<TABLE>
<CAPTION>
Party Jurisdiction Appointed Agent
- ----- ------------ ---------------
<S> <C> <C>
AerCo Limited Jersey Corporation Service Company
375 Hudson Street
New York, NY 10014
U.S.A.
Bankers Trust Company New York Bankers Trust Company
4 Albany Street
10th Floor
New York, NY 10006
U.S.A.
</TABLE>
<PAGE> 186
EXHIBIT H
INSURANCE PROVISIONS
<TABLE>
<S> <C>
Minimum Limits
-----------------
Model (liability cover)
- -----
F100 U.S.$300 million
B737 U.S.$400 million
MD83 U.S.$400 million
A320 U.S.$400 million
A300 U.S.$550 million
B767 U.S.$550 million
B757 U.S.$450 million
B747 U.S.$750 million
DC8 U.S.$450 million
</TABLE>
<PAGE> 187
EXHIBIT I
FORM OF MONTHLY REPORT TO THE ISSUER
AND EACH RATING AGENCY
(i) With respect to each Payment Date,
A. The balances on deposit on the Calculation Date
immediately preceding the prior Payment Date;
B. The aggregate amounts of deposits and withdrawals
between such Calculation Date and the Calculation
Date immediately preceding such Payment Date; and
C. The balances on deposit in the Expense Account,
Collection Account and Lessee Funded Account on the
Calculation Date immediately preceding such Payment
Date.
(ii) Analysis of Expense Account Activity
Balance on the preceding Calculation Date
Net Transfer to the Expense Account from the Collection
Account during the period between prior Calculation Date
and the relevant Calculation Date
Payments during the period between the prior Calculation
Date and the relevant Calculation Date:
(1) Payments on prior Payment Date;
(2) Other payments;
Balance on the relevant Calculation Date
(iii) Analysis of Collection Account Activity
Balance on the preceding Calculation Date;
- Required Expense Amount (including on preceding
Payment Date);
- Net Transfer to Lessee Funded Account during period;
- Collections during period;
- Transfer from the Aircraft Purchase Account;
- Drawings under Credit Facilities;
- Aggregate Note Payments;
- Swap Payments;
<PAGE> 188
I-2
- Repayments of drawings under credit or liquidity
enhancement facilities;
Balance on relevant Calculation Date (separately stating
components of the Liquidity Reserve Amount)
Analysis of current Payment Date distributions
(iv) Payments on the Notes
(a) Floating Rate Notes (by class and, if
applicable, subclass)
- Applicable LIBOR for the
current Interest Accrual Period;
- Applicable Margin for the
current Interest Accrual Period;
- Applicable Interest Rate for
current Interest Accrual Period;
- Interest Amount Payable;
- Step-Up Interest;
- Opening Outstanding Principal Balance;
- Minimum Principal Payment Amount;
- Scheduled Principal Payment Amount;
- Supplemental Principal Payment Amount;
- Redemption Amount;
- amount allocable to principal;
- amount allocable to Premium;
- Closing Outstanding Principal Balance;
(b) Fixed Rate Notes (by class and, if applicable, subclass)
- Interest Amount Payable;
- Opening Outstanding Principal Balance;
- Minimum Principal Payment Amount;
- Scheduled Principal Payment Amount;
- Redemption Amount
- amount allocable to principal;
- amount allocable to Premium;
- Closing Outstanding Principal Balance;
<PAGE> 189
I-3
(v) Floating Rate Note information for next Interest
Accrual Period (by subclass):
Applicable LIBOR;
Applicable Margin;
Applicable Interest Rate
(vi) Payments per $100,000 Initial Outstanding
Principal Balance of Notes (by subclass):
Opening Outstanding Principal Balance;
Total Principal Payments;
Closing Outstanding Principal Balance;
Total Interest;
Total Premium
<PAGE> 190
EXHIBIT J
FORM OF CERTIFICATE OF TRANSFER
AerCo Limited
22 Grenville Street
St. Helier
Jersey
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: Subclass -- Notes due 2023 of AerCo Limited
Reference is hereby made to the Indenture, dated as of July 15, 1998
(the "Indenture"), between AerCo Limited, as issuer (the "Issuer") and
Bankers Trust Company, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $____ in such Note[s] or interests (the "Transfer"), to
__________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS
CORRESPONDING TO THE RULE 144A GLOBAL NOTE OR DEFINITIVE REGISTERED NOTES
PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in
accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Book-Entry Interests or Definitive Registered
Notes are being transferred to a Person that the Transferor reasonably
believes is purchasing the Book-Entry Interests or Definitive Registered
Notes for its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such
Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Any such Transfer of a Book-Entry Interest
in the Regulation S Global Note for Definitive Registered Notes shall only
occur under the circumstances specified in the Indenture. Upon consummation
of the proposed Transfer in accordance with the terms of the
<PAGE> 191
J-2
Indenture, the transferred Book-Entry Interest or Definitive Registered Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Rule 144A Global Note and/or the Definitive
Registered Note and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS
CORRESPONDING TO THE REGULATION S GLOBAL NOTE OR DEFINITIVE REGISTERED NOTES
PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor
and any Person acting on its behalf reasonably believed and believes that
the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore
securities market and neither such Transferor nor any Person acting on its
behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of
the requirements of Rule 904(b) of Regulation S under the Securities Act and
(iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act. Any such Transfer of a
Book-Entry Interest in the Regulation S Global Note for Definitive
Registered Notes shall only occur under the circumstances specified in the
Indenture. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred Book-Entry Interest or
Definitive Registered Note will be subject to the restrictions on Transfer
enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Registered Note and in the Indenture and
the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
_______________________________
[Insert Name of Transferor]
By:____________________________
Name:
Title:
Dated: ____________________ , ______
<PAGE> 192
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] Book-Entry Interests corresponding to the
(i) [ ] Rule 144A Global Note (CUSIP _______), or
(ii) [ ] Regulation S Global Note (CUSIP _______), or
(b) [ ] Definitive Registered Note.
2. that the Transferee will hold:
[CHECK ONE]
(a) [ ] Book-Entry Interests corresponding to the:
(i) [ ] Rule 144A Global Note (CUSIP _______), or
(ii) [ ] Regulation S Global Note (CUSIP _______), or
(b) [ ] Definitive Registered Notes;
in accordance with the terms of the Indenture.
<PAGE> 193
EXHIBIT K
CORE LEASE PROVISIONS
1. Representations and Warranties, etc.
representations and warranties or a legal opinion or such other
comfort acceptable to the lessor as to, without limitation, the
due execution of such lease by the related lessee and the
validity of such lessee's obligations thereunder, due
authorization of such lease and procurement of relevant licenses
and permits in connection therewith;
2. Subleasing
permission to sublease only if the primary lessee thereunder
remains obligated to make payments on such primary lease, except
with respect to the specific classes of sublessees and under the
specific conditions provided in such lease;
3. Permitted Encumbrances
provisions requiring the lessee not to create any Encumbrances
in respect of the aircraft or the related engines, except for
exceptions thereto consistent with the reasonable commercial
practices of leading international aircraft operating lessors,
including Encumbrances not affecting the use or operation of the
aircraft arising in the ordinary course of the lessee's
business;
4. No Right to Sell
the lease shall not permit a lessee to sell any aircraft except,
with respect to an aircraft the subject of a purchase option,
pursuant to an agreement entered into by such lessee prior to
the exercise of such purchase option to sell or otherwise
transfer ownership of such aircraft upon the exercise of such
purchase option;
5. Events of Loss
provisions stipulating that the lease will terminate in the
event of a Total Loss of the relevant aircraft;
6. Return of Aircraft
provisions for redelivery of the relevant aircraft, including,
if applicable, replacement engines and parts, on expiry or
termination of the lease (other than any expiration or
termination coincident with the purchase of the
<PAGE> 194
K-2
relevant aircraft pursuant to exercise of a purchase option by
the relevant lessee or in cases in which such lease provides
for retention of the relevant Aircraft by the lessee or for
delivery to a third party), specifying the required return
condition and any obligation upon the Lessee to remedy or
compensate the lessor, directly or indirectly, for any material
deviations from such return condition, in each case considering
the other terms of the relevant lease and to the extent
consistent with the reasonable commercial practices of leading
international aircraft operating lessors;
7. Termination Events
provisions setting forth the conditions under which the Lessor
may terminate a lease and repossess the relevant aircraft, at
any time after the expiration of any agreed grace period or
remedy period, in each case consistent with the reasonable
commercial practices of leading international aircraft operating
lessors;
8. Assignment
provisions prohibiting the assignment by the Lessee of any
benefits or obligations under the lease to any Person, subject
to exceptions consistent with the reasonable commercial
practices of leading international aircraft operating lessors;
9. Disclaimer of Conditions or Warranty
provisions acknowledging that when the Lessee gives formal
notice of acceptance of the relevant aircraft, it takes delivery
of such aircraft with no condition, warranty or representation
of any kind having been given by or on behalf of the lessor in
respect of such aircraft, except as to matters expressly set
forth in the lease;
10. Net Lease
provisions stating the Lessee's obligation to make rental
payments is absolute and unconditional under any and all
circumstances and regardless of other events or similar
provisions.
<PAGE> 195
APPENDIX A
CLASS PERCENTAGES
See Tab No. 14.
<PAGE> 196
APPENDIX B
TARGET PRINCIPAL BALANCES
See Tab No. 14.
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into July 15, 1998, between AERCO LIMITED, a Jersey limited liability company
(the "ISSUER"), and MORGAN STANLEY & CO. INTERNATIONAL LIMITED (the
"REPRESENTATIVE").
This Agreement is made pursuant to the Purchase Agreement, dated as of
June 23, 1998 (the "PURCHASE AGREEMENT"), among the Issuer and the
Representative, on behalf of itself and the several other initial purchasers
named in Schedule I thereto (the "INITIAL PURCHASERS"), which provides for the
issue and sale by the Issuer to the Initial Purchasers of $800,000,000
aggregate principal amount of the Issuer's notes in the class and subclass
designations and in the respective aggregate principal amounts set forth in
Schedule I thereto (the "NOTES"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuer has agreed to provide to the
Initial Purchasers and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"CLOSING DATE" shall mean the Closing Date as defined in the
Purchase Agreement.
"ISSUER" shall have the meaning set forth in the preamble and shall
also include the Issuer's successors.
"EXCHANGE OFFER" shall mean the exchange offer by the Issuer of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
1
<PAGE> 2
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form F-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"EXCHANGE NOTES" shall mean the subclasses of securities issued by the
Issuer under a supplement to the Indenture, containing terms identical to
the subclasses of Notes (except that (i) interest thereon shall accrue from
the last date on which interest was paid on the Notes or, if no such
interest has been paid, from July 15, 1998, and (ii) the interest rate per
annum on each subclass of the Exchange Notes shall be the applicable
interest rate set forth in the form of such subclass of Notes without
giving effect to any increase in such interest rate pursuant to the
definition of "Stated Interest Rate" contained in the Indenture) and to be
offered to Holders of Registrable Notes in exchange for Registrable Notes
pursuant to the Exchange Offer.
"HOLDER" shall mean the Representative, for so long as it owns any
Registrable Notes, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes
under the Indenture; provided that for purposes of Sections 4 and 5 of
this Agreement, the term "Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"INDENTURE" shall mean the Indenture relating to the Notes dated as of
July 15, 1998 between the Issuer and Bankers Trust Company, as trustee, as
the same may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided
that whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable Notes
held by the Issuer shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage
or amount.
"REPRESENTATIVE" shall have the meaning set forth in the preamble.
"PERSON" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as
2
<PAGE> 3
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration
Statement, and by all other amendments and supplements to such
prospectus, and in each case including all material incorporated by
reference therein.
"REGISTRABLE NOTES" shall mean the Notes; provided, however, that
the Notes shall cease to be Registrable Notes (i) when a Registration
Statement with respect to such Notes shall have been declared effective
under the 1933 Act and such Notes shall have been disposed of pursuant to
such Registration Statement, (ii) when such Notes have been sold to the
public pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the 1933 Act or (iii) when such Notes shall have
ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Issuer with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association
of Securities Dealers, Inc. registration and filing fees, (ii) all fees
and expenses incurred in connection with compliance with state securities
or "blue sky" laws (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with "blue sky"
qualification of any of the Exchange Notes or Registrable Notes), (iii)
all expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to
the performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and disbursements relating to the qualification
of the Indenture under applicable securities laws, (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the fees and
disbursements of counsel for the Issuer and, in the case of a Shelf
Registration Statement, the fees and disbursements of one counsel for the
Holders which counsel shall be counsel for the Initial Purchasers and
(viii) the fees and disbursements of the independent public accountants
of the Issuer, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, but excluding fees and expenses of counsel to the
underwriters (other than fees and expenses set forth in clause (ii)
above) or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of
Registrable Notes by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement of
the Issuer that covers any of the Exchange Notes or Registrable Notes
pursuant to the provisions of this Agreement and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
3
<PAGE> 4
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Issuer pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Notes (but no other
securities unless approved by the Holders whose Registrable Notes are
covered by such Shelf Registration Statement) on an appropriate form
under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TRUSTEE" shall mean the trustee with respect to the Notes under the
Indenture.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
registration in which Registrable Notes are sold to an Underwriter (as
hereinafter defined) for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Issuer shall use its best efforts
to cause to be filed an Exchange Offer Registration Statement covering the
offer by the Issuer to the Holders to exchange all of the Registrable Notes for
Exchange Notes and to have such Registration Statement remain effective until
the closing of the Exchange Offer. The Issuer shall commence the Exchange
Offer promptly after the Exchange Offer Registration Statement has been
declared effective by the SEC and use its best efforts to have the Exchange
Offer consummated not later than 60 days after such effective date. The Issuer
shall commence the Exchange Offer by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in addition to
such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Notes validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period
of not less than 20 business days commencing from the date such notice is
mailed) (the "EXCHANGE DATES");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
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(iv) that Holders electing to have a Registrable Security exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal,
to the institutions and at the addresses (located in the Borough of
Manhattan, The City of New York and in Luxembourg) specified in the
notice prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending to
the applicable institution and at the address (located in either the
Borough of Manhattan, The City of New York or Luxembourg) specified in
the notice a telegram, telex, facsimile transmission or letter setting
forth the name of such Holder, the principal amount of Registrable Notes
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Notes exchanged.
As soon as practicable after the last Exchange Date, the Issuer shall:
(i) accept for exchange Registrable Notes or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes or portions thereof so accepted for
exchange by the Issuer and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, Exchange Notes equal in principal
amount to the principal amount of the Registrable Notes surrendered by
such Holder.
The Issuer shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Issuer shall inform the
Representative of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Representative shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Notes in the Exchange Offer.
(b) In the event that (i) the Issuer determines that the Exchange Offer
Registration provided for in Section 2(a) above is not available or may not be
consummated as soon as practicable after the last Exchange Date because it
would violate applicable law or the applicable interpretations of the Staff of
the SEC, (ii) the Exchange Offer is not for any other reason consummated by the
date that is 270 days after the Closing Date or (iii) the Exchange Offer has
been completed and in the opinion of counsel for the Initial Purchasers a
Registration Statement must be filed and a Prospectus must be delivered by the
Representative in connection with any offering or sale of Registrable Notes,
the Issuer shall use its best efforts to cause to be filed as soon as
practicable after such determination, date or notice of such opinion of counsel
is given to the Issuer, as the case may be, a Shelf
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<PAGE> 6
Registration Statement providing for the sale by the Holders of all of the
Registrable Notes and to have such Shelf Registration Statement declared
effective by the SEC. The Issuer agrees to use its best efforts to keep the
Shelf Registration Statement continuously effective until the second
anniversary of the Closing Date or such shorter period that will terminate when
all of the Registrable Notes covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement. The Issuer further
agrees to supplement or amend the Shelf Registration Statement if required by
the rules, regulations or instructions applicable to the registration form used
by the Issuer for such Shelf Registration Statement or by the 1933 Act or by
any other rules and regulations thereunder for shelf registration or if
reasonably requested by a Holder with respect to information relating to such
Holder, and to use its best efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable as soon as
thereafter practicable. The Issuer agrees to furnish to the Holders of
Registrable Notes copies of any such supplement or amendment promptly after its
being used or filed with the SEC.
(c) The Issuer shall pay all Registration Expenses in connection with the
registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay
all underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of such Holder's Registrable Notes pursuant to the
Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
offering of Registrable Notes pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume. As provided for in the Indenture,
from and after the date that is 270 days after the Closing Date, the interest
rate on each subclass of Notes will be increased by 0.50% per annum until the
completion of an Exchange Offer or the date a Shelf Registration Statement is
declared effective by the SEC, whereupon the interest rate on each subclass of
Notes will permanently decrease to the applicable interest rate provided for
such subclass of Note.
(e) Without limiting the remedies available to the Representative and the
Holders, the Issuer acknowledges that any failure by the Issuer to comply with
its obligations under Section 2(a) and Section 2(b) hereof may result in
material irreparable injury to the Representative or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Representative or any Holder may obtain such relief as may be required to
specifically enforce the Issuer's obligations under Section 2(a) and Section
2(b) hereof.
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<PAGE> 7
3. Registration Procedures.
In connection with the obligations of the Issuer with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Issuer shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by
the Issuer and (y) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Notes by the selling Holders
thereof and (z) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and use its best efforts to
cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period and cause
each Prospectus to be supplemented by any required prospectus supplement
and, as so supplemented, to be filed pursuant to Rule 424 under the 1933
Act; to keep each Prospectus current during the period described under
Section 4(3) and Rule 174 under the 1933 Act that is applicable to
transactions by brokers or dealers with respect to the Registrable Notes
or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, to counsel for the Representative, to counsel for the
Holders and to each Underwriter of an Underwritten Offering of
Registrable Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Notes; and the Issuer consents to the use
of such Prospectus and any amendment or supplement thereto in accordance
with applicable law by each of the selling holders of Registrable Notes
and any such Underwriters in connection with the offering and sale of the
Registrable Notes covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in accordance with
applicable law;
(d) use its best efforts to register or qualify the Registrable
Notes under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC, to cooperate with
such Holders in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such Holder to consummate the disposition in each such jurisdiction of
such Registrable Notes owned by such Holder; provided, however, that the
Issuer shall
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<PAGE> 8
not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general consent to
service of process or (iii) subject itself to taxation in any such
jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes, counsel for the Holders and counsel for the
Representative promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Registration Statement has
become effective and when any post-effective amendment thereto has been
filed and becomes effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes
covered thereby, the representations and warranties of the Issuer
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to the offering cease to be
true and correct in all material respects or if the Issuer receives any
notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event during the
period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related Prospectus
untrue in any material respect or which requires the making of any
changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading and (vi) of any determination by the
Issuer that a post-effective amendment to a Registration Statement would
be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment and provide immediate notice to each Holder of
the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and
not bearing any restrictive legends and enable such Registrable Notes to
be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders may
reasonably request at least two business days prior to the closing of any
sale of Registrable Notes;
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<PAGE> 9
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use its best efforts to
prepare and file with the SEC a supplement or post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes,
such Prospectus will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Issuer agrees to notify the Holders to suspend use of
the Prospectus as promptly as practicable after the occurrence of such an
event, and the Holders hereby agree to suspend use of the Prospectus
until the Issuer has amended or supplemented the Prospectus to correct
such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Representative and its counsel (and, in the case of a
Shelf Registration Statement, the Holders and their counsel) and make
such of the representatives of the Issuer as shall be reasonably
requested by the Representative or its counsel (and, in the case of a
Shelf Registration Statement, the Holders or their counsel) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment
of or supplement to a Registration Statement or a Prospectus or any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Representative and its counsel
(and, in the case of a Shelf Registration Statement, the Holders and
their counsel) shall not have previously been advised and furnished a
copy or to which the Representative or its counsel (and, in the case of a
Shelf Registration Statement, the Holders or their counsel) shall object;
(k) obtain a CUSIP number and such other identification numbers as
may be necessary for all Exchange Notes or Registrable Notes, as the case
may be, not later than the effective date of a Registration Statement;
(l) use its best efforts to list the Exchange Notes, if any, on the
Luxembourg Stock Exchange not later than the Effective Date of an Exchange
Offer Registration Statement;
(m) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration
of the Exchange Notes or Registrable Notes, as the case may be, cooperate
with the Trustee and the Holders to effect such changes to the Indenture
as may be required for the Indenture to be so qualified in accordance with
the terms of the TIA and execute, and use its best efforts to cause the
Trustee to execute, all documents as may be required to
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<PAGE> 10
effect such changes and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so qualified in a timely
manner;
(n) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable Notes,
any Underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, all financial
and other records, pertinent documents and properties of the Issuer, and
cause the respective officers, directors and employees of the Issuer to
supply all information reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with a Shelf
Registration Statement;
(o) in the case of a Shelf Registration, use its best efforts to
cause all Registrable Notes to be listed on any securities exchange or
any automated quotation system on which similar securities issued by the
Issuer are then listed if requested by the Majority Holders, to the
extent such Registrable Notes satisfy applicable listing requirements;
(p) use its best efforts to cause the Exchange Notes or Registrable
Notes, as the case may be, to be rated by Standard Poor's Ratings Group,
Moody's Investors Service, Inc. and Duff & Phelps Credit Rating Co. or
two other nationally recognized statistical rating organizations (as such
term is defined in Rule 436(g)(2) under the 1933 Act);
(q) if reasonably requested by any Holder of Registrable Notes
covered by a Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with
respect to such Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such Prospectus supplement
or such post-effective amendment as soon as the Issuer has received
notification of the matters to be incorporated in such filing; and
(r) in the case of a Shelf Registration, enter into such customary
agreements and take all such other actions in connection therewith
(including those requested by the Holders of a majority of the
Registrable Notes being sold) in order to expedite or facilitate the
disposition of such Registrable Notes including, but not limited to, an
Underwritten Offering and in such connection, (i) to the extent possible,
make such representations and warranties to the Holders and any
Underwriters of such Registrable Notes with respect to the business of
the Issuer and its subsidiaries, the Registration Statement, Prospectus
and documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) obtain opinions of counsel
to the Issuer (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders and such Underwriters and
their respective counsel) addressed to each selling Holder and
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Underwriter of Registrable Notes, covering the matters customarily
covered in opinions requested in underwritten offerings, (iii) obtain
"cold comfort" letters from the independent certified public accountants
of the Issuer (and, if necessary, any other certified public accountant
of any subsidiary of the Issuer, or of any business acquired by the
Issuer for which financial statements and financial data are or are
required to be included in the Registration Statement) addressed to each
selling Holder and Underwriter of Registrable Notes, such letters to be
in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount of the
Registrable Notes being sold or the Underwriters, and which are
customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Issuer
made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Issuer may require each
Holder of Registrable Notes to furnish to the Issuer such information regarding
the Holder and the proposed distribution by such Holder of such Registrable
Notes as the Issuer may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Issuer of the happening of any event of the
kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Notes pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Issuer, such Holder will deliver to the Issuer (at its expense) all copies
in its possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Notes current at the
time of receipt of such notice. If the Issuer shall give any such notice to
suspend the disposition of Registrable Notes pursuant to a Registration
Statement, the Issuer shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the
number of days during the period from and including the date of the giving of
such notice to and including the date when the Holders shall have received
copies of the supplemented or amended Prospectus necessary to resume such
dispositions. The Issuer may give any such notice only twice during any 365
day period and any such suspensions may not exceed 30 days for each suspension
and there may not be more than two suspensions in effect during any 365 day
period.
The Holders of Registrable Notes covered by a Shelf Registration Statement
who desire to do so may sell such Registrable Notes in an Underwritten
Offering. In any such Underwritten Offering, the investment banker or
investment bankers and manager or managers (the "UNDERWRITERS") that will
administer the offering will be selected by the Majority Holders of the
Registrable Notes included in such offering.
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4. Participation of Broker-Dealers in Exchange Offer.
(a) The Issuer shall require each holder of Notes who wishes to exchange
any such Notes for Exchange Notes in the Exchange Offer to represent that (i)
it is neither an affiliate of the Issuer nor a broker-dealer tendering Notes
acquired directly from the Issuer for its own account, (ii) any Exchange Notes
to be received by it are being acquired in the ordinary course of its business
and (iii) at the time of commencement of the Exchange Offer, it has no
arrangement with any person to participate in a distribution (within the
meaning of the 1933 Act) of the Exchange Notes.
(b) The Staff of the SEC has taken the position that any broker-dealer
that receives Exchange Notes for its own account in the Exchange Offer in
exchange for Notes that were acquired by such broker-dealer as a result of
market-making or other trading activities (a "PARTICIPATING BROKER-DEALER"), may
be deemed to be an "underwriter" within the meaning of the 1933 Act and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Notes.
The Issuer understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means
by which Participating Broker-Dealers may resell the Exchange Notes, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Notes owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Notes for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of this
Agreement, the Issuer agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be reasonably requested by the Representative or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Notes by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Issuer shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as
would otherwise be contemplated by Section 3(i), for a period exceeding
180 days after the last Exchange Date (as such period may be extended
pursuant to the penultimate paragraph of Section 3 of this Agreement) and
Participating Broker-Dealers shall not be authorized by the Issuer to
deliver and shall not deliver such Prospectus after such period in
connection with the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set forth
in Section 3 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Staff of the SEC or the 1933
Act and the rules and
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regulations thereunder, will be in conformity with the reasonable request
to the Issuer by the Representative or with the reasonable request in
writing to the Issuer by one or more broker-dealers who certify to the
Representative and the Issuer in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in
connection with such application of the Shelf Registration procedures set
forth in Section 3 to an Exchange Offer Registration, the Issuer shall be
obligated (x) to deal only with one entity representing the Participating
Broker-Dealers, which shall be the Representative unless it elects not to
act as such representative, (y) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which shall be
counsel to the Representative unless such counsel elects not to so act
and (z) to cause to be delivered only one, if any, "cold comfort" letter
with respect to the Prospectus in the form existing on the last Exchange
Date and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (i) above.
(c) The Representative shall have no liability to the Issuer or any Holder
with respect to any request that it may make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) The Issuer agrees to indemnify and hold harmless the Representative,
each Holder and each person, if any, who controls the Representative or any
Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of
the 1934 Act, or is under common control with, or is controlled by, the
Representative or any Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Representative, any Holder or any such controlling
or affiliated person in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
thereto) pursuant to which Exchange Notes or Registrable Notes were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Issuer shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to an Initial
Purchaser or any Holder furnished to the Issuer in writing by the
Representative or any selling Holder expressly for use therein. In connection
with any Underwritten Offering permitted by Section 3, the Issuer will also
indemnify the Underwriters, if any, selling brokers, dealers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of the Securities Act and the Exchange Act) to the same
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extent as provided above with respect to the indemnification of the Holders, if
requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuer, the Representative and the other selling Holders, and each
of their respective trustees, directors, officers who sign the Registration
Statement and each Person, if any, who controls the Issuer, the Representative
and any other selling Holder within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing
indemnity from the Issuer to the Representative and the Holders, but only with
reference to information relating to such Holder furnished to the Issuer in
writing by such Holder expressly for use in any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such 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 indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and 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 indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Representative and all persons,
if any, who control the Representative within the meaning of either Section 15
of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for the Issuer, its
directors, its officers who sign the Registration Statement and each person, if
any, who controls the Issuer within the meaning of either such Section and (c)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Holders and all persons, if any, who control any Holders within
the meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving the Representative and
persons who control the Representative, such firm shall be designated in writing
by the Representative. In such case involving the Holders and such persons who
control Holders, such firm shall be designated in writing by the Majority
Holders. In all other cases, such firm shall be designated by the Issuer. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such
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settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which such indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph (b)
of this Section 4 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, 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 in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Issuer and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuer or by the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective number of Registrable Notes of such Holder that
were registered pursuant to a Registration Statement.
(e) The Issuer and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Notes were
sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Representative, any Holder
15
<PAGE> 16
or any person controlling the Representative or any Holder, or by or on behalf
of the Issuer, its officers or directors or any person controlling the Issuer,
(iii) acceptance of any of the Exchange Notes and (iv) any sale of Registrable
Notes pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer has not entered into, and on
or after the date of this Agreement will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuer's other issued
and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Issuer has obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding Registrable Notes
affected by such amendment, modification, supplement, waiver or consent;
provided, however, that no amendment, modification, supplement, waiver or
consents to any departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder
to the Issuer by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is, with respect to the
Representative, the address set forth in the Purchase Agreement; and (ii) if to
the Issuer, initially at the Issuer's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
16
<PAGE> 17
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms of the Purchase Agreement. If any transferee of any
Holder shall acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Notes such
person shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement and such person shall
be entitled to receive the benefits hereof. The Representative (in its
capacity as Representative) shall have no liability or obligation to the Issuer
with respect to any failure by a Holder to comply with, or any breach by any
Holder of, any of the obligations of such Holder under this Agreement.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuer, on the one
hand, and the Representative, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders
hereunder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
(i) Severability. In the event that any one or more of the provisions
17
<PAGE> 18
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AERCO LIMITED
By: /s/ Frederick W. Bradley Jr.
_____________________________________
Name: Frederick W. Bradley, Jr.
Title: Director
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
By: /s/ C. Scott Peterson
________________________________________
Name: C. Scott Peterson
Title: Managing Director
18
<PAGE> 1
EXHIBIT 9.1
Dated 3rd June 1998
MOURANT & CO. TRUSTEES LIMITED
=====================================
INSTRUMENT OF TRUST
declaring the
AERCO HOLDING TRUST
=====================================
Mourant du Feu & Jeune,
22 Grenville Street,
St. Helier,
Jersey, JE4 8PX,
Channel Islands.
Tel: (01534) 609000
Fax: (01534) 609333
<PAGE> 2
THIS INSTRUMENT OF TRUST is made the 3rd day of June one thousand nine hundred
and ninety-eight BY MOURANT & CO. TRUSTEES LIMITED of 22 Grenville Street, St.
Helier, Jersey, Channel Islands.
WHEREAS:
(A) Property specified in the Schedule (hereinafter called the Original
Property) has or will be paid and transferred to the Trustees or otherwise
placed under their control to the intent that they should hold it upon the
trusts and in the manner hereinafter declared.
(B) Further money investments or other property may be paid or transferred to or
otherwise placed under the control of the Trustees to be held upon the trusts
hereof.
(C) For the purposes of identification this Trust shall be known as the AerCo
Holding Trust or by such other name as the Trustees may from time to time in
their discretion declare to be the name of this Trust.
NOW THIS INSTRUMENT WITNESSES as follows:-
1. The proper law of this Trust is the law of the Island of Jersey
notwithstanding that one or more of the Trustees may from time to time be
resident or domiciled elsewhere than in the Island of Jersey.
2. (1) In this Instrument where the context so admits the expressions
hereinafter defined shall have the meanings thereby assigned to them
respectively that is to say:-
(a) AerCo means AerCo Limited a company to be incorporated in the Island
of Jersey;
2
<PAGE> 3
(b) charitable means exclusively charitable according to the laws of the Island
of Jersey for the time being in force.
(c) charitable purposes means purposes which are charitable and which are to be
or may be carried into effect in the Island of Jersey by a corporation
company association society trust or other institution formally exempted
from the payment of Income Tax in Jersey under Article 115(a) of the Income
Tax (Jersey) Law 1961 as amended.
(d) charity means:
(i) a corporation company association society or other institution
established for charitable purposes;
(ii) a trust established for charitable purposes.
(e) instrument includes any document executed in the manner required by the law
of the Island of Jersey or by the law of the place where the same was
executed.
(f) Trustees means the trustees for the time being and from time to time of
this Trust.
(g) Trust Fund means:
(i) the Original Property;
(ii) all other money investments or other property which may hereafter be
transferred or paid to or into the control of or
3
<PAGE> 4
otherwise vested in and accepted by the Trustees as additions
to the Trust Fund;
(iii) any accumulations made in pursuance of the power hereinafter
contained; and
(iv) the property from time to time representing the said property
additions and accumulations.
(2) Words importing the singular shall include the plural and the
masculine gender shall include the feminine and the neuter and vice versa
in each case and words importing persons shall include bodies of persons
whether corporate or unincorporate.
(3) Reference to Clauses and the Schedule are, unless the context requires
otherwise, references to clauses of and the schedule to this instrument.
3. The Trustees shall stand possessed of the Trust Fund UPON TRUST as to the
investments or other property other than money in their discretion either to
permit the same to remain as invested or to sell or convert into money all or
any of such investments or other property and UPON TRUST as to money with a like
discretion to invest the same in their name or under their control in any of the
investments authorised hereunder with power at a like discretion from time to
time to vary or transpose any such investments for others of a nature authorised
hereunder.
4. The Trustees shall stand possessed of the Trust Fund upon with and subject
to the trusts powers and provisions herein contained or imposed by law of and
concerning the same and the Trustees shall have the right at any times to
accept such additional money investments or other property as may be paid
transferred to or otherwise placed under their control by any persons by gift
inter vivos by will or under the provision of any other trust or otherwise to
be held upon the trusts hereof.
4
<PAGE> 5
5. The Trustees shall hold the Trust Fund and the income thereof UPON TRUST to
pay transfer or apply all or part thereof to or for the benefit of such
charities and charitable purposes as the Trustees shall in their discretion
determine and failing such determination UPON TRUST for charity generally.
6. Subject thereto the Trustees shall have power to accumulate all or any part
of the income of the Trust Fund from time to time or at any time or for periods
continuous or discontinuous as the Trustees may in their discretion think fit
and shall hold any accumulations so made as part of the Trust Fund.
7. The Trustees shall be discharge from any further liability in respect of
any part of the Trust Fund which is paid or transferred to or applied for the
benefit of any charity or charitable purpose.
8. Where a certificate is given by or on behalf of the directors of AerCo that
it is in the best commercial interests of AerCo in connection with a
procurement of finance for the purposes of undertaking the business of AerCo or
otherwise that the Trustees as shareholders of AerCo pass resolutions for the
purpose of making specified amendments to the Memorandum or Articles of
Association of AerCo and/or enter into any agreements with or give any
undertaking to any person relating to amendments to the Memorandum or Articles
of Association of AerCo and/or restricting in any way the exercise of any of
the rights, powers or discretions of the Trustees to sell transfer or otherwise
dispose of their shares in AerCo or any of them and/or to vote in respect of
any such shares and/or requiring the exercise of their voting rights in a
specified manner such certificate shall be conclusive that to do so is in the
best commercial interests of AerCo and the Trustees shall rely thereon without
enquiry.
9. Subject always to the trusts hereinbefore declared the Trustees shall in
relation to the trust property have all the same powers as a natural person
acting as a beneficial owner thereof and without prejudice thereto and all
statutory powers and immunities have the powers and immunities set out herein
it being provided that the Trustees shall not exercise any of their
5
<PAGE> 6
powers so as to conflict with the beneficial provisions of this Trust or to
infringe any restrictions imposed herein upon the exercise of any powers.
10. (a) The Original Property shall be applied by the Trustees to acquiring
ninety five per cent of the issued share capital of AerCo but subject
thereto any moneys requiring investment hereunder may be invested in
or upon any such investments of whatsoever nature and wheresoever
situate and whether producing income or not (including where
permissible by law the purchase of any immovable or movable property
whatsoever or any interest therein) as the Trustees shall in their
discretion think fit.
(b) Subject to and without prejudice to Clause 9 the Trustees shall have
the following powers:-
(1) to employ and pay at the expense of the capital or income of the
Trust Fund any agent in any part of the world and whether a
solicitor advocate attorney banker accountant stockbroker or
other agent to transact any business or do any act required to be
transacted or done in the execution of the trusts hereof
including the receipt and payment of money and the execution of
documents;
(2) to determine as the Trustees shall consider just and the law may
permit whether any moneys for the purposes of this Trust be
considered as capital or income of the Trust Fund and whether out
of the capital or income any taxes expenses outgoings or losses
shall or ought to be paid or borne;
(3) in the event of any probate succession estate or other duties or
fees or of any taxes upon capital income or wealth or of any
other taxes of whatsoever nature and wheresoever arising becoming
payable in the
6
<PAGE> 7
Island of Jersey or in any other parts of the world in respect of the
Trust Fund or any parts thereof or in respect of any property
transferred by or to or under the control of the Trustees or any
beneficiary under this Trust to pay all or any part of such duties fees
and taxes out of the Trust Fund and to have entire discretion as to the
time and manner in which the said duties fees and taxes shall be paid
(whether or not any such payment shall be capable of being enforced by
law) and no person interested under this Trust shall be entitled to
make any claim whatsoever against the Trustees by reason of them making
such payment;
(4) to invest or hold or allow to remain in the name or under the control
of some or one only of the Trustees or of any person or corporation as
nominee of the Trustees the whole or such part of the Trust Fund as the
Trustees shall in their discretion think fit;
(5) at any times and in any parts of the world and either alone or jointly
with any other persons to form or incorporate or cause to be formed or
incorporated or to acquire or cause to be acquired any company or
corporation aggregate whether or not with limited liability and with
such objects powers rules articles and regulations as the Trustees in
their discretion may think fit and to vary or amend any of such objects
powers rules articles and regulations or if the Trustees shall think
fit as aforesaid to effect the reconstruction of any such company or
corporation or its amalgamation with some other body or to put it into
liquidation;
(6) to promote or concur in the winding up dissolution or liquidation of
any company in which they are interested as holders of shares or other
securities and accept in satisfaction of all or any of their rights
therein
7
<PAGE> 8
a distribution in specie of the assets of any such company and have power
thereafter to hold and carry on business with such assets either alone or
in conjunction with any other persons whatsoever and wheresoever;
(7) to borrow or raise money or enter into any guarantees for or in connection
with any of the purposes of this Trust;
(8) to give all such undertakings and enter into such contracts and incur all
such obligations relating to the Trust Fund or any parts thereof as the
Trustees shall in their discretion think fit;
(9) to assign pledge charge mortgage hypothecate or otherwise encumber either
in the Island of Jersey or elsewhere the whole or any parts of the Trust
Fund by way of security for any borrowing or guarantee or other obligation
made given or incurred by the Trustees in connection with this Trust;
(10) to institute and defend proceedings at law and to proceed to the final end
and determination thereof or compromise the same as the Trustees shall
consider advisable;
(11) to act or to nominate one or more persons to act as director or other
officer or employee of any company in which any part of the Trust Fund may
be invested either in the Island of Jersey or elsewhere and to retain any
fees or other remuneration received in respect of any such directorship
office or employment notwithstanding that it is held by virtue of votes
attaching to the Trustees holding any shares or stock in such company and
provided always that this paragraph shall be construed subject to the next
following paragraph;
8
<PAGE> 9
(12) if the Trust Fund shall include any shares or other interests in a company
the ownership of which gives to them the right in any circumstances to control
the affairs of such company or of any of its subsidiaries the Trustees shall be
under no liability or duty to appoint any representative to the board of
directors of such company or of any of its subsidiaries and further shall have
no responsibility to enquire into oversee or take part in the management or
affairs or business of such company or any of its subsidiaries and in the event
that any representative of the Trustees as aforesaid is appointed to the board
of directors of such company or any of its subsidiaries the provisions of Clause
13 hereof shall apply both to the Trustees and to any such representative,
provided however that this exemption from liability shall not apply where the
Trustees do in fact appoint all the members to any such board of directors
(whether or not they have such right to appoint);
(13) to give proxies and powers of attorney (with or without powers of
substitution) for voting or acting on behalf of the Trustees in relation to the
Trust Fund or any part thereof;
(14) from time to time to employ and if the Trustees shall in their discretion
think fit act upon the advice of an investment adviser and the Trustees shall
not be responsible for any loss occasioned by reason of their having acted or
failed to act upon advice received from any such adviser;
(15) to exercise all voting rights appertaining to the Trust Fund or any parts
thereof as the Trustees shall in their discretion think fit; and
9
<PAGE> 10
(16) to lend any moneys forming part of the Trust Fund to or for the
benefit of any charity or charitable purpose with or without
security and upon such terms as the Trustees shall in their
discretion think fit.
11. The Trustees shall not be bound to maintain a balance between income and
capital nor shall they be under any obligation to diversify the investments in
the Trust Fund.
12. The Trustees shall have power from time to time revocably or irrevocably
to release or to any extent to restrict the future exercise of any of their
powers notwithstanding the fiduciary nature thereof.
13. In the purported execution of the trusts and powers hereof no Trustee
shall be liable for any loss to the Trust Fund arising in consequence of the
failure depreciation or loss of any investments made in good faith or by reason
of any mistake or omission made in good faith or of any other matter or thing
except fraud wilful misconduct or gross negligence on the part of the Trustee
who is sought to be made liable.
14. (1) The power of appointing new or additional trustees of this Trust shall
be vested in the Trustees or the personal representative or the
liquidator of the last remaining Trustee and such power shall extend
to the appointment of new trustees in place of any Trustee dying or
resigning his trusteeship and also to the appointment of additional
trustees up to any number subject to such limit (if any) as may for
the time being be imposed by law but so that any person whether an
individual or a body corporate may be appointed and if appointed may
act as a new or additional trustee of this Trust notwithstanding that
he is resident outside the Island of Jersey.
(2) There shall be no requirement that there be more than one Trustee.
10
<PAGE> 11
(3) The office of a Trustee shall be ipso facto determined and vacated if
such Trustee being an individual shall be found to be a lunatic or of
unsound mind or if he shall become subject to any proceedings under
any bankruptcy or insolvency laws applicable to him or if such Trustee
being a company shall enter into liquidation or dissolution whether
compulsory or voluntary (not being merely a voluntary liquidation for
the purposes of amalgamation or reconstruction).
15. The Trustees shall keep accurate accounts of their trusteeship and may
have them audited annually at the expense of the Trust Fund or the income
thereof as the Trustees shall determine by a firm of chartered accountants
selected by the Trustees.
16. The expenses in connection with the preparation establishment and
administration of this Trust including without prejudice to the generality of
the foregoing the remuneration and charge of the Trustees hereinafter provided
for and of the investment and re-investment of any parts of the Trust Fund and
the collection of income and other sums derivable therefrom may be paid out of
the Trust Fund and may be charged against capital or income or partly out of
one and partly out of the other at the discretion of the Trustees.
17. (1) Any Trustee may receive reimbursement from the Trust Fund of any
expenses costs and other liabilities including without prejudice to
the generality of the foregoing liabilities to taxation incurred by
him purely by reason of his duties relating to this Trust.
(2) The Trustees shall have power by instrument at any times to indemnify
to the extent permitted by law any persons who have at any time been
trustees of this Trust and each of them and their respective officers
and employees estates and effects from and against all or any actions
proceedings costs claims and demands and including without limiting
the foregoing liabilities whether or not then existing in respect of
any duty tax or fiscal imposition arising from or
11
<PAGE> 12
otherwise in connection with the trusts hereof and to assign pledge
charge mortgage hypothecate or otherwise encumber the whole or any
parts of the Trust Fund as security for such indemnity in such manner
as the Trustees shall in their discretion think fit.
18. (1) Any Trustee who shall be a company authorised to undertake trust
business shall be entitled (in addition to reimbursement of its proper
expenses costs and liabilities) to act as a Trustee on its normal
terms and conditions (including the right to remuneration and the
incidence thereof) in force from time to time and in addition any
Trustee being a banker may without accounting for any resultant profit
act as banker and perform any service on behalf of the trusts hereof
and on the same terms as would be made with a customer.
(2) Any Trustee who shall be a solicitor advocate attorney or accountant
or engaged in any other profession business or trade shall be entitled
to charge be reimbursed and be paid out of the Trust Fund his usual
professional or other charges for work or business done or transacted
or time expended by him or his firm or any employee or partner of his
in the execution of or otherwise in relation to this Trust including
acts which a Trustee not being in that or any profession business or
trade could have done. Any such person shall be entitled to retain any
commission which would or may become payable to him notwithstanding
that such commission is payable as a direct or indirect result of any
dealing with property which is or may become subject to the trusts
hereof.
19. The Trustees shall have power from time to time to revoke or vary any of
the administrative provisions of this Trust or to add any further
administrative provisions in such manner in all respects (but subject as
hereinafter provided) as the Trustees may consider expedient or to rectify any
manifest errors in this Trust PROVIDED ALWAYS THAT the power conferred by this
paragraph shall only be exercisable if the Trustees shall be advised in
12
<PAGE> 13
writing by an advocate of at least ten years' standing practising in the Island
of Jersey that it would be expedient for the purposes of this Trust that the
administrative provisions of this Trust be revoked varied or added to or such
errors be rectified in the manner specified in such written advice and such
power shall be exercisable only by the Trustees causing to be prepared and
executed an instrument in a form appropriate to carry such advice into effect.
20. Every decision resolution or exercise of a power or discretion required to
be or capable of being made by the Trustees hereunder shall be validly made if
so made by a majority in number of the Trustees for the time being and any
instruments executed in pursuance of any such decision resolution or exercise
shall have binding legal effect (as executed by all the Trustees hereof) if it
shall be executed by a majority in number of the Trustees for the time being
but not so as to render any of the Trustees liable for any act or thing done or
omitted without his consent by reason of the provisions of this clause or for
any act in which he joins for conformity only.
21. The Trust hereby created shall be irrevocable.
13
<PAGE> 14
SCHEDULE
The Original Property
The sum of US$19 which shall be applied to acquiring ninety five per cent of the
issued share capital of AerCo (which shares shall comprise the Original
Property).
IN WITNESS WHEREOF this Instrument of Trust has been duly executed by the
Trustees the day and year first above written.
The Common Seal of Mourant & Co. )
Trustees Limited was hereunto affixed in the )
presence of:-- )
[SEAL]
/s/
_________________________
Director
/s/
_________________________
Director
14
<PAGE> 1
EXHIBIT 9.2
DATED AS OF 15TH JULY 1998
MOURANT & CO. TRUSTEES LIMITED
AND
JURIS LIMITED
AND
LIVELY LIMITED
AND
GPA GROUP PLC
AND
AERCO LIMITED
AND
BANKERS TRUST COMPANY
=====================================
SHAREHOLDERS UNDERTAKING
=====================================
[MOURANT DU FEU & JEUNE LOGO]
ADVOCATES, SOLICITORS AND NOTARIES PUBLIC
P.O. Box 87, 22 Grenville Street, St Helier, Jersey JE4 8PX, Channel Islands
Tel: 01534 609000 Fax: 01534 609333
<PAGE> 2
THIS AGREEMENT is made as of the 15th day of July, 1998
BETWEEN:
(1) MOURANT & CO. TRUSTEES LIMITED a company incorporated under the laws of
Jersey and having its registered office at 22 Grenville Street, St Helier,
Jersey, Channel Islands JE4 8PX in its capacity as trustee of Aerco Holding
Trust (the "TRUSTEE");
(2) JURIS LIMITED a company incorporated under the laws of Jersey and having
its registered office at 22 Grenville Street aforesaid ("JURIS");
(3) LIVELY LIMITED a company incorporated under the laws of Jersey and having
its registered office at 22 Grenville Street aforesaid ("LIVELY");
(4) GPA GROUP PLC a company incorporated under the laws of Ireland and having
its registered office at GPA House, Shannon, County Clare, Ireland ("GPA
GROUP");
(5) AERCO LIMITED a company incorporated under the laws of Jersey and having
its registered office at 22 Grenville Street aforesaid (the "COMPANY");
(6) BANKERS TRUST COMPANY in its capacity as indenture trustee under the
Indenture (as defined below) (the "NOTE INDENTURE TRUSTEE").
WHEREAS:
(A) By a trust instrument dated 4th June, 1998 (the "INSTRUMENT") the "Aerco
Holding Trust" (the "Charitable Trust") was established and certain
property, as specified therein, was transferred to the Trustee to be held
by it upon the trusts and in the manner therein declared. The property held
by the Trustee upon such trusts now comprises nineteen shares numbered 1-19
inclusive forming part of the issued share capital of the Company
1
<PAGE> 3
registered in the names of Juris (as to 10 shares) and Lively (as to 9
shares) as bare nominees for the Trustee.
(B) GPA Group is the registered holder and beneficial owner of one share
numbered 20 of the issued share capital of the Company and is also to
subscribe for certain notes to be issued by the Company pursuant to the
Indenture (as defined below).
(C) The twenty issued shares numbered 1-20 inclusive referred to in
recitals (A) and (B) above (together, the "SHARES" and each, a "SHARE")
constitute the entire issued share capital of the Company.
(D) The Trustee, Juris, Lively and GPA Group have been requested by the
Company and the Note Indenture Trustee to enter into this Agreement in
connection with the issue by the Company of the Notes (as hereinafter
defined) pursuant to the trust indenture to be entered into between the
Company and the Note Indenture Trustee and dated as of the date hereof
(the "INDENTURE") and to support certain of the covenants to be given by
the Company in the Indenture.
(E) On the certification of the directors of the Company pursuant to
Clause 8 of the Instrument the Trustee has agreed to enter into this
Agreement on the terms and conditions hereinafter appearing.
IN WITNESS WHEREOF it is hereby agreed as follows:
1. DEFINITIONS
(A) In this Agreement, unless the context otherwise requires, capitalised
terms not otherwise defined shall bear the respective meanings assigned
to them in the Indenture.
2
<PAGE> 4
(B) In this Agreement, "Notes" means the U.S. dollar denominated Class A,
B, C, D and E Notes to be issued by the Company pursuant to the
Indenture.
2. COVENANTS OF THE TRUSTEES
The Trustee hereby covenants to and agrees with the Note Indenture Trustee
that for so long as any amount is outstanding or payable under any of the
Notes it will not, and will procure that its nominees will not, without the
prior written approval of the Note Indenture Trustee (which approval may be
withheld for whatever reason or for no reason) and of all of the Directors
of the Company:-
(i) take any action in its capacity as a shareholder of the Company (a)
regarding the institution of any proceeding by the Company seeking
liquidation, winding-up, reorganisation, arrangement, adjustment,
protection, relief or composition of its debts under any law relating
to bankruptcy, insolvency or reorganisation or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or for any
substantial part of its property, or (b) in the case of any such
proceeding instituted against the Company (but not instituted by the
Company), any action authorising or consenting to such proceedings
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for it, or any substantial part of its property, or
that of any subsidiary); or (c) any action seeking termination of the
Company's corporate existence; or
(ii) take any action in its capacity as a shareholder of the Company
regarding the increase or reduction or reclassification of the share
capital of the Company or the issuance of any additional shares of the
Company; or
3
<PAGE> 5
(iii) take any action in its capacity as a shareholder of the Company
under any circumstances regarding the waiver, repeal, amendment,
variation, supplement or other modification of any of the provisions
of the Memorandum or Articles of Association of the Company; or
(iv) take any action in its capacity as a shareholder of the Company to
wind up or terminate the corporate existence of the Company; or
(v) transfer the Shares owned by it or any part thereof or any interest
therein unless the transferee of the Shares owned by it or any part
thereof or the acquirer of the interest therein (a) shall be a
trustee of a trust established for charitable purposes substantially
identical to those for which the Charitable Trust is established;
and (b) shall enter into an agreement substantially identical to
this agreement in favour of the Note Indenture Trustee PROVIDED
HOWEVER THAT the above restriction shall not apply in the case of
any transfer by Juris or Lively of the Shares held by them to a
third party to act as nominee holder of such Shares for the Trustee
on terms substantially identical to those on which Juris or Lively,
as the case may be, currently act as nominee.
3. COVENANTS OF JURIS AND LIVELY
Juris and Lively hereby covenant to and agree with the Note Indenture
Trustee that for so long as any amount is outstanding or payable under any
of the Notes they will not, without the prior written approval of the Note
Indenture Trustee (which approval may be withheld for whatever reason or
for no reason) and of all of the Directors of the Company, transfer the
Shares or any part thereof or the acquirer of the interest therein shall
enter into a agreement substantially identical to this Agreement in favour
of the Note Indenture Trustee PROVIDED HOWEVER THAT the above restriction
shall not apply in the case of any transfer by Juris or Lively of the
Shares held by them to a third party
4
<PAGE> 6
to act as nominee holder of such Shares for the Trustee on terms
substantially identical to those on which Juris or Lively, as the case may
be, currently act as nominee.
4. COVENANTS OF GPA GROUP
GPA Group hereby covenants to and agrees with the Note Indenture Trustee
that for so long as any amount is outstanding or payable under any of the
Notes it will not, without the prior written approval of the Note Indenture
Trustee (which approval may be withheld for whatever reason or for no
reason) and of all of the Directors of the Company:-
(i) take any action in its capacity as a shareholder of the Company (a)
regarding the institution of any proceeding by the Company seeking
liquidation, winding-up, reorganisation, arrangement, adjustment,
protection, relief or composition of its debts under any law relating
to bankruptcy, insolvency or reorganisation or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or for any
substantial part of its property, or (b) in the case of any such
proceeding instituted against the Company (but not instituted by the
Company), any action authorising or consenting to such proceedings
(including, without limitation, the entry of an order for relief
against, or the appointment or a receiver, trustee, custodian or other
similar official for it, or any substantial part of its property, or
that of any subsidiary); or (c) any action seeking termination of the
Company's corporate existence; or
(ii) take any action in its capacity as a shareholder of the Company
regarding the increase or reduction or reclassification of the share
capital of the Company or the issuance of any additional shares of the
Company; or
5
<PAGE> 7
(iii) take any action in its capacity as a shareholder of the Company under
any circumstances regarding the waiver, repeal, amendment, variation,
supplement or other modification of any of the provisions of the
Memorandum or Articles of Association of the Company; or
(iv) take any action in its capacity as a shareholder of the Company to
wind up or terminate the corporate existence of the Company; or
(v) transfer the Share owned by it or any part thereof or any interest
therein unless the transferee of the Share or any part thereof or the
acquirer of the interest therein shall enter into an agreement
substantially identical to this agreement in favour of the Note
Indenture Trustee.
5. UNDERTAKING FEE
In consideration of the undertaking given by the Trustee, Juris and Lively
in the Agreement the Company agrees to pay the Trustee an undertaking fee
(the "UNDERTAKING FEE") equal to US$1500 per annum for each year or part
thereof during which any amount is outstanding or payable under any of the
Notes. The Undertaking Fee shall be payable by the Company to the Trustee
in January of each year commencing 1999.
6. SUCCESSORS AND ASSIGNS
(A) This Agreement shall be binding on and enure to the benefit of the
Note Indenture Trustee and its successors and assigns.
(B) This Agreement shall be binding on each of the Trustee, Juris,
Lively, GPA Group and their respective successors and assigns and
persons otherwise entitled to the Shares or any of them or any
interest therein by operation of law.
6
<PAGE> 8
7. GOVERNING LAW AND JURISDICTION
(A) This Agreement shall be governed by and construed in accordance with
Jersey Law.
(B) Each of the parties hereto irrevocably agrees that the Courts of
Jersey shall have jurisdiction to hear and determine any suit, action
or proceeding and to settle any disputes which may arise out of or in
connection with this Agreement and for such purposes irrevocably
submits to the jurisdiction of such Courts.
(C) Each of the parties hereto irrevocably waives any objection which it
might now or hereafter have to the Courts referred to in sub-class (B)
above being nominated as the forum to hear and determine any suit,
action or proceeding and to settle any disputes which may arise out of
or in connection with these presents and agrees not to claim that any
such Court is not a convenient or appropriate forum.
(D) The submission to the jurisdiction of the Courts referred to in
sub-clause (B) above shall not (and shall not be construed so as to)
limit the right of the Note Indenture Trustee to take proceedings
against the Trustee, Juris, Lively, GPA Group or any of them in any
other court of competent jurisdiction nor shall the taking of
proceedings in one or more jurisdictions preclude the Note Indenture
Trustee from taking proceedings against the Trustee, Juris, Lively,
GPA Group or any of them in any other jurisdiction, whether
concurrently or not.
8. MISCELLANEOUS
(A) The Trustee, Juris, Lively and GPA Group agree that, in the event of a
breach of this Agreement, damages shall be an inadequate remedy to the
other party and
7
<PAGE> 9
that specific performance, injunction or other equitable relief are
therefore appropriate remedies to prevent or restrain a breach or
possible breach.
(B) In the event of any one or more of the provisions contained in this
Agreement being invalid, illegal or unenforceable in any respect under
any law, the validity, legality and enforceability of the remaining
provisions herein contained shall not be in any way affected or
impaired thereby.
9. COUNTERPARTS
This Agreement may be executed by one or more of the parties hereto in any
number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same
instrument.
IN WITNESS whereof the parties hereto have executed and delivered this Agreement
the day and year first above written.
8
<PAGE> 10
SIGNED by:- GARETH ESSEX-CATER )
for and on behalf of )
MOURANT & CO. TRUSTEES LIMITED )
in the presence of:- )
BEN ROBINS
22 GRENVILLE STREET
ST HELLIER
JERSEY
SIGNED by:- JULIA CHAPMAN )
for and on behalf of )
JURIS LIMITED )
in the presence of:- )
SIGNED by:- JULIA CHAPMAN )
for and on behalf of )
LIVELY LIMITED )
in the presence of:- )
SIGNED by:- JOHN REDMOND )
for and on behalf of )
GPA GROUP PLC )
in the presence of:- )
SIGNED by:- FREDERICK W. BRADLEY JR. )
for and on behalf of )
AERCO LIMITED )
in the presence of:- )
SIGNED by:- CRAIG M. KANTON )
for and on behalf of )
BANKERS TRUST COMPANY )
in the presence of:- )
9
<PAGE> 11
SIGNED by:- GARETH ESSEX-CATER )
for and on behalf of )
MOURANT & CO. TRUSTEES LIMITED )
in the presence of:- )
BEN ROBINS
22 GRENVILLE STREET
ST HELLIER
JERSEY
SIGNED by:- JULIA CHAPMAN )
for and on behalf of )
JURIS LIMITED )
in the presence of:- )
SIGNED by:- JULIA CHAPMAN )
for and on behalf of )
LIVELY LIMITED )
in the presence of:- )
SIGNED by:- JOHN REDMOND )
for and on behalf of )
GPA GROUP PLC )
in the presence of:- )
SIGNED by:- FREDERICK W. BRADLEY SR. )
for and on behalf of )
AERCO LIMITED )
in the presence of:- )
SIGNED by:- CRAIG M. KANTON )
for and on behalf of )
BANKERS TRUST COMPANY )
in the presence of:- )
9
<PAGE> 1
Exhibit 10.1
================================================================================
EXECUTION COPY
ADMINISTRATIVE AGENCY AGREEMENT
among
GPA ADMINISTRATIVE SERVICES LIMITED,
GPA GROUP PLC, as Guarantor,
AerCo LIMITED,
and
THE ENTITIES LISTED ON APPENDIX A HERETO
Dated as of July 15,1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
PAGE
SECTION 1.01. Definitions...................................... 1
ARTICLE 2
APPOINTMENT; ADMINISTRATIVE SERVICES
SECTION 2.01. Appointment...................................... 8
SECTION 2.02. Limitations...................................... 8
SECTION 2.03. Administrative Services.......................... 10
SECTION 2.04. Accounting and Draft Accounts.................... 18
SECTION 2.05. Additional Administrative Services............... 21
SECTION 2.06. Additional Aircraft.............................. 21
SECTION 2.07. New Subsidiaries................................. 21
SECTION 2.08. AerCo Group Responsibility....................... 22
ARTICLE 3
STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY
SECTION 3.01. Standard of Performance.......................... 22
SECTION 3.02. Liability and Indemnity.......................... 22
SECTION 3.03. Conflicts of Interest............................ 24
ARTICLE 4
ADMINISTRATIVE AGENT UNDERTAKINGS
SECTION 4.01. The Administrative Agent......................... 24
ARTICLE 5
UNDERTAKINGS OF AERCO GROUP
SECTION 5.01. Cooperation...................................... 27
SECTION 5.02. Information...................................... 27
SECTION 5.03. Scope of Services................................ 28
SECTION 5.04. Ratification..................................... 28
SECTION 5.05. Covenants........................................ 29
SECTION 5.06. Ratification by Subsidiaries..................... 30
i
<PAGE> 3
ARTICLE 6
APPROVALS
PAGE
SECTION 6.01. Approvals......................................... 30
ARTICLE 7
EFFECTIVENESS
SECTION 7.01. Effectiveness...................................... 31
ARTICLE 8
ADMINISTRATIVE FEES, EXPENSES AND SUBORDINATION
SECTION 8.01. Administrative Fees............................... 31
SECTION 8.02. Expenses.......................................... 32
SECTION 8.03. Taxes............................................. 32
SECTION 8.04. Payment of Expenses............................... 33
SECTION 8.05. Subordination of Fees and Expenses................ 33
ARTICLE 9
TERM, REMOVAL OF OR TERMINATION BY THE ADMINISTRATIVE AGENT
SECTION 9.01. Term.............................................. 33
SECTION 9.02. Right to Terminate................................ 33
SECTION 9.03. Consequences of Termination....................... 36
SECTION 9.04. Survival.......................................... 36
ARTICLE 10
ASSIGNMENT AND DELEGATION
SECTION 10.01. Assignment and Delegation........................ 37
ARTICLE 11
GUARANTEE
SECTION 11.01. Guarantee........................................ 37
SECTION 11.02. Absolute Obligations............................. 38
SECTION 11.03. Guarantor's Representations...................... 39
SECTION 11.04. Successors and Assigns; Amendments............... 39
SECTION 11.05. Limitations...................................... 40
SECTION 11.06. Payments; Costs of Enforcement................... 40
ii
<PAGE> 4
ARTICLE 12
MISCELLANEOUS
PAGE
SECTION 12.01. Notices......................................... 40
SECTION 12.02. Governing Law................................... 41
SECTION 12.03. Jurisdiction.................................... 42
SECTION 12.04. Agent for Service of Process.................... 42
SECTION 12.05. WAIVER OF JURY TRIAL............................ 42
SECTION 12.06. Counterparts; Third Party Beneficiaries......... 42
SECTION 12.07. Entire Agreement................................ 43
SECTION 12.08. Power of Attorney............................... 43
SECTION 12.09. Restrictions on Disclosure...................... 43
SECTION 12.10. Rights of Setoff................................ 44
SECTION 12.11. No Partnership.................................. 44
SECTION 12.12. Implied Terms Excluded.......................... 45
Appendix A............................................... Subsidiaries
iii
<PAGE> 5
ADMINISTRATIVE AGENCY AGREEMENT dated as of July 15, 1998, (the
"AGREEMENT") among GPA ADMINISTRATIVE SERVICES LIMITED, a company incorporated
under the laws of Ireland (the "ADMINISTRATIVE AGENT"), GPA GROUP PLC, a
company incorporated under the laws of Ireland (the "GUARANTOR" or "GPA
GROUP"), AerCo LIMITED, a company incorporated under the laws of Jersey,
Channel Islands ("AERCO") and the entities listed on Appendix A hereto.
For the consideration set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Administrative
Agent, the Guarantor, and AerCo Group each agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings. Unless otherwise defined herein, all capitalized terms
used but not defined herein have the meanings assigned to such terms in the
Indenture.
"ADDITIONAL FEE" has the meaning assigned to such term in Section 8.01
hereto.
"ADDITIONAL NOTES" has the meaning assigned to such term in the Offering
Memorandum.
"ADMINISTRATIVE FEE" has the meaning assigned to such term in Section
8.01(a) hereof.
"ADMINISTRATIVE SERVICES" has the meaning assigned to such term in Section
2.01(a) hereof.
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the Person specified; provided, however, that (i) that GPA Group and its
Subsidiaries, on the one part, and Babcock & Brown and its Subsidiaries, on the
other part, shall not be considered to be Affiliates of each other, (ii) each
of AerCo and its Subsidiaries and Affiliates, on the one part, and Babcock &
Brown and its Subsidiaries, on the other part, shall not be considered to be
Affiliates of each other and (iii) each of AerCo and its Subsidiaries and
<PAGE> 6
Affiliates, on the one part, and GPA Group and its Subsidiaries, on the other
part, shall not be considered to be Affiliates of each other.
"AFTER-TAX BASIS" means on a basis such that any payment received, deemed
to have been received or receivable by any Person shall, if necessary, be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction of all Federal, state, local and Irish or other
foreign Taxes, penalties, fines, interest, additions to Tax and other charges
resulting from the receipt (actual or constructive) or accrual of such payments
imposed by or under any Federal, state, local or Irish or other foreign law or
Governmental Authority (after taking into account any current deduction to
which such Person shall be entitled with respect to the amount that gave rise
to the underlying payment and on a present value basis (determined on the basis
of discounting at 8% any deductions, credits, or other tax benefits in other
years to which such Person reasonably anticipates being entitled)) be equal to
the payment received, deemed to have been received or receivable.
"AIRCRAFT ASSET" has the meaning assigned to such term in the Servicing
Agreement.
"AERCO GROUP" has the meaning assigned to such term in Section 2.01(a)
hereof.
"AERCO" means AerCo Limited, a company incorporated under the laws of
Jersey, Channel Islands.
"ANNUAL APPRAISED VALUE" means the average Base Value of an Aircraft at
the time acquired by a member of AerCo Group as determined annually by three
independent appraisers, which initially shall be Aircraft Information Services,
Inc., BK Associates, Inc. and Airclaims Limited, or, thereafter, be such other
independent appraisers as may be selected by the Administrative Agent and
approved by the board of AerCo.
"ASSET EXPENSES BUDGET" has the meaning assigned to such term in Section
7.04(a) of the Servicing Agreement.
"BUSINESS OBJECTIVES" means maximizing the cash flows derived from the
leases relating to the Aircraft over time, subject to the constraints imposed
by the Indenture and Servicing Agreement, and seeking to achieve a balanced and
diversified portfolio (including, without limitation, with respect to lessees,
geography and lease term lengths), in all cases taking into account the
then-existing and anticipated market conditions affecting the operating leases
of used aircraft and the commercial aviation industry generally.
2
<PAGE> 7
"COMPETITOR" has the meaning assigned to such term in the Servicing
Agreement.
"CONCENTRATION THRESHOLDS" has the meaning assigned to such term in
Section 2.02(a) of Schedule 2.02(a) of the Servicing Agreement.
"CONFLICTS STANDARD" has the meaning assigned to such term in Section
3.02(b) of the Servicing Agreement.
"CONSOLIDATED QUARTERLY DRAFT ACCOUNTS" has the meaning assigned to such
term in Section 2.04(b)(ii) hereof.
"CONSOLIDATING QUARTERLY DRAFT ACCOUNTS" has the meaning assigned to such
term in Section 2.04(b)(iii) hereof.
"CONTROL" of a Person (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise) of such Person.
"DOLLARS" or "$" means the lawful money of the United States of America.
"DRAFT ACCOUNTS" has the meaning assigned to such term in Section 2.04
(b)(iii) hereof.
"EU" means the European Union.
"FEE PERIOD" has the meaning assigned to such term in Section 8.01(a)
hereof.
"FIXED FEE" has the meaning assigned to such term in Section 8.01 hereto.
"GOVERNMENTAL AUTHORITY" means any court, administrative agency or
commission or other governmental agency or instrumentality (or any officer or
representative thereof) domestic, foreign or international, of competent
jurisdiction including, without limitation, the EU.
"GUARANTEED OBLIGATIONS" has the meaning assigned to such term in Section
11.01(a) hereof.
3
<PAGE> 8
"GUARANTEED PARTIES" has the meaning assigned to such term in Section
11.01(a) hereof.
"GUARANTOR" means GPA Group.
"INDENTURE" means the Indenture dated as of July 15, 1998, between AerCo
and the Trustee.
"INFLATION FACTOR" means with respect to any calendar year the result
(expressed as a decimal) of the following calculation:
IF = (X-1) x 0.75
where:
"IF" means the Inflation Factor;
"X" means the average of (a) the quotient (expressed as a decimal) of (i)
the U.S. CPI published in respect of the most recently ended calendar year (the
"New Year") divided by (ii) the U.S. CPI published in respect of the calendar
year immediately preceding the New Year and (b) the quotient (expressed as a
decimal) of (i) the Irish CPI published in respect of the New Year divided by
(ii) the Irish CPI published in respect of the immediately preceding calendar
year. For the avoidance of doubt, if X is less than 1, the Inflation Factor
shall be a negative number.
"INITIAL PERIODS" has the meaning assigned to such term in Section 7.04(b)
of the Servicing Agreement.
"IRISH CPI" means the Consumer Price Index (all items) published quarterly
by the Central Statistics Office of Ireland (current base date November 1989 =
100) or by any other Irish governmental department or other Person to which the
publication thereof may have been transferred. If the base date for Irish CPI
is at any time revised then Irish CPI shall be calculated for the purposes
hereof as so revised.
"LEDGERS" has the meaning assigned to such term in Section 2.04(b)(i)
hereof.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset, (b)
the interest of a vendor or a lessor which is not a Person within AerCo Group
under any conditional sale agreement, capital lease or title retention
4
<PAGE> 9
agreement relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOSSES" means any and all liabilities (including liabilities arising out
of the doctrine of strict liability), obligations, losses, damages, penalties,
Taxes, actions, suits, judgments, costs, fees, expenses (including reasonable
legal fees, expenses and related charges and costs of investigation) and
disbursements, of whatsoever kind and nature; provided that the term "Losses"
shall not include any indemnified party's management time or overhead expenses.
"MAINTENANCE RESERVES" means the aggregate of
(i) any cash amount payable under a Lease and expressed as (a) a
maintenance reserve, (b) constituting a fund for application towards
the cost of maintenance, overhauls or repairs or (c) supplemental
rent payable by reference to the level of utilization of such
aircraft or of any engine, part or complement thereof; and
(ii) any letters of credit, guarantees or other credit support
provided either as security for the cost of maintenance, overhauls or
repairs, or as security for the general obligations of the Lessee
under the Lease, but in an amount calculated by reference to the
level of utilization of such aircraft or of any engine, part or
complement thereof,
in respect of all of the Leases.
"MATERIAL ADVERSE EFFECT" with respect to any Person means an event,
condition, matter, change or effect that impacts or, insofar as reasonably can
be foreseen, in the future is likely to impact, in a material adverse manner,
the condition (financial or otherwise), properties, assets, liabilities,
earnings, capitalization, shareholders' equity, licenses or franchises,
businesses, operation or prospects of such Person or the ability of such Person
to consummate the transactions contemplated by the Indenture or to perform
fully any of its obligations under any of the Related Documents.
"NOTES OFFERING" has the meaning assigned to such term in Section 8.01
hereof.
"OFFERING MEMORANDUM" means the offering memorandum issued in connection
with the purchase by AerCo of Aircraft Lease Portfolio
5
<PAGE> 10
Securitization 94-1 Limited and the Transferring Companies and the issuance by
AerCo of the Notes.
"OPERATING BUDGET" has the meaning assigned to such term in Section
7.04(a) of the Servicing Agreement.
"ONE YEAR PERIOD" has the meaning assigned to such term in Section 2.04(a)
hereof.
"PERIOD" has the meaning assigned to such term in Section 2.04(a) hereof.
"QUARTER" means each fiscal quarter of AerCo or any of its Subsidiaries,
as applicable.
"RATINGS" means the ratings assigned to the Notes by the Rating Agencies.
"REDUCING FEE" has the meaning assigned to such term in Section 8.01(a)
hereof.
"REIMBURSABLE EXPENSES" has the meaning assigned to such term in Section
8.02(b) hereof.
"RELEVANT JURISDICTION" means, in the case of AerCo, Jersey, Channel
Islands; and, in the case of a Subsidiary of AerCo, the jurisdiction in which
it is incorporated, or if the context requires, tax resident.
"RENTAL FEE" has the meaning assigned to such term in Section 8.01 hereto.
"REPRESENTATIVES" with respect to any Person means the officers,
directors, employees, advisors and agents of such Person.
"SCHEDULE 2.02 (A)" has the meaning assigned to such term in Section
2.03(m) hereof.
"SERVICE PROVIDERS" has the meaning assigned to such term in Section
2.02(d) hereof.
"SERVICES" has the meaning assigned to such term in Section 2.02(a) of the
Servicing Agreement.
6
<PAGE> 11
"STANDARD OF CARE" has the meaning assigned to such term in Section 3.01
of the Servicing Agreement.
"STANDARD OF PERFORMANCE" has the meaning assigned to such term in Section
3.01 of the Administrative Agency Agreement.
"STIPULATED INTEREST RATE" means, for any period, a rate per annum equal
to LIBOR in effect during such period plus 2% per annum.
"SUBSIDIARY" of any Person means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are,
or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture or unincorporated association), but more
than 50% of whose ownership interest representing the right to make decisions
for such other entity is, now or hereafter owned or controlled, directly or
indirectly, by such Person, but such corporation, company or other entity shall
be deemed to be a Subsidiary only so long as such ownership or control exists.
"THREE YEAR PERIOD" has the meaning assigned to such term in Section
2.04(a) hereof.
"TRANSACTION COSTS" means all out-of-pocket expenses incident to any Notes
Offering (specifically excluding, except to the extent otherwise expressly
included herein, any direct or indirect commissions, discounts, fees or other
remuneration allowed or paid to any underwriters in connection with any such
Notes Offering), including the cost of printing any offering documents
(including the Offering Memorandum) and any expenses (including fees and
disbursements of counsel) incurred by any underwriters in connection with
qualification of the Notes for sale under the laws of such jurisdictions as the
underwriters designate and the printing of memoranda relating thereto, for any
fees charged by investment rating agencies for the rating of the Notes, for any
filing fees of the National Association of Securities Dealers, Inc. relating to
the Notes and for expenses incurred in distributing any Prospectuses.
"U.S. CPI" means with respect to any calendar year or any period during
any calendar year the "Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average for All Items" published by the Bureau of Labor Statistics
for the United States Department of Labor (1982-1984=100). If the U.S. CPI
shall be converted to a different standard reference base or otherwise revised
after the date hereof, U.S. CPI shall thereafter be calculated with use of such
new or revised statistical measure published by the Bureau of Labor
7
<PAGE> 12
Statistics or, if not so published, as may be published by any other reputable
publisher of such price index selected by Servicing Company.
"U.K. GAAP" has the meaning assigned to such term in Section 2.04(b)(i)
hereto.
"YEAR" means each 12 month fiscal year (or such shorter fiscal period as
agreed upon in the future) ended June 30 or as modified in the future.
ARTICLE 2
APPOINTMENT; ADMINISTRATIVE SERVICES
SECTION 2.1. Appointment. (a) AerCo hereby appoints the Administrative
Agent as the provider of the administrative and related services set forth in
Sections 2.03 through 2.07 (the "ADMINISTRATIVE SERVICES") to AerCo and each
Subsidiary of AerCo (collectively, "AERCO GROUP") on the terms and subject to
the conditions set forth in this Agreement.
(b) The Administrative Agent hereby accepts such appointments and agrees
to perform the Administrative Services on the terms and subject to the
conditions set forth in this Agreement.
(c) The Administrative Services do not include any service or matter which
is the responsibility of the Servicer under the Servicing Agreement, the Cash
Manager under the Cash Management Agreement, the Company Secretary under the
Secretarial Services Agreement or the company secretaries of AerCo Group's
Subsidiaries.
(d) The Administrative Services do not include any service or matter that
falls under the categories of "investment business services" or "investment
advice" under the Investment Intermediaries Act, 1995 or any other applicable
provision of Irish law that would require such services to be performed by an
entity that has obtained prior authorization from the Central Bank of Ireland.
SECTION 2.2. Limitations. (a) The Administrative Agent agrees (with
respect to the Administrative Services agreed by it to be carried out
hereunder) to comply with the terms of the articles of incorporation, by-laws,
trust agreements or similar constituting documents of each Person within AerCo
Group and all agreements to which any Person within AerCo Group is a party
(including all Related Documents), provided that copies of such documents and
agreements have been delivered to the Administrative Agent and, without
prejudice to the foregoing, not to enter into, on behalf of any Person within
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AerCo Group, any commitments, loans or obligations or charge, mortgage, pledge,
encumber or otherwise restrict or dispose of the property or assets or expend
any funds of any Person within AerCo Group save (i) as expressly permitted by
the terms of this Agreement or (ii) upon the express direction of, as
applicable, any of the board of directors of AerCo or any of its Subsidiaries.
(b) Each Person within AerCo Group hereby appoints AerCo to act as its
representative and, having been duly authorized to do so by each of its
Subsidiaries, as the representative of each of its Subsidiaries with respect to
any matter in respect of which any Person within AerCo Group, or AerCo Group as
a whole, is required or permitted to take any action pursuant to the terms of
this Agreement. Accordingly, in connection with the performance of the
Administrative Services, the Administrative Agent shall in all cases be entitled
to rely on the instructions (or other actions) of AerCo as representative of
each Person within AerCo Group. The Administrative Agent further agrees to make
reasonable efforts so as not to take any action inconsistent with the Servicing
Agreement.
(c) In connection with the performance of the Administrative Services, the
Administrative Agent shall (i) have no responsibility for the failure of any
other Person (other than any Person acting as a delegate of the Administrative
Agent under this Agreement pursuant to Section 10.01 hereof) providing services
directly to AerCo Group to perform its obligations to AerCo Group, (ii) in all
cases be entitled to rely upon the instructions of AerCo Group or any of its
Representatives and upon notices, reports or other communications made by any
Person providing services to AerCo Group (other than any Affiliate of the
Administrative Agent) and shall not be responsible for the accuracy or
completeness of any such notices, reports or other communications except to the
extent that the Administrative Agent has actual notice of any matter to the
contrary and (iii) not be obligated to act in any manner which is reasonably
likely to (A) violate any Applicable Law, (B) lead to an investigation by any
Governmental Authority or (C) expose the Administrative Agent to any liabilities
for which, in the Administrative Agent's good faith opinion, adequate bond or
indemnity has not been provided.
(d) Subject to the limitations set forth in Section 2.02(a), in connection
with the performance of the Administrative Services, the Administrative Agent
is expressly authorized by AerCo and each other Person within AerCo Group (i)
to engage in and conclude commercial negotiations with the Persons providing
services to AerCo Group, including, without limitation, where the context
permits, the Servicer, the Cash Manager, the Reference Agent, the Company
Secretary and other Persons performing similar services or advising AerCo Group
(the "SERVICE PROVIDERS") and with their
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Representatives, and (ii) after such consultation, if any, as the
Administrative Agent deems necessary under the circumstances, to act on such
Person's behalf with regard to any and all matters requiring any action on the
part of the Administrative Agent under the Servicing Agreement. AerCo Group
agrees that it will give the Administrative Agent and the Servicer 60 days
prior written notice of any limitation or modification of the authority set
forth in this Section 2.02(d).
(e) The Administrative Agent may rely on the advice of any law firm,
accounting firm, risk management adviser, tax adviser, insurance adviser,
aircraft appraiser or other professional adviser appointed by any Person within
AerCo Group and any Person appointed in good faith by the Administrative Agent
and shall not be liable for any claim by any Person within AerCo Group to the
extent that it was acting in good faith upon the advice of any such persons.
(f) Notwithstanding the appointment of, and the delegation of authority and
responsibility to, the Administrative Agent hereunder, AerCo and each other
Person within AerCo Group shall continue to have and exercise through its board
of directors real and effective central control and management of all matters
related to its ongoing business, operations, assets and liabilities, subject to
matters that are expressly the responsibility of the Administrative Agent in
accordance with the terms of this Agreement, and each of AerCo and each other
Person within AerCo Group shall at all times conduct its separate ongoing
business in such a manner as the same shall at all times be readily identifiable
from the separate business of the Administrative Agent, and none of the Persons
within AerCo Group is merely lending its name to decisions taken by others.
SECTION 2.3. Administrative Services. The Administrative Agent hereby
agrees to perform and provide the following services for each Person within
AerCo Group and their respective governing bodies:
(a) administrative services:
(i) except in such instances in which such preparation and distribution is
required to be done by another party by Applicable Law, preparation and
distribution, at such time as shall be agreed with the Administrative
Agent, of draft board or trustees meeting agendas and any other papers
required in connection with such meetings;
(ii) maintaining, or monitoring the maintenance of, the books, records,
registers and associated filings of each Person within AerCo
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Group, other than those required to be maintained by the Company
Secretary;
(iii) providing any administrative assistance reasonably necessary to
assist any Person within AerCo Group in carrying out its obligations,
including providing timely notice of decisions to be made, or actions to
be taken, under any of the Related Documents; provided, that if such
obligations of AerCo Group under any of the Related Documents are only
required upon receipt of notice to AerCo Group or the Administrative
Agent, then the Administrative Agent shall provide such administrative
assistance only to the extent it has received such notice or is otherwise
aware of such obligations (it being understood that the Administrative
Agent shall not be deemed to be otherwise aware of such obligations solely
because notice has been provided to a Person within AerCo Group or GPA
Group other than the Administrative Agent);
(iv) assisting AerCo Group in: (a) developing its interest rate
management policy and developing financial models, cash flow projections
and forecasts, by proposing such policies, models, projections and
forecasts to the relevant board for approval, and, after such approval,
implementing them to the extent required by AerCo Group, and (b) making
its aircraft lease, sale and capital investment decisions to the extent
(i) such assistance is not contemplated to be provided by the Servicer
pursuant to the Servicing Agreement and (ii) such decisions are not
required to be made by the board;
(v) procuring, when the Administrative Agent considers in good faith that
it is appropriate or necessary to do so, and coordinating the advice of,
legal counsel, accounting, tax and other professional advisers at the
expense of the relevant Person within AerCo Group, to assist such Person
in carrying out its obligations, and supervising, in accordance with
instructions from such Person, such legal counsel and other advisers;
(vi) as frequently as is necessary for AerCo Group to comply with its
obligations under the Related Documents and as required in connection with
the acquisition of Additional Aircraft, arranging for the Appraisals to be
made and providing the Appraisals to the relevant Service Providers;
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(vii) providing the Cash Manager with information with respect to the
Annual Appraised Value of the Aircraft and any changes thereto; and
(viii) providing assistance to the Servicer with respect to matters for
which such assistance is contemplated by the Servicing Agreement or is
reasonably necessary in order for the Servicer to perform its duties in
accordance with the Servicing Agreement.
(b) to monitor the performance of the Service Providers and to report on such
performance to the board of directors of AerCo on a quarterly basis, including:
(i) with respect to the Servicer:
(A) monitoring and reviewing the information and other reports
provided by the Servicer pursuant to the Servicing Agreement,
including with respect to the status of Lease payments, Lessee
receivables, Maintenance Reserves, security deposits, adjustments of
rentals and claims against Maintenance Reserves in accordance with
Lease terms (to the extent provided to the Administrative Agent);
(B) assisting in evaluating the Servicer's performance relative to
the Standard of Care and the Conflicts Standard;
(C) assisting in establishing standards for evaluating the Servicer's
performance relative to the terms of the Servicing Agreement
generally, assisting in evaluating such performance against such
standards and recommending action with respect thereto;
(D) reviewing and providing advice with respect to recommendations
made by the Servicer for approval by any Person within AerCo Group;
(E) monitoring the compliance of the Servicer with its obligations
under the Servicing Agreement; and
(F) authorization of payment by the Cash Manager of invoices approved
by the Servicer in accordance with Section 6.03 of Schedule 2.02(a)
of the Servicing Agreement;
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(ii) with respect to the other Service Providers:
(A) to the extent not provided for in the relevant agreement,
assisting in establishing standards for performance evaluation and
compliance with the terms of such agreement;
(B) assisting in evaluating the performance and compliance of each
Service Provider against its obligations under the relevant agreement
or such standards as are established pursuant to subsection
2.03(b)(ii)(A) above;
(C) monitoring and reviewing the information and reports provided by
the Cash Manager to the Administrative Agent and the relevant Person
within AerCo Group and reviewing and providing advice with respect to
such reports; and
(D) implementing any other request by Persons within AerCo Group to
evaluate the performance of the Service Providers under the relevant
agreements with such Persons within AerCo Group, which shall be at
the expense of such Persons, to the extent services are required that
are materially greater in scope than those being provided pursuant to
the express terms of this Agreement;
(c) to the extent that (i) the following services are not provided by the other
Service Providers, and (ii) the relevant information is provided to the
Administrative Agent by Persons within AerCo Group or the Service Providers, to
act as liaison with the Rating Agencies with respect to the rating impact of any
decisions on behalf of AerCo Group, including:
(i) advising the Rating Agencies from time to time of any material changes
in the Portfolio, coordinating with AerCo Group and the Service Providers
and providing the Rating Agencies with such statistical and other
information as they may from time to time request and in connection with
the acquisition of Additional Aircraft (such information to be provided at
AerCo Group's expense to the extent that providing such information
requires services that are materially greater in scope than those being
provided pursuant to the express terms of this Agreement);
(ii) providing the Rating Agencies with the outstanding principal balances
of each class or subclass of Notes and loan-to-value
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ratios (i.e., ratio of debt to Annual Appraised Value of AerCo Group's
assets); and
(iii) coordinating among AerCo Group, the Servicer and the Appraisers to
ensure that the Appraisals are received as required;
(d) to provide assistance to AerCo Group in procuring lessee consents, novations
and other documentation and in taking all other actions necessary in connection
with the reissue or amendment of letters of credit under which the current
beneficiary is the Guarantor or an Affiliate of the Guarantor such that the new
beneficiary becomes a Person within AerCo Group;
(e) to provide assistance to AerCo Group in connection with (i) the reissue or
amendment of letters of credit under which the current beneficiary is the
Guarantor or an Affiliate of the Guarantor such that the new beneficiary becomes
a Person within AerCo Group, (ii) the re-lease and/or sale of the Aircraft,
(iii) the acquisition of Additional Aircraft and issuance of Additional Notes,
(iv) the issuance of Refinancing Notes and (v) any other financing transactions
relating to AerCo Group after the Closing Date, including:
(i) coordinating with the Service Providers, legal and other professional
advisers to monitor the protection of AerCo Group's interests and rights
and coordinating the execution of documentation required at closings;
(ii) providing qualified personnel to attend and provide administrative
support (including the preparation of any certificates required pursuant
to the Servicing Agreement) at the closings in connection with sales or
re-leases of the Aircraft, if required (it being understood that the
Administrative Agent will not be obligated to provide legal counsel or
legal or technical services to AerCo Group);
(iii) coordinating with AerCo Group and the Service Providers and
assisting in the management of the closing process so that closings will
occur on a timely basis;
(iv) providing all necessary administrative support to complete any
documentation and other related matters (including assistance in
completing registration statements, offering memoranda and other offering
or disclosure documents in connection with financings or refinancings);
and
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(v) appointing counsel and other appropriate professional advisers to
represent AerCo Group in connection with any such closings;
(f) to coordinate with the Cash Manager, including:
(i) reviewing the impact on AerCo Group's operation and financial
condition and on the Notes of any proposal for the re-lease or sale of an
Aircraft or the acquisition of Additional Aircraft;
(ii) establishing any sales objectives in connection with expected cash
flow needs;
(iii) analyzing the effect of the budgets developed pursuant to Section
2.04(a) below on the expected cash flows of AerCo Group with respect to
the payment of the Notes; and
(iv) providing written notice to the Cash Manager identifying in
reasonable detail Expenses, Lease obligations or other liabilities of
Persons within AerCo Group for which interim withdrawals may be made
pursuant to Sections 3.04 and 3.05 of the Indenture.
(g) with respect to the implementation, following board approval, of AerCo
Group's interest rate management strategy (including hedging strategy), (i) to
obtain information and reports from, and, where it or the board deems such
opinions appropriate, the opinion of, third party advisers for the purpose of
making decisions as to hedging strategy and swap counterparties and to advise
the board of such opinions; (ii) to provide assistance with respect to any
closings on behalf of AerCo Group in connection with any such hedging
activities; (iii) to calculate the amount of any broken funding costs under any
swap agreements; (iv) at least every three months following the Closing Date,
to assist Persons within AerCo Group in seeking to enter into additional swap
agreements or to sell at market value or unwind part or all of any initial or
future swap agreements entered into by such Persons, in order to rebalance the
fixed and floating mix of interest obligations and the fixed and floating mix
of Rental Payments and (v) from time to time following the Closing Date, to
assist Persons within AerCo Group to sell at market value or unwind part or all
of any initial or future options on interest rate swaps purchased by such
Persons.
(h) based on information produced or provided to it, to prepare, file and/or
distribute, with the assistance of outside counsel and auditors, if
appropriate, all reports to be prepared, filed and/or distributed by AerCo
Group or its governing bodies, subject to board approval in the case of reports
on Form 20-F and 6-K under the Exchange Act, including:
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(i) filings AerCo Group is required to make in various jurisdictions and
preparing such filings or monitoring counsel and advisers in connection
with the preparation and filing of such materials;
(ii) compliance by AerCo Group with the periodic reporting requirements of
the Exchange Act, in particular, working with necessary professional
advisers to AerCo Group and the Service Providers, as appropriate, to
prepare on behalf of AerCo Group and to arrange for the filing and
distribution of an annual report on Form 20-F in respect of AerCo Group
and any required reports on Form 6-K in respect of AerCo Group;
(iii) reports required or recommended to be distributed to investors
(including press releases), and managing investor relations on behalf of
AerCo Group, and preparing or arranging for the preparation and
distribution of such reports at AerCo Group's expense; and
(iv) reports required to be filed with any Governmental Authorities, and
preparing on behalf of AerCo Group or arranging for the preparation of and
arranging for the filing of any reports required to be filed with any
other entity in order for AerCo Group not to be in violation of Applicable
Law or any applicable covenants;
(i) with respect to amendments,
(i) to report on the substance of any proposed amendments to any Related
Documents other than the Leases;
(ii) to the extent requested by AerCo Group or by the parties to Related
Documents and subject to approval by the appropriate board, to coordinate
with AerCo Group's legal counsel, the other parties thereto and their
counsel the preparation and execution of any amendments to the Related
Documents (other than amendments relating to the Aircraft or the Leases),
and to provide assistance in the implementation of such amendments; and
(iii) to the extent reasonably requested by the Servicer, to coordinate
and provide assistance on behalf of AerCo Group with the Servicer and seek
to obtain appropriate approvals to take any action which may be required
to amend the terms of the Leases;
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(j) to the extent reasonably requested by the Servicer, to coordinate and
provide assistance on behalf of AerCo Group with the Servicer and outside
counsel in a Lessee default or repossession situation;
(k) to authorize payment of certain bills and expenses (i) payable to legal and
professional advisers authorized to be engaged or consulted pursuant to this
Agreement or (ii) approved by the board of AerCo or any of its Subsidiaries,
and remit approved invoices to the Cash Manager for payment processing;
(l) to provide to the Servicer periodically (but not more than once each week)
a statement of AerCo Group's interest rate hedging policies;
(m) providing assistance to AerCo with respect to matters for which action by
AerCo is required under the Servicing Agreement and the Indenture, including
such assistance that may be necessary for AerCo to:
(i) comply with Sections 6.06, 7.04 and 7.05 of the Servicing Agreement;
(ii) provide such instructions to the Servicer as the Servicer may require
in interpreting the Indenture, the Concentration Thresholds and Annex 2 to
Schedule 2.02(a) to the Servicing Agreement ("SCHEDULE 2.02(A)");
(iii) direct the Servicer to amend the minimum hull and liability
insurance coverage amounts set forth in Annex 1 to Schedule 2.02(a) to the
Servicing Agreement;
(iv) direct the Servicer that settlement offers received by the Servicer
with respect to claims for damage or loss in excess of $2,000,000 with
respect to an Aircraft Asset are acceptable;
(v) request periodic reports from the Servicer regarding insurance matters;
(vi) grant approvals when such approvals are required by Section 7.05(a)
and Schedule 2.02(a) of the Servicing Agreement;
(vii) provide the Servicer with such information as the Servicer may
reasonably request in connection with the Concentration Thresholds;
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(viii) recommend to the Servicer fixed rates of interest to be considered
by the Servicer in connection with negotiation by the Servicer of proposed
leases and advise the Servicer whether AerCo intends to enter into any
swap agreements with respect to such proposed leases and as to the
additional costs associated with such swap agreements;
(ix) advise the Servicer as required by Section 3.02(d) of Schedule
2.02(a) of the Servicing Agreement; and
(x) direct the Servicer to arrange for the sale of an Aircraft Asset and
certify to the Servicer that such sale complies with the terms of the
Indenture;
(xi) direct the Servicer to arrange for the acquisition of Additional
Aircraft;
(xii) direct the Servicer to cooperate with any additional refinancings,
note offerings, corporate restructurings and any additional issuances of
debt securities to fund such acquisitions;
(xiii) make any discretionary decisions, judgments or assumptions
necessary in connection with the preparation of any projections, and
provide the Servicer with any written policies and guidelines that the
Servicer shall require in connection with such preparation; and
(xiv) request valuations of Aircraft Assets in accordance with Section
5.01 of Schedule 2.02(a) of the Servicing Agreement.
(n) to inform the board of AerCo as soon as is reasonably practicable if the
Administrative Agent believes that (i) net revenues generated by the Leases will
be insufficient to satisfy the payment obligations of AerCo Group and (ii) an
Event of Default will result from such insufficiency, and to advise the board as
to any appropriate action to be taken (subject to the provisions of the Related
Documents) with respect to such insufficiency and to cause the actions directed
by the board to be implemented so as to avoid an Event of Default, if it is
possible to do so; and
(o) to advise the board of AerCo as to the appropriate levels of the Liquidity
Reserve Amount.
SECTION 2.4. Accounting and Draft Accounts. (a) Budgeting Process. The
Administrative Agent shall, in accordance with the procedures, policies and
guidelines described below and on the basis of information generated by the
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Administrative Agent and information provided by the Service Providers and
AerCo Group:
(i) in respect of the Initial Periods, each one Year period (a "ONE YEAR
PERIOD") and each three Year Period (a "THREE YEAR PERIOD" and, together
with a One Year Period, and an Initial Period, each a "PERIOD") during the
term of the Servicing Agreement, and on behalf of AerCo Group, prepare and
deliver to the Servicer, not later than 60 days immediately preceding the
commencement of each Year (other than with respect to the fiscal year
commencing July 1, 1998), a proposed Operating Budget and Asset Expenses
Budget for such Period together with reasonably detailed information
regarding the assumptions underlying such proposed Operating Budget and
Asset Expenses Budget, such proposed Operating Budget and Asset Expenses
Budget to be based, in part, on the information provided by the Servicer
pursuant to Section 7.04(f) of the Servicing Agreement;
(ii) on behalf of AerCo Group, review and discuss with the Servicer the
proposed Operating Budget and the Asset Expenses Budget prepared pursuant
to Section 7.04 of the Servicing Agreement;
(iii) submit the revised proposed Operating Budget and Asset Expenses
Budget for each Period, no later than 30 days immediately preceding the
commencement of each Year, to AerCo for its consideration and approval
(other than with respect to the fiscal year commencing July 1, 1998);
(iv) in the event that the proposed Operating Budget and Asset Expenses
Budget are not approved, review and revise, in consultation with the
Servicer, the Operating Budget and Asset Expenses Budget to the extent
possible to address the concerns of AerCo, it being understood that final
approval of the Operating Budget and Asset Expenses Budget is the
responsibility of AerCo.
(b) Management Accounts and Financial Statements. The Administrative Agent
shall, in accordance with the procedures, policies and guidelines described
below and on the basis of information generated by the Administrative Agent and
information provided by the Service Providers and AerCo Group:
(i) establish an accounting system and maintain the accounting ledgers of
and for each Person within AerCo Group and their Subsidiaries in
accordance with accounting principles generally accepted
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in the United Kingdom, ("U.K. GAAP"), unless otherwise required by
Applicable Law and specified by the relevant boards of Persons within
AerCo Group (collectively, the "LEDGERS");
(ii) prepare and deliver (within 40 days after the end of the relevant
Quarter or, if the end of such Quarter coincides with the end of a Year,
within 75 days after the end of such Year), with respect to AerCo Group,
on a consolidated basis, a draft balance sheet and draft statement of
changes in shareholders' equity or residual trust interest as of the end
of each Quarter and Year, as applicable, and draft statements of income
and cash flows for each Quarter and Year, as applicable (the "CONSOLIDATED
QUARTERLY DRAFT ACCOUNTS");
(iii) to the extent required by Applicable Law, prepare and deliver
(within 40 days after the end of the relevant Quarter or, if the end of
such Quarter coincides with the end of a Year, within 90 days after the
end of such Year), with respect to AerCo Group and such Persons within
AerCo Group as specified by the relevant boards of Persons within AerCo
Group in a written schedule provided to the Administrative Agent (which
schedule may be updated by such boards to the Administrative Agent
delivered at least 30 days prior to the commencement of the relevant
Quarter), on a consolidating company-by-company basis, a draft balance
sheet and statement of changes in shareholders' equity or residual trust
interest as of the end of each Quarter and Year, as applicable, with
respect to such Person and draft statements of income and cash flows for
such Quarter and Year, as applicable (the "CONSOLIDATING QUARTERLY DRAFT
ACCOUNTS" and, together with the Consolidated Quarterly Draft Accounts the
"DRAFT ACCOUNTS"). The board of AerCo shall specify the applicable legal
requirements mandating the preparation of such Consolidating Quarterly
Draft Accounts in the written schedule provided to the Administrative
Agent pursuant to this section;
(iv) arrange for, coordinate with and assist AerCo Group's auditors in
preparing annual audits;
(v) prepare or arrange for the preparation of and arrange for the filing
of AerCo Group's tax returns in conjunction with AerCo Group's tax
advisers after submission to the board of directors to the extent required
by the board or Applicable Law;
(vi) compare the expected cash flows of AerCo Group, as provided by the
Cash Manager, and the budgets to actual results.
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(c) The Administrative Agent shall be entitled to request instructions
from the board of AerCo as to general guidelines or principles to be followed
in preparing Draft Accounts and as to amending or supplementing any such
guidelines or principles. The entry in the Ledgers of any item in accordance
with the specific instructions of AerCo Group shall always be permitted, and
the Administrative Agent shall make such entries upon instruction.
SECTION 2.5. Additional Administrative Services. The Administrative
Agent will provide additional Administrative Services, including (a) providing
assistance in arranging one or more refinancings of all or a portion of the
Notes, and (b) undertaking efforts to avoid any adverse change in the tax
status of any Person within AerCo Group. In addition, subject to Section
8.01(b), upon a request by AerCo Group, the Administrative Agent will take such
other actions as may be appropriate to facilitate AerCo Group's business
operations and assist the relevant boards of directors or trustees in carrying
out their obligations; provided, however, that the Administrative Agent will
not be obligated or permitted to take any action that might reasonably be
expected to result in the business of AerCo Group ceasing to be separate and
readily identifiable from, and independent of, the Administrative Agent, the
Guarantor and any of their Affiliates.
SECTION 2.6. Additional Aircraft. In the event that AerCo Group shall
acquire any Additional Aircraft and notwithstanding that AerCo Group may retain
different service providers for such Additional Aircraft, the Administrative
Agent hereby agrees to provide the same Administrative Services with respect to
all such Additional Aircraft.
SECTION 2.7. New Subsidiaries. The Administrative Agent shall be
responsible for coordinating with outside legal counsel, auditors, tax advisers
and other professional advisers with respect to all corporate and
administrative matters relating to the formation, operation, corporate affairs
and related matters with respect to all Subsidiaries which are or may become
members of AerCo Group, including identifying such outside advisers, a
potential company secretary and candidates for director to the extent
necessary, and shall be permitted to incur expenses in respect of such
Subsidiaries without AerCo Group's consent up to such aggregate amount as shall
be authorized from time to time. To the extent that the Administrative Agent
shall deem it necessary or desirable in order for AerCo Group to carry on its
business, the Administrative Agent shall have the authority to assist in the
formation of new Subsidiaries of AerCo Group and to appoint any director or
company secretary to any such Subsidiary without the consent of AerCo Group.
The Administrative Agent and its personnel may act as company secretary for any
Subsidiary.
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SECTION 2.8. AerCo Group Responsibility. (a) The obligations of the
Administrative Agent hereunder are limited to those matters that are expressly
the responsibility of the Administrative Agent in accordance with the terms of
this Agreement. Notwithstanding the appointment of the Administrative Agent to
perform the Administrative Services, AerCo Group shall remain responsible for
all matters and decisions related to its business, operations, assets and
liabilities.
(b) Without derogating from the authority and responsibility of the
Administrative Agent with respect to the performance of certain of the
Administrative Services as set forth in this Agreement, it is hereby expressly
agreed and acknowledged that the Administrative Agent is not authorized or
empowered to make or enter into any agreement, contract or other legally
binding arrangement, in respect of or relating to the business or affairs of
AerCo Group, or pledge the credit of, incur any indebtedness on behalf of or
expend any funds of any Person within AerCo Group other than as expressly
permitted in accordance with the terms of this Agreement, all such authority
and power being reserved to the appropriate Persons within AerCo Group.
ARTICLE 3
STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY
SECTION 3.1. Standard of Performance. The Administrative Agent will
devote the same amount of time and attention to and will be required to
exercise the same level of skill, care and diligence in the performance of its
services as it would if it were administering such services on its own behalf
(the "STANDARD OF PERFORMANCE").
SECTION 3.2. Liability and Indemnity. (a) The Administrative Agent
shall not be liable for any Losses or Taxes to or of or payable by AerCo Group
at any time from any cause whatsoever or any Losses or Taxes directly or
indirectly arising out of or in connection with or related to the performance
by the Administrative Agent of this Agreement unless such Losses or Taxes are
the result of the Administrative Agent's own wilful misconduct or gross
negligence or that of any of its directors, officers, agents or employees, as
the case may be.
(b) Notwithstanding anything to the contrary set forth in any other agreement
to which any Person within AerCo Group is a party, AerCo and each other Person
within AerCo Group do hereby assume liability for and do hereby agree to
indemnify and hold harmless on an After-Tax Basis the Administrative
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Agent, its directors, officers, employees and agents and each of them from any
and all Losses or Taxes that may be imposed on, incurred by or asserted against
any of them arising out of, in connection with or related to the Administrative
Agent's performance under this Agreement (including any Losses or Taxes
incurred by the Administrative Agent as a result of indemnifying any Person to
whom it shall have delegated its obligations hereunder in accordance with
Section 10.01, but only to the extent the Administrative Agent would have been
indemnified had it performed such obligations), except as a result of the gross
negligence or wilful misconduct of the Administrative Agent or any of its
directors, officers, employees or agents. This indemnity shall not apply to:
(i) Taxes imposed on net income by the revenue authorities of Ireland in
respect of any payment by AerCo Group to the Administrative Agent due to
the performance of the Administrative Services; and
(ii) Taxes imposed on net income of the Administrative Agent by any
Government Authority other than Irish Authorities to the extent such Taxes
would not have been imposed in the absence of any connection of the
Administrative Agent with such jurisdiction imposing such Taxes other than
any connection that results from the performance by the Administrative
Agent of its obligations under this Agreement.
This indemnity shall expressly inure to the benefit of any director,
officer, agent or employee of the Administrative Agent now existing or in the
future and to the benefit of any successor of the Administrative Agent and
shall survive the expiration of this Agreement.
(c) The Administrative Agent agrees to indemnify and hold harmless on an
After-Tax Basis each Person within AerCo Group, its directors or trustees and
its agents for any Losses whatsoever which they or any of them may incur or be
subject to in consequence of the performance of the Administrative Services or
any breach of the terms of this Agreement by the Administrative Agent, but only
to the extent such Losses arise due to the gross negligence, wilful misconduct
or fraud of the Administrative Agent or any of its directors, officers or
employees, as the case may be; provided, however, that this indemnity shall not
apply and the Administrative Agent shall have no liability in respect of Losses
to the extent that they arise from (i) the wilful misconduct, recklessness or
gross negligence of any Person within AerCo Group, its directors, trustees or
agents, (ii) any breach by the Administrative Agent of its obligations under
this Agreement to the extent such breach is a result of a Service Provider's
failure to perform its obligations to AerCo Group or a failure by AerCo Group
to comply with its obligations under this Agreement, (iii) any action that
AerCo Group requires the Administrative Agent to take pursuant to a
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direction but only to the extent that the Administrative Agent takes such
action in accordance with such direction and in accordance with the provisions
hereof or (iv) a refusal by AerCo Group to take action upon a recommendation
made in good faith by the Administrative Agent in accordance with the terms
hereof.
SECTION 3.3. Conflicts of Interest. Each of AerCo and the Persons within
AerCo Group, acknowledges and agrees that (a) in addition to providing the
Administrative Services under this Agreement, the Administrative Agent may
provide similar services for itself and for other third parties; (b) an
Affiliate of the Administrative Agent has been appointed to act as Cash
Manager, (c) in the course of conducting such activities, the Administrative
Agent will from time to time have conflicts of interest in performing its
duties on behalf of AerCo Group, itself and any other entities in respect of
which it provides such similar services; and (d) AerCo Group has approved the
transactions contemplated by this Agreement and desires that such transactions
be consummated and in giving such approval has expressly recognized that such
conflicts of interest may arise and that when such conflicts of interest arise,
the Administrative Agent shall promptly report the same to AerCo Group and
shall act in a manner that (i) treats AerCo Group equally with such other
entities, (ii) does not violate the Standard of Performance set forth in
Section 3.01 or any of the covenants of the Administrative Agent set forth in
Article 4 hereof and (iii) would not be reasonably likely to have a Material
Adverse Effect on AerCo Group.
ARTICLE 4
ADMINISTRATIVE AGENT UNDERTAKINGS
SECTION 4.1. The Administrative Agent. The Administrative Agent hereby
covenants with AerCo Group that it will conduct its business such that it is a
separate and readily identifiable business from, and independent of, AerCo
Group and further covenants as follows (it being understood that these
covenants shall not prevent any Person within AerCo Group from publishing
financial statements that are consolidated with those of GPA Group, if to do so
is required by Applicable Law or accounting principles from time to time in
effect, and that the Affiliates of the Administrative Agent and certain Persons
within AerCo Group may file a consolidated tax return for United States
federal, state and local income tax purposes):
(a) if the Administrative Agent receives any money whatsoever, which money
belongs to AerCo Group or is to be paid to AerCo Group or into any
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account pursuant to any Related Document or otherwise, it will hold such money
in trust for AerCo Group, and shall keep such money separate from all other
money belonging to the Administrative Agent and shall as promptly as
practicable thereafter pay the same into the relevant account in accordance
with the terms thereof without exercising any right of setoff;
(b) it will comply with any proper directions, orders and instructions which
AerCo Group may from time to time give to it in accordance with the provisions
of this Agreement;
(c) it will not knowingly fail to comply with any legal requirements in the
performance of the Administrative Services;
(d) unless to do so would be in accordance with the Indenture, it will not take
any steps for the purpose of procuring the appointment of any administrative
receiver or the making of an administrative order or for instituting any
bankruptcy, reorganization, arrangement, insolvency, winding up, liquidation,
composition or any like proceedings under the laws of any jurisdiction in
respect of any Person within AerCo Group or in respect of any of their
liabilities, including, without limitation, as a result of any claim or
interest of the Administrative Agent or any of its Affiliates;
(e) it will promptly take or arrange (through the appointment of counsel or
accountants, as appropriate, and by coordinating with the Company Secretary)
for the taking of all steps as may be reasonable to ensure that the Company
Secretary prepares and files the application of AerCo to renew its annual
exemption from Jersey taxation, including coordinating and arranging for the
filing of all necessary papers with the appropriate Jersey fiscal and other
authorities;
(f) it will cooperate with AerCo Group and its agents and directors, including
by providing such information as may reasonably be requested, to permit AerCo
Group or its authorized agents to monitor the Administrative Agent's compliance
with its obligations under this Agreement;
(g) during the term of this Agreement, it will observe all corporate
formalities necessary to remain a legal entity separate and distinct from, and
independent of each Person within AerCo Group;
(h) during the term of this Agreement, it will maintain its assets and
liabilities separate and distinct from each Person within AerCo;
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(i) during the term of this Agreement, it will maintain records, books,
accounts and minutes separate from those of each Person within AerCo Group;
(j) during the term of this Agreement, it will pay its obligations in the
ordinary course of its business as a legal entity separate from each Person
within AerCo Group;
(k) during the term of this Agreement, it will keep its funds separate and
distinct from the funds of each Person within AerCo Group, and it will receive,
deposit, withdraw and disburse such funds separately from the funds of such
Person;
(l) during the term of this Agreement, it will conduct its business in its own
name, and not in the name of any Person within AerCo Group;
(m) during the term of this Agreement, it will not pay or become liable for any
debt of any Person within AerCo Group, other than to make payments in the form
of indemnity as required by the express terms of this Agreement;
(n) during the term of this Agreement, it will not hold out that it is a
division of any Person within AerCo Group, or that any such Person is a
division of it;
(o) during the term of this Agreement, it will not induce any third party to
rely on the creditworthiness of any Person within AerCo Group in order that
such third party will be induced to contract with it;
(p) during the term of this Agreement, it will not enter into any agreements
between it and any Person within AerCo Group that are more favorable to either
party than agreements that the parties would have been able to enter into at
such time on an arm's-length basis with a non-affiliated third party, other
than any agreements in effect on the date hereof (it being understood that the
parties hereto do not intend by this covenant to ratify any self-dealing
transactions);
(q) during the term of this Agreement, it will devote at least one of its
employees to working full time on behalf of AerCo Group; and
(r) during the term of this Agreement, it will (i) forward promptly to the
Servicer a copy of any material communication received from any Person in
relation to any Lease or Aircraft; (ii) grant such access to the Servicer to
its books of account, documents and other records and to its employees as may
be reasonably necessary for the Servicer to perform its obligations in respect
of
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any Lease or Aircraft under the Servicing Agreement, provided, however, that
the Servicer shall not have access to the minutes of the Administrative Agent's
board meetings and other confidential business information; and (iii) execute
and deliver such documents and do such acts and things as the Servicer may
reasonably request in order to effect the purposes of the Servicing Agreement.
ARTICLE 5
UNDERTAKINGS OF AERCO GROUP
SECTION 5.1. Cooperation. AerCo and the other Persons within AerCo
Group, shall use commercially reasonable efforts to cause any Service Provider
to, at all times cooperate with the Administrative Agent to enable the
Administrative Agent to provide the Administrative Services, including
providing the Administrative Agent with all powers of attorney as may be
reasonably necessary or appropriate for the Administrative Agent to perform the
Administrative Services in accordance with this Agreement.
SECTION 5.2. Information. AerCo or its agents will provide the
Administrative Agent with the following information in respect of itself and
all other Persons within AerCo Group:
(a) copies of all Related Documents, including the articles of incorporation,
by-laws, trust agreements (or equivalent documents) of each such Person, and
copies of all books and records maintained on behalf of such Persons;
(b) details of all bank accounts and bank mandates maintained by any Person
within AerCo Group;
(c) names of and contact information with respect to the board of directors,
board of trustees, company secretaries and registered offices of any Person
within AerCo Group;
(d) such other information as is necessary to the Administrative Agent's
performance of the Administrative Services; and
(e) a copy of any information provided to AerCo Group pursuant to the Servicing
Agreement;
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provided, that such information as is referred to in this Section 5.02
(with the exception of paragraph (e)) shall be provided to the Administrative
Agent upon execution of this Agreement and, in respect of any amendment or
changes to the information provided to the Administrative Agent upon execution
of this Agreement, promptly following the effectiveness of such amendments or
changes.
SECTION 5.3. Scope of Services. (a) In the event that any Person within
AerCo Group shall enter into any agreement, amendment or other modification of
any Leases or shall take any other action that has the effect of increasing in
any material respect the scope, nature or level of the Administrative Services
to be provided under this Agreement without the Administrative Agent's express
prior written consent, AerCo Group shall so notify the Administrative Agent and
the Administrative Agent shall not be obligated to perform the affected
Administrative Service to the extent of such increase unless and until the
Administrative Agent and AerCo Group shall agree on the terms of such increased
Administrative Service (it being understood that (i) the Administrative Agent
shall have no liability to any Person within AerCo Group directly or indirectly
arising out of, in connection with or related to the Administrative Agent's
failure to perform such increased Administrative Service prior to any such
agreement and (ii) AerCo Group shall not be permitted to engage another Person
to perform the affected Administrative Service without the prior written
consent of the Administrative Agent unless the Administrative Agent has
indicated it is unable or unwilling to act in respect of the affected
Administrative Service).
(b) In the event that AerCo Group shall acquire Additional Aircraft, AerCo
Group shall so notify the Administrative Agent and the Administrative Agent
shall be obligated to provide the Administrative Services with respect to such
Additional Aircraft in accordance with Section 2.06 hereof.
SECTION 5.4. Ratification. Each Person within AerCo Group hereby
ratifies and confirms and agrees to ratify and confirm (and shall furnish
written evidence thereof upon request of the Administrative Agent) any act or
omission by the Administrative Agent in accordance with this Agreement in the
exercise of any of the powers or authorities conferred upon the Administrative
Agent under the terms of this Agreement, it being expressly understood and
agreed that none of the foregoing shall have any obligation to ratify and
confirm, and expressly does not ratify and confirm, any act or omission of the
Administrative Agent in violation of this Agreement, the Standard of
Performance or for which the Administrative Agent is obligated to indemnify
AerCo Group or any Subsidiary under Article 3 hereof.
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SECTION 5.5. Covenants. Each of AerCo and the other Persons within AerCo
Group covenants with the Administrative Agent that it will conduct its business
such that it is a separate and readily identifiable business from, and
independent of, the Administrative Agent, the Guarantor and any of its
Affiliates (it being understood that these covenants shall not prevent any
Person within AerCo Group from publishing financial statements that are
consolidated with those of GPA Group, if to do so is required by Applicable Law
or accounting principles from time to time in effect);
(a) during the term of this Agreement, it will observe, and will cause its
Subsidiaries to observe, all corporate formalities necessary to remain legal
entities separate and distinct from, and independent of, the Administrative
Agent, the Guarantor and any of its Subsidiaries;
(b) during the term of this Agreement, it will maintain, and will cause its
Subsidiaries to maintain, each of their respective assets and liabilities
separate and distinct from those of the Administrative Agent;
(c) during the term of this Agreement, it will maintain, and will cause its
Subsidiaries to maintain, records, books, accounts, and minutes separate from
those of the Administrative Agent;
(d) during the term of this Agreement, it will pay, and will cause its
respective Subsidiaries to pay, each of their respective obligations in the
ordinary course of business as legal entities separate from the Administrative
Agent
(e) during the term of this Agreement, it will keep, and will cause its
Subsidiaries to keep, each of their respective funds separate and distinct from
any funds of the Administrative Agent, and will receive, deposit, withdraw and
disburse such funds separately from any funds of the Administrative Agent;
(f) during the term of this Agreement, it will conduct, and will cause its
respective Subsidiaries to conduct, each of their respective businesses in
their own name, and not in the name of the Administrative Agent;
(g) during the term of this Agreement, it will not agree, and will cause its
Subsidiaries not to agree, to pay or become liable for any debt of the
Administrative Agent, other than to make payments in the form of indemnity as
required by the express terms of this Agreement;
(h) during the term of this Agreement, it will not hold out, and will cause its
Subsidiaries not to hold out, that any of them is a division of the
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Administrative Agent, or that the Administrative Agent is a division of any of
them;
(i) during the term of this Agreement, it will not induce, and will cause its
Subsidiaries not to induce, any third party to rely on the creditworthiness of
the Administrative Agent in order that such third party will be induced to
contract with it;
(j) during the term of this Agreement, it will not enter into, and will cause
its Subsidiaries not to enter into, any transaction between any of them and the
Administrative Agent that are more favorable to either party than transactions
that the parties would have been able to enter into at such time on an
arm's-length basis with a non-affiliated third party, other than any agreements
in effect on the date hereof (it being understood that the parties hereto do
not intend by this covenant to ratify any self-dealing transactions); and
(k) during the term of this Agreement, it will observe, and it will cause its
Subsidiaries to observe, all material corporate or other procedures required
under Applicable Law and under each of their respective constitutive documents.
SECTION 5.6. Ratification by Subsidiaries. AerCo hereby undertakes to
procure that, if so requested by the Administrative Agent, any subsidiary of
AerCo formed or acquired after the date hereof, shall execute an agreement with
the Administrative Agent adopting and confirming, as regards such Subsidiary,
the terms of this Agreement, and agreeing to ratify anything done by the
Administrative Agent in connection herewith.
ARTICLE 6
APPROVALS
SECTION 6.1. Approvals. The Administrative Agent recognizes that certain
instructions hereunder and under the other Related Documents to be given by
AerCo Group may also require the approval of an AerCo Group Subsidiary. In
such circumstances, the Administrative Agent will seek approval from the
relevant AerCo Group Subsidiary and shall report on such approval to AerCo
Group; provided, however, that nothing herein shall in any way diminish any
authority which may be granted to AerCo to act as representative of each Person
within the AerCo Group.
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ARTICLE 7
EFFECTIVENESS
SECTION 7.1. Effectiveness. The effectiveness of this Agreement and all
obligations of the parties hereunder shall be conditioned upon the execution
hereof by all parties to this Agreement.
ARTICLE 8
ADMINISTRATIVE FEES, EXPENSES AND SUBORDINATION
SECTION 8.1. Administrative Fees. (a) In consideration of the
Administrative Agent's performance of the Administrative Services, AerCo Group
agrees to pay to the Administrative Agent the following fees: (i) a fee (an
"ADMINISTRATIVE FEE") of 2.0% of the rental payments made by the Lessees under
the Leases received in respect of each Fee Period from AerCo in respect of its
services to AerCo (the "RENTAL FEE") subject to an annual minimum of $200,000
(the "FIXED FEE"); provided however, if the Rental Fee Percentage (as defined
in the Servicing Agreement) is adjusted according to Section 10.01 of the
Servicing Agreement, the Administrative Fee will be reduced by the amount of
the increase in Servicing Fees (as defined in the Servicing Agreement)
resulting from such Rental Fee Percentage adjustment; and
(ii) a fee for participation in and cooperation with refinancings and other
public or private securities offerings ("NOTES OFFERINGS") of 0.025% of the Net
Proceeds of any such offering (the "ADDITIONAL FEE"). "NET PROCEEDS" means the
cash proceeds received by any person selling Notes (other than underwriters)
within AerCo Group or any other person in connection with any Notes Offering,
less Transaction Costs incurred by any person within AerCo Group or any such
other person in connection with any such Notes Offering (other than the fees
payable pursuant to this Section 8.01).
The Administrative Fee shall be payable in arrears for each period
commencing on the Closing Date (or, thereafter, the most recent Calculation
Date) and ending on the next succeeding Calculation Date during the term of
this Agreement (each such period, a "FEE PERIOD"), such payment to be made no
later than the Payment Date immediately following the end of each such Fee
Period.
(b) The above fees have been calculated on the basis of estimated time and
resources having regard to the expectations of AerCo Group and the
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Administrative Agent concerning the services required from the Administrative
Agent. To the extent the performance of the Administrative Services requires
an investment of time, resources or services that is materially greater or less
than anticipated, the Administrative Agent and AerCo Group shall negotiate in
good faith to arrive at an adjustment to the Administrative Fees that
appropriately reflects the work performed by the Administrative Agent.
(c) The Fixed Fee shall be automatically adjusted as of each March 31 during
the term of this Agreement commencing March 31, 1999, for inflation by
multiplying such fees in effect on such March 31 by the sum of 1.00 plus (if
positive) or minus (if negative) the Inflation Factor with respect to the
immediately preceding calendar year.
SECTION 8.2. Expenses. (a) The Administrative Agent shall be responsible
for all telephone, facsimile and communications costs and expenses directly
relating to or associated with the Administrative Agent's performance of its
duties as set forth in this Agreement up to an annual amount of $200,000.
(b) Subject to the provisions of Section 8.02(a) and Section 8.05, AerCo Group
shall be responsible for the following expenses incurred by the Administrative
Agent in the performance of its obligations ("REIMBURSABLE EXPENSES"):
(i) reasonable out of pocket expenses, including travel, accommodation and
subsistence and approved expenditures in respect of insurance coverage for
the Administrative Agent;
(ii) annual telephone, fax and communication costs and expenses
necessarily and directly incurred in connection with the performance of
the Administrative Services in excess of $200,000;
(iii) expenses expressly authorized by (i) the boards of any Person within
AerCo Group or (ii) any Person to whom such authority has been delegated,
other than the Administrative Agent or its Affiliates; and
(iv) expenses expressly authorized pursuant to other provisions of this
Agreement.
SECTION 8.3. Taxes. The fees specified in Section 8.01 are net of any
value added tax required to be accounted for by the Administrative Agent.
Where the Administrative Agent is required to account for value added tax in
respect of any amounts payable by or on behalf of AerCo Group to the
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Administrative Agent, AerCo Group shall cause to be paid to the Administrative
Agent such additional amounts as are necessary to discharge such value added
tax upon production of a valid value added tax invoice. AerCo Group and the
Administrative Agent shall cooperate in good faith to file an application for
relief from value added taxes on VAT Form 60A as soon as practicable after the
date of this Agreement.
SECTION 8.4. Payment of Expenses. No later than each Calculation Date,
the Administrative Agent shall deliver a notice to the Cash Manager and AerCo
Group, setting forth the amounts of expenses paid by the Administrative Agent
pursuant to Section 8.02 of this Agreement through and including such
Calculation Date (it being understood that if there are no such expenses the
Administrative Agent will be under no obligation to provide such notice).
Subject to Section 8.05 of this Agreement, on the next Payment Date following
such Calculation Date, AerCo Group agrees to pay to the Administrative Agent
all such amounts.
SECTION 8.5. Subordination of Fees and Expenses. The Administrative
Agent agrees that the fees payable to it under Section 8.01 hereof and the
Reimbursable Expenses shall be paid to it in accordance with the Indenture, and
that all such fees and Reimbursable Expenses shall be subordinated in right of
payment to all other payments set forth in the Indenture as ranking higher in
priority of payment thereto.
ARTICLE 9
TERM, REMOVAL OF OR TERMINATION BY THE ADMINISTRATIVE AGENT
SECTION 9.1. Term. This Agreement shall have a term commencing on the
Closing Date and expiring on the date of payment in full of all amounts
outstanding to be paid on the Notes (including the Class D and E Notes) and any
other securities issued by AerCo relating to Additional Aircraft owned by AerCo
Group.
SECTION 9.2. Right to Terminate. (a) At any time during the term of this
Agreement, AerCo Group shall be entitled to terminate this Agreement on 120
days written notice if:
(i) the Administrative Agent shall materially breach any of its
obligations under this Agreement and, after written notice from AerCo
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the Administrative Agent has failed to cure such breach within 30 days; or
(ii) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
relief in respect of the Administrative Agent, or of a substantial part of
the property or assets of the Administrative Agent, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
U.S. Federal or state or foreign bankruptcy, insolvency, receivership or
similar law, and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered or the Administrative Agent, shall go into
liquidation, suffer a receiver or mortgagee to take possession of all or
substantially all of its assets or have an examiner appointed over it or
if a petition or proceeding is presented for any of the foregoing and not
discharged within 60 days; or
(iii) the Administrative Agent shall (A) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
U.S. Federal or state or foreign bankruptcy, insolvency, receivership or
similar law, (B) consent to the institution of, or fail to contest the
filing of, any petition described in clause (ii) above, (C) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, or (D) make a general assignment for the benefit of its
creditors.
(b) At any time during the term of this Agreement the Administrative Agent
shall be entitled to terminate this Agreement on 60 days' written notice if:
(i) any AerCo Group entity shall fail to pay in full when due (A) any
Administrative Fee within 30 days or any Reimbursable Expenses in an
aggregate amount in excess of $750,000 within 30 days, in either case,
after the effectiveness of written notice from the Administrative Agent of
such failure or (B) any other amount payable to the Administrative Agent
hereunder, within 60 days after written notice from the Administrative
Agent of such failure.
(ii) any Person within AerCo Group shall fail to perform or observe or
shall violate in any material respect any material term, covenant,
condition or agreement to be performed or observed by it in respect of
this Agreement for 30 days after AerCo Group shall have
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received notice of such failure (other than with respect to payment
obligations referred to in clause (b)(i) of this Section 9.02);
(iii) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
relief in respect of AerCo or any other Person within AerCo Group, or of a
substantial part of the property or assets of any of AerCo or any other
Person within AerCo Group under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other U.S. Federal or state or
foreign bankruptcy, insolvency, receivership or similar law, and such
proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered or
AerCo or any other Person within AerCo Group shall go into liquidation,
suffer a receiver or mortgagee to take possession of all or substantially
all of its assets or have an examiner appointed over it or if a petition
or proceeding is presented for any of the foregoing and not discharged
within 60 days; or
(iv) AerCo or any other Person within AerCo Group shall (A) voluntarily
commence any proceeding or file any petition seeking relief under any U.S.
Federal or state or foreign bankruptcy, insolvency, receivership or
similar law, (B) consent to the institution of, or fail to contest the
filing of, any petition described in clause 9.02(b)(iii) above, (C) file
an answer admitting the material allegations of a petition filed against
it in any such proceeding or (D) make a general assignment for the benefit
of its creditors.
(c) No termination of this Agreement by AerCo Group pursuant to Section 9.02(a)
and no termination by the Administrative Agent pursuant to Section 9.02(b)
shall become effective prior to the date of appointment by AerCo Group of a
successor Administrative Agent and the acceptance of such appointment by such
successor Administrative Agent; provided, however, that in the event that a
successor Administrative Agent shall not have been appointed within 90 days
after such termination, the Administrative Agent may petition any court of
competent jurisdiction for the appointment of a successor Administrative Agent.
Upon action by either party pursuant to the provisions of this Section
9.02(c), the Administrative Agent shall be entitled to the payment of any
compensation owed to it hereunder and to the reimbursement of all Reimbursable
Expenses incurred in connection with all services rendered by it hereunder, as
provided in Section 8 hereof, and for so long as the Administrative Agent is
continuing to perform any of the Administrative Services for any Person within
AerCo Group, the Administrative Agent shall be entitled to continue to be paid
all amounts due to it hereunder, net of any
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amounts that shall have been finally adjudicated by a court of competent
jurisdiction to be owed by the Administrative Agent to AerCo Group or not to be
due to the Administrative Agent, until a successor Administrative Agent shall
have been appointed and shall have accepted such appointment in accordance with
the provisions of Section 9.03(c).
(d) The parties hereto agree not to amend this Agreement to reduce the scope of
the Administrative Services to be provided by the Administrative Agent
hereunder unless a third party reasonably acceptable to the parties hereto and
to the Servicer becomes a party to this Agreement and agrees to provide such
Administrative Services in the place of the Administrative Agent.
SECTION 9.3. Consequences of Termination. (a) Notices. (i) Following the
termination of this Agreement by AerCo Group or by the Administrative Agent
pursuant to Section 9.02, the Administrative Agent will promptly forward to
AerCo Group any notices received by it during the year immediately after
termination.
(ii) AerCo Group will notify promptly any relevant third party, including
each Rating Agency, the Trustee, and the Servicer, of the termination of
this Agreement by AerCo Group or by the Administrative Agent and will
request that any such notices and accounting reports and communications
thereafter be made or given directly to the entity engaged to serve as
Administrative Agent, and to AerCo Group.
(b) Accrued Rights. A termination of this Agreement by AerCo Group or by the
Administrative Agent hereunder shall not affect the respective rights and
liabilities of any party accrued prior to such termination in respect of any
prior breaches hereof or otherwise.
(c) Replacement. If this Agreement is terminated by AerCo Group or by the
Administrative Agent under Section 9.02, the Administrative Agent will
cooperate with any person appointed to perform the Administrative Services,
including providing such person with all information and documents reasonably
requested.
SECTION 9.4. Survival. Notwithstanding any termination or the expiration
of this Agreement, the obligations of AerCo Group and the Administrative Agent
under Section 3.02 shall survive such termination or expiration, as the case
may be.
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ARTICLE 10
ASSIGNMENT AND DELEGATION
SECTION 10.1. Assignment and Delegation. (a) No party to this Agreement
shall assign or delegate or otherwise subcontract this Agreement or all or any
part of its rights or obligations hereunder to any Person without the prior
written consent of the other parties, such consent not to be unreasonably
withheld.
(b) Without limiting the foregoing, any Person who shall become a
successor by assignment or otherwise of any party hereto shall be required as a
condition to the effectiveness of any such assignment or other arrangement to
become a party to this Agreement.
ARTICLE 11
GUARANTEE
SECTION 11.1. Guarantee. (a) The Guarantor absolutely, irrevocably and
unconditionally guarantees for the benefit of AerCo Group (the "GUARANTEED
PARTIES"), as primary obligor and not merely as a surety, the following (which
are collectively referred to as the "GUARANTEED OBLIGATIONS"): the full and
punctual payment by the Administrative Agent when due of any and all amounts
that are or may become due and payable by the Administrative Agent to the
Guaranteed Parties under the Administrative Agency Agreement and the timely
performance of all other obligations owed by the Administrative Agent to the
Guaranteed Parties hereunder. The Guarantor hereby further agrees that if the
Administrative Agent shall fail to pay or perform any Guaranteed Obligation
when the same shall become due and payable or is required to be performed, the
Guarantor will pay or perform, as the case may be, such Guaranteed Obligation
promptly upon receipt of notice stating that such Guaranteed Obligation was not
paid when due or performed when required, as the case may be. To the extent
that the Guarantor performs under this Guarantee, the rights of the Guarantor
will be subrogated to the rights of the Administrative Agent under the
Administrative Agency Agreement. The obligations of the Guarantor under this
Guarantee are expressly subject to any defenses that the Administrative Agent
may have against the Guaranteed Parties under the terms of the Administrative
Agency Agreement, including any and all claims, defenses, rights and set-offs
available to the Administrative Agent, except any thereof arising out of, based
on or otherwise described in clause (i) or (ii) of Section Reference to Section
11.02(b) typed in manually -- does not work with cross-ref because sections (a)
& (b) are manually typed in main body of doc11.02(b) hereof. The performance
obligation of the
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Guarantor under this Guarantee will be deemed satisfied when and to the extent
that the Administrative Agent performs its obligations under the Administrative
Agency Agreement. The foregoing guarantee of the Guarantor is given solely to
the Guaranteed Parties and, except as expressly permitted by Section 11.05
hereof, the Guarantor undertakes no liability or responsibility hereby to any
Person other than the Guaranteed Parties.
(b) The Guarantor hereby waives (i) notice of acceptance hereof and (ii)
presentment to, demand of payment from or protest to the Administrative Agent
of any of the Guaranteed Obligations. This Guarantee shall be a continuing
guarantee of payment and performance and not of collection only, and shall
remain operative and in full force and effect until the earlier of such time as
(i) the Guaranteed Obligations shall have been paid and performed in full, (ii)
the Administrative Agency Agreement shall have been terminated in accordance
with its terms or (iii) the Administrative Agency Agreement shall have been
assigned pursuant to its terms by the Administrative Agent to a third party
which is not affiliated with the Guarantor; provided, however, that the
obligations of the Guarantor under this Guarantee shall not terminate with
respect to those provisions that expressly survive the termination of the
Administrative Agency Agreement, as set forth in Section 9.04 hereof, until the
obligations of the Administrative Agent hereunder shall have been performed in
full.
(c) If any Guaranteed Obligation paid by any Person is at any time repaid by
the recipient thereof in compliance with any court order pertaining to any
bankruptcy or insolvency proceedings relating to the Administrative Agent, the
amount so repaid shall not be deemed to have been paid and shall be deemed to
be outstanding, and the obligation of the Guarantor hereunder to pay such
Guaranteed Obligation shall remain in full force and effect.
SECTION 11.2. Absolute Obligations. The obligations of the Guarantor
hereunder shall be absolute and unconditional and shall not be affected by any
circumstances other than (a) any claims, defenses, rights and set-offs
available to the Administrative Agent under the Administrative Agency Agreement
or otherwise (except those set forth in clauses (i) and (ii) of Section
Cross-ref (b) typed in manually-- cross-ref does not work as sub-paras (a) and
(b) typed manually within text of doc11.02(b)) and (b) performance by the
Administrative Agent of its obligations under the Administrative Agency
Agreement, including (i) any lack of genuineness, authorization, validity,
legality or enforceability of the bankruptcy, reorganization or similar
proceeding by or against the Administrative Agent or any other Person or the
appointment of a receiver or examiner with respect thereto or (ii) any
amendment, waiver or other modification of the Administrative Agency Agreement
that shall have been entered into with the consent of the Administrative Agent.
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<PAGE> 43
SECTION 11.3. Guarantor's Representations. The Guarantor represents and
warrants as of the date hereof to the Guaranteed Parties that:
(a) the Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of Ireland, and has full power, authority and legal
right to execute and deliver, and to perform its obligations under, this
Guarantee;
(b) the Guarantor has taken all necessary corporate and legal action to
authorize the guarantee hereunder on the terms and conditions of this Guarantee
and to authorize its execution, delivery and performance;
(c) this Guarantee has been duly executed and delivered by a duly authorized
officer or representative of the Guarantor, and constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms;
(d) the execution, delivery and performance of this Guarantee will not
constitute a default under or violate any provision of any law or regulation,
or any judgment or order of any court, arbitrator or governmental authority, in
each case applicable to the Guarantor, or the certificate of incorporation or
by-laws of the Guarantor, or any agreement to which the Guarantor is a party;
and
(e) no consent of any other Person, and no consent, license, permit, approval
or authorization of, exemption by, notice or report to, or registration, filing
or declaration with, any governmental authority, bureau or agency is required
in connection with the execution delivery, performance, validity or
enforceability with respect to the Guarantor of this Guarantee.
SECTION 11.4. Successors and Assigns; Amendments. (a) This Guarantee
shall be binding upon and inure to the benefit of the Guarantor and the
Guaranteed Parties and their respective permitted successors and assigns. The
Guarantor may not assign its rights or obligations under this Guarantee to any
Person. The Guaranteed Parties may assign their rights under this Guarantee
only to such person as it shall assign its rights under the Administrative
Agency Agreement and only on the terms set forth in Section 10.01 of the
Administrative Agency Agreement.
(b) This Guarantee may not be amended in any material respect without first
obtaining the written permission of the Guaranteed Parties and the Guarantor.
39
<PAGE> 44
SECTION 11.5. Limitations. Except as expressly provided in Section 11.06
and without limiting the provisions of Section 11.02, the Guarantor shall have
no greater obligations or liabilities under this Guarantee than does the
Administrative Agent under the Administrative Agreement. Without limiting the
foregoing, the Guarantor shall be entitled to the benefits of Section 3.02 of
the Administrative Agency Agreement and the Guarantor, so long as it shall have
any obligation under this Guarantee, shall be entitled to the benefit of all
indemnities to which the Administrative Agent is entitled under the
Administrative Agency Agreement as if the Guarantor were named as a party
thereto and shall be bound by the provisions thereof to the same extent.
SECTION 11.6. Payments; Costs of Enforcement. (a) All payments to be
made by the Guarantor hereunder shall be made in United States Dollars and in
such funds and in such manner as the Administrative Agent is required to make
such payments under the Administrative Agency Agreement, and all such payments
shall be free and clear of and without deduction or withholding for or on
account of any and all Taxes.
(b) The Guarantor agrees to reimburse the Guaranteed Parties for any reasonable
cost or expense (including the reasonable fees and disbursements of counsel for
the Guaranteed Parties) which may be reasonably incurred by or behalf of the
Guaranteed Parties in connection with the failure of the Guarantor to perform
any of its obligations hereunder and any enforcement proceedings resulting
therefrom.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. Notices. Subject to paragraph (d) below, all notices,
consents, directions, approvals, instructions, requests and other
communications required or permitted by such agreement to be given to any
Person shall be in writing, and any such notice shall become effective five
Business Days after being deposited in the mails, certified or registered,
return receipt requested, with appropriate postage prepaid for first class
mail, or if delivered by hand or courier service or in the form of a facsimile,
when received (and, in the case of a facsimile, receipt of such facsimile is
confirmed to the sender), and shall be directed to the address or facsimile
number of such Person set forth below (with a copy to the Administrative
Agent):
If to AerCo Limited, or its Subsidiaries, to it at:
40
<PAGE> 45
AerCo Limited
c/o Mourant & Co. Secretaries Limited
22 Grenville Street
St. Helier
Jersey JE4 8PX, Channel Islands
Attention: Company Secretary
Telephone: 011-44-1534-609-000
Telecopy: 011-44-1534-609-333
If to the Administrative Agent, to it at:
GPA Administrative Services Limited
c/o GPA Group plc
GPA House
Shannon
Co. Clare, Ireland
Attention: Company Secretary
Telephone: 353-61-360000
Telecopy: 353-61-360113
If to the Guarantor, to it at:
GPA Group plc
GPA House
Shannon
Co. Clare, Ireland
Attention: Company Secretary
Telephone: 353-61-360000
Telecopy: 353-61-360220
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is conclusively presumed to have been duly given,
whether or not the addressee receives it.
From time to time any party to such agreement may designate a new address
or number for purposes of notice thereunder by notice to each of the other
parties thereto.
SECTION 12.2. Governing Law. This agreement shall be governed by and
construed in accordance with the law of the State of New York.
41
<PAGE> 46
SECTION 12.3. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 12.01 shall
be deemed effective service of process on such party.
SECTION 12.4. Agent for Service of Process. Each of AerCo and its
Subsidiaries hereby appoint Corporation Service Company, 375 Hudson Street, New
York, N.Y., U.S.A. 10014 as its nonexclusive agent for service of process in
the United States in connection with the Administrative Agency Agreement. The
parties may use any legally available means of service of process. Each of
AerCo and its Subsidiaries will promptly notify the other persons listed in
Section 12.01 of any change in the address of the respective agents; provided,
however, that each of AerCo and its Subsidiaries will at all times maintain an
agent located within New York State for service of process in connection with
the Administrative Agency Agreement, the identity of any successor agent to be
reasonably satisfactory to the Administrative Agent.
SECTION 12.5. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 12.6. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto where
upon the same instrument. This agreement shall become effective when each
party hereto shall have received a counterpart hereof signed by the other party
hereto. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
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<PAGE> 47
SECTION 12.7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 12.8. Power of Attorney. Each of AerCo and the Subsidiaries
shall appoint the Servicer and its successors, and its permitted designees and
assigns, as their true and lawful attorney-in-fact. All services to be
performed and actions to be taken by the Servicer pursuant tot his Agreement
shall be performed to and on behalf of each of AerCo and the Subsidiaries. The
Servicer shall be entitled to seek and obtain from each of AerCo and the
Subsidiaries a power of attorney in respect of the execution of any specific
action as the Servicer deems appropriate.
SECTION 12.9. Restrictions on Disclosure. The Administrative Agent
agrees that it shall not, prior to the termination or expiration of this
Agreement or within the three years after such termination or expiration,
disclose to any Person any confidential or proprietary information, whether of
a technical, financial, commercial or other nature, received directly or
indirectly from AerCo Group regarding AerCo Group or its business or the
Aircraft, except as authorized in writing by AerCo Group or otherwise permitted
by this Agreement, and except:
(a) to Representatives of the Administrative Agent and any of its Affiliates in
furtherance of the purposes of this Agreement;
(b) to the extent (i) required by Applicable Law or by judicial or
administrative process, including pursuant to any subpoena, civil investigative
demand or similar demand or request of any court, regulatory authority,
arbitrator or arbitration to which the Administrative Agent or an affiliate
thereof is a party, or (ii) reasonably necessary in order to enable the
Administrative Agent to perform the Administrative Agent Services, but in the
case of clause (i) above, in the event of proposed disclosure, the
Administrative Agent shall seek the assistance of AerCo Group to protect
information in which AerCo Group has an interest to the maximum extent
achievable;
(c) to the extent such information is required to be included in any
preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated by the Indenture
approved in advance by AerCo.
(d) to the extent that the information:
43
<PAGE> 48
(i) was generally available in the public domain;
(ii) was lawfully obtained from a source under no obligation of
confidentiality, directly or indirectly, to any Person within AerCo Group;
(iii) was disclosed to the general public with the approval of any Person
within AerCo Group; or
(iv) was developed independently by the Administrative Agent or any
Affiliates of the Administrative Agent; and
(e) to the extent the Administrative Agent reasonably deems necessary to
protect and enforce its rights and remedies under this Agreement; provided,
however, that in such an event the Administrative Agent shall act in a manner
reasonably designed to prevent disclosure of such confidential information; and
provided further, that prior to disclosure of such information the
Administrative Agent shall inform AerCo of such disclosure.
SECTION 12.10. Rights of Setoff. To the extent permitted by Applicable
Law, the Administrative Agent hereby waives any right it may have under
Applicable Law to exercise any rights of setoff it has under Applicable Law
with respect to any assets it holds owned by, or money or monies it owns to,
any Person within AerCo Group pursuant to and in accordance with the terms and
conditions of this Agreement; provided, however, that this Section 12.09 shall
not affect any rights of setoff or other rights that the Administrative Agent
has or may have under the express terms and conditions of this Agreement.
SECTION 12.11. No Partnership. (a) It is expressly recognized and
acknowledged that this Agreement is not intended to create a partnership, joint
venture or other similar arrangement between any AerCo Group member or members
on the one part and the Administrative Agent on the other part. It is also
expressly understood that any actions taken on behalf of any AerCo Group member
by the Administrative Agent shall be taken as agent for AerCo Group, either
naming the relevant AerCo Group entity, or naming the Administrative Agent as
agent for an undisclosed principal. No AerCo Group member shall hold itself
out as a partner of the Administrative Agent, and the Administrative Agent will
not hold itself out as a partner of any AerCo Group member.
(b) The Administrative Agent shall not have any fiduciary duty or other implied
obligations or duties to any AerCo Group member, any Lessee or any other Person
arising out of this Agreement.
44
<PAGE> 49
SECTION 12.12. Implied Terms Excluded. For the avoidance of doubt, the
provisions of Section 39 of the Sale of Goods and Supply of Services Act, 1980
of Ireland are hereby expressly excluded.
45
<PAGE> 50
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first written above.
GPA ADMINISTRATIVE SERVICES LIMITED
By /s/ John Redmond
_________________________________________
Name: John Redmond
Title: Director
GPA GROUP PLC,
as Guarantor
By /s/ John Redmond
_________________________________________
Name: John Redmond
Title: Secretary
AERCO LIMITED
By /s/ Frederick W. Bradley Jr.
_________________________________________
Name: Fredereck W. Bradley Jr.
Title: Director
AERCO IRELAND LIMITED
By /s/ Patrick J Dalton
_________________________________________
Name: Patrick J Dalton
Title: Director
<PAGE> 51
AERCO IRELAND II LIMITED
By /s/ John Redmond
_________________________________________
Name: John Redmond
Title: Director
AERFI BELGIUM N.V.
By /s/ John Redmond
_________________________________________
Name: John Redmond
Title: Director
AERCOUSA INC.
By /s/ Stephanie Rudolph
_________________________________________
Name: Stephanie Rudolph
Title: Director
AIRCRAFT LEASE PORTFOLIO
SECURITIZATION 94-1 LIMITED
By /s/ George Adrian Robinson
_________________________________________
Name: George Adrian Robinson
Title: Director
<PAGE> 52
ALPS 94-1 (BELGIUM) N.V.
By /s/ George Adrian Robinson
_________________________________________
Name: George Adrian Robinson
Title: Director
PERGOLA LIMITED
By /s/ Michael Horgan
_________________________________________
Name: Michael Horgan
Title: Director
<PAGE> 53
APPENDIX A
AerCo Ireland Limited
AerCo Ireland II Limited
AerCoUSA Inc.
AerFi Belgium N.V.
Aircraft Lease Portfolio Securitization 94-1 Limited
ALPS 94-1 (Belgium) N.V.
Pergola Limited
<PAGE> 1
Exhibit 10.2
================================================================================
EXECUTION COPY
CASH MANAGEMENT AGREEMENT
among
GPA CASH MANAGER II LIMITED,
a limited company organized
under the laws of Ireland,
as Cash Manager,
GPA GROUP PLC,
a public limited company organized
under the laws of Ireland,
as Guarantor,
AerCo LIMITED,
a limited liability company
organized under the laws of Jersey, Channel islands,
BANKERS TRUST COMPANY,
a New York banking corporation, not in its individual capacity, but solely as
trustee under the Indenture, dated as of the date hereof, among AerCo Limited,
as issuer, and Bankers Trust Company, as trustee, and as Security Trustee under
the Security Trust Agreement
and
THE ENTITIES LISTED ON APPENDIX A HERETO
Dated as of July 15, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions 3
ARTICLE 2
APPOINTMENT; CASH MANAGEMENT SERVICES
SECTION 2.01. Appointment.......................................... 4
SECTION 2.02. Establishment of Accounts............................ 5
SECTION 2.03. Description of Accounts.............................. 5
SECTION 2.04. Investments of Cash.................................. 7
SECTION 2.05. Calculations......................................... 8
SECTION 2.06. Withdrawals and Transfers............................ 8
SECTION 2.07. Ratings and the Accounts............................. 10
SECTION 2.08. Records.............................................. 10
SECTION 2.09. Reports.............................................. 10
SECTION 2.10. Additional Aircraft.................................. 10
SECTION 2.11. Professional Advice.................................. 10
ARTICLE 3
STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY
SECTION 3.01. Standard of Performance.............................. 11
SECTION 3.02. Liability and Indemnity.............................. 11
SECTION 3.03. Conflicts of Interest................................ 12
ARTICLE 4
CASH MANAGER UNDERTAKINGS
SECTION 4.01. Cash Manager Undertakings............................ 12
ARTICLE 5
UNDERTAKINGS OF AERCO GROUP
SECTION 5.01. Cooperation.......................................... 15
SECTION 5.02. Information.......................................... 15
SECTION 5.03. Scope of Services.................................... 16
SECTION 5.04. Ratification......................................... 17
<PAGE> 3
PAGE
[S] [C]
SECTION 5.05. Accounts and Cash Arrangements........................ 17
SECTION 5.06. Further Assurances.................................... 18
SECTION 5.07. Covenants of AerCo Group.............................. 18
ARTICLE 6
EFFECTIVENESS
SECTION 6.01. Effectiveness.......................................... 19
ARTICLE 7
CASH MANAGEMENT FEES AND EXPENSES
SECTION 7.01. Cash Management Fees................................... 20
SECTION 7.02. Expenses............................................... 20
ARTICLE 8
TERM; REMOVAL OF OR TERMINATION BY THE CASH MANAGER
SECTION 8.01. Term................................................... 20
SECTION 8.02. Right to Terminate..................................... 20
SECTION 8.03. Consequences of Termination............................ 23
SECTION 8.04. Survival............................................... 23
ARTICLE 9
APPOINTMENT OF SUCCESSOR CASH MANAGER
SECTION 9.01. Appointment of Successor Cash Manager.................. 24
ARTICLE 10
ASSIGNMENT AND DELEGATION
SECTION 10.01. Assignment and Delegation............................. 24
ARTICLE 11
GUARANTEE
SECTION 11.01. Guarantee............................................. 25
SECTION 11.02. Reinstatement......................................... 26
SECTION 11.03. Unconditional Nature of Guarantee..................... 26
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
PAGE
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Notices............................................... 27
SECTION 12.02. Governing Law......................................... 29
SECTION 12.03. Jurisdiction.......................................... 29
SECTION 12.04. Agent for Service of Process.......................... 29
SECTION 12.05. WAIVER OF JURY TRIAL.................................. 29
SECTION 12.06. Counterparts; Third Party Beneficiaries............... 29
SECTION 12.07. Entire Agreement...................................... 30
SECTION 12.08. Table of Contents; Headings........................... 30
SECTION 12.09. Restrictions on Disclosure............................ 30
SECTION 12.10. No Partnership........................................ 31
APPENDIX A - Subsidiaries
SCHEDULE 1 - Accounts
EXHIBIT A - Certificate Authorizing Direct Funds Transfer to Expense Payee
EXHIBIT B - Certificate Authorizing Delegation of Certain Cash Management
Services
</TABLE>
iii
<PAGE> 5
CASH MANAGEMENT AGREEMENT dated as of July 15, 1998, among AerCo Limited,
a limited liability company incorporated in Jersey, Channel Islands ("AERCO"),
Bankers Trust Company, a New York banking corporation ("BANKERS TRUST"), not in
its individual capacity, but solely as trustee under the Indenture, dated as of
the date hereof (the "INDENTURE"), among AerCo, as issuer and Bankers Trust,
as trustee (the "TRUSTEE"), GPA Group plc, a public limited company organized
under the laws of Ireland (the "GUARANTOR" or "GPA GROUP"), GPA Cash Manager II
Limited, a limited company organized under the laws of Ireland, as Cash Manager
(the "CASH MANAGER") and the subsidiaries of AerCo, each listed on Appendix A
hereto (collectively with AerCo, the "AERCO GROUP").
For the consideration set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Cash Manager,
AerCo and the other AerCo Group Members agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings. Unless otherwise defined herein, all capitalized terms
used but not defined herein have the meanings assigned to such terms in the
Indenture and the Security Trust Agreement.
"AFTER-TAX BASIS" means on a basis such that any payment received, deemed
to have been received or receivable by any Person shall, if necessary, be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction of all U.S. federal, state, local and Irish or
other foreign Taxes, penalties, fines, interest, additions to Tax and other
charges resulting from the receipt (actual or constructive) or accrual of such
payments imposed by or under any U.S. federal, state, local or Irish or other
foreign law or Governmental Authority (after taking into account any current
deduction to which such Person shall be entitled with respect to the amount
that gave rise to the underlying payment and on a present value basis
(determined on the basis of discounting at 8% any deductions, credits, or other
tax benefits in other years to which such Person reasonably anticipates being
entitled)) be equal to the payment received, deemed to have been received or
receivable.
"CASH MANAGEMENT SERVICES" has the meaning assigned to such term in
Section 2.01 hereof.
3
<PAGE> 6
"GOVERNMENTAL AUTHORITY" means any court, administrative agency or
commission or other governmental agency or instrumentality (or any officer or
representative thereof) domestic, foreign or international, of competent
jurisdiction including, without limitation, the European Union.
"INDENTURE" means the Indenture dated as of July 15, 1998, between each of
AerCo and the Trustee.
"LOSSES" means any and all liabilities (including liabilities arising out
of the doctrine of strict liability), obligations, losses, damages, penalties,
Taxes, actions, suits, judgments, costs, fees, expenses (including reasonable
legal fees, expenses and related charges and costs of investigation) and
disbursements, of whatsoever kind and nature; provided, that the term "Losses"
shall not include any indemnified party's management time or overhead expenses.
"OFFERING MEMORANDUM" means the offering memorandum in connection with the
purchase by AerCo of Aircraft Lease Portfolio Securitization 94-1 Limited and
the Transferring Companies and the issuance by AerCo of the Notes.
"REPRESENTATIVES" with respect to any Person means the officers,
directors, employees, advisors and agents of such Person.
"STANDARD OF PERFORMANCE" has the meaning assigned to such term in Section
3.01 hereof.
ARTICLE 2
APPOINTMENT; CASH MANAGEMENT SERVICES
SECTION 2.1. Appointment. (a) The Security Trustee, on behalf of the
Secured Parties, having been duly authorized by AerCo, hereby appoints the Cash
Manager as the provider to AerCo Group of the cash management services set
forth herein and in the Indenture (the "CASH MANAGEMENT SERVICES") and
delegates to the Cash Manager its authority to administer the Accounts, to
undertake the transactions contemplated hereby (including the power to direct
withdrawals or transfers from the Accounts in accordance with this Agreement
and the Indenture) and to otherwise perform the Cash Management Services on
behalf of AerCo Group on the terms and subject to the conditions set forth in
this Agreement.
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<PAGE> 7
(b) The Cash Manager hereby accepts such appointment and agrees to perform
the Cash Management Services on the terms and subject to the conditions set
forth in this Agreement.
SECTION 2.2. Establishment of Accounts. (a) Operating Bank. The
Operating Bank shall be the Senior Trustee, initially Bankers Trust Company,
located at Four Albany Street, New York, New York 10006.
(b) Establishment of Accounts. The Cash Manager shall establish and
maintain each of the Accounts set forth on Schedule 1 hereto, in each case in
the manner described herein and in Section 3.01 of the Indenture. The Cash
Manager shall take all actions necessary to establish, and shall establish,
additional or replacement Accounts from time to time as required by and in
accordance with the terms of Section 3.01 of the Indenture. In addition, the
Cash Manager shall take all actions necessary to cause the Security Trustee to
be granted, to the extent possible, a security interest pursuant to Section
2.01 of the Security Trust Agreement in the interest of each AerCo Group Member
in the cash balances from time to time deposited in the Accounts.
(c) Successor Operating Bank. If the Operating Bank should change as a
result of (A) the resignation of the Senior Trustee or replacement of the
Senior Trustee by an Eligible Institution pursuant to the terms of the
Indenture, (B) the repayment in full of the Senior Class of Notes or (C) such
Operating Bank's failure to meet the criteria necessary to qualify as an
Eligible Institution, then the Cash Manager, acting on behalf of the Security
Trustee, shall thereupon promptly establish replacement accounts as necessary
at the successor Operating Bank and transfer the balance of funds in each
Account then maintained at the former Operating Bank to such successor
Operating Bank.
SECTION 2.3. Description of Accounts. (a) Collection Account. The Cash
Manager shall establish and maintain the Collection Account in accordance with
Section 3.01(b) of the Indenture.
(b) The Lessee Funded Account. The Cash Manager shall establish and
maintain the Lessee Funded Account in accordance with Section 3.01(c) of the
Indenture.
(c) Expense Account. The Cash Manager shall establish and maintain the
Expense Account in accordance with Section 3.01(d) of the Indenture.
(d) Rental Accounts. The Cash Manager shall establish and maintain the
Rental Accounts, and from time to time shall establish and maintain one or more
additional Rental Accounts (including one or more Non-Trustee Accounts
5
<PAGE> 8
that, for tax or other regulatory or legal purposes, cannot be established in
the name of the Security Trustee), each in accordance with Section 3.01(e) of
the Indenture.
(e) Refinancing Account. The Cash Manager shall establish and maintain a
Refinancing Account with respect to each subclass of Notes in accordance with
Section 3.01(f) of the Indenture.
(f) Defeasance/Redemption Account. The Cash Manager shall establish and
maintain the Defeasance/Redemption Account in accordance with Section 3.01(g)
and Article XI of the Indenture.
(g) Aircraft Purchase Account. The Cash Manager shall establish and
maintain the Aircraft Purchase Account in accordance with Section 3.01(h) of
the Indenture.
(h) Note Account. The Cash Manager shall establish and maintain the Note
Account in accordance with Section 3.01(i) of the Indenture.
(i) Lessee Payment Instructions. (i) The Cash Manager shall furnish
transfer instructions in the form set forth in Exhibit D to the Security Trust
Agreement to each bank other than the Operating Bank at which a Rental Account
is located and take all necessary steps to ensure that all funds on deposit in
each such Rental Account are transferred from such Rental Account to the
Collection Account within one Business Day of receipt thereof.
(ii) Not later than one month after the Closing Date and from time
to time thereafter, the Cash Manager shall (A) transmit payment
instructions directing each Lessee which, in accordance with the terms
of the relevant Lease, made payments into any bank accounts prior to the
Closing Date to make all future Rental Payments to a designated Rental
Account at the Operating Bank, (B) transmit payment instructions to the
bank in which such Accounts are maintained, directing such bank to
forward to a designated Rental Account at the Operating Bank any
payments made into any such Account after the Closing Date and (C) close
any such Accounts as soon as practicable after all AerCo Group Lessees
have been given payment instructions pursuant to this Section 2.03(i)
and the Cash Manager has become satisfied that all such Lessees are
making and will continue to make payments in accordance with such
payment instructions.
(j) Bank Account Statements. The Cash Manager shall take all necessary
steps to ensure that the Operating Bank and each other bank at which
6
<PAGE> 9
a Rental Account is located shall furnish as of the close of business on each
Calculation Date a statement providing the then current balance of each
applicable Account to the Security Trustee, AerCo, the Trustee, the Servicer
and the Cash Manager.
(k) Maintaining the Non-Trustee Accounts. So long as any Secured
Obligations remain Outstanding:
(i) The Cash Manager shall maintain, or cause to be maintained,
each Non-Trustee Account in the name of the related Grantor (as defined
in the Security Trust Agreement) only with a bank (an "ACCOUNT BANK")
that has entered into a letter agreement in substantially the form of
Exhibit D to the Security Trust Agreement (or made such other
arrangements as are acceptable to the Cash Manager and the Security
Trustee) with such Grantor and the Security Trustee (an "ACCOUNT
LETTER").
(ii) The Cash Manager (x) shall promptly instruct each Person
obligated at any time to make any payment to any Grantor for any reason
(an "OBLIGOR") to make such payment to a Non-Trustee Account meeting the
requirements of clause (i) above, (y) shall instruct each such Account
Bank to transfer to the Collection Account, in immediately available
funds, within one Business Day of receipt thereof, an amount equal to
the credit balance of the Non-Trustee Account in such Account Bank
(other than any amount required to be left on deposit in such Account
Bank for local tax or other regulatory or legal purposes), and (z) shall
transfer or cause each such Account Bank to transfer to the Security
Trustee for deposit in the Collection Account, within one Business Day
of receipt thereof, all other Cash Collateral and any proceeds of any of
the Collateral.
(iii) Upon the termination of any Account Letter or other
arrangement with respect to the maintenance of a Non-Trustee Account by
any Grantor or any Account Bank, the Cash Manager shall immediately
notify all Obligors that were making payments to such Non-Trustee
Account to make all future payments to another Non-Trustee Account
meeting the requirements of clause (i) above or, if practicable at such
time, to an Account in the name of the Security Trustee.
SECTION 2.4. Investments of Cash. The Cash Manager shall invest and
reinvest the funds on deposit in the Accounts as permitted by and in accordance
with Section 3.02 of the Indenture.
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SECTION 2.5. Calculations. Pursuant to Section 3.06 of the Indenture,
the Cash Manager shall, at the times and in the manner set forth therein,
determine or calculate each of the amounts required to be determined or
calculated by it pursuant to Sections 3.06(a) through (f) of the Indenture.
SECTION 2.6. Withdrawals and Transfers. The Cash Manager shall make the
following withdrawals and transfers in accordance with the terms of the
Indenture:
(a) Closing Date Deposits, Withdrawals and Transfers. On the Closing
Date, the Cash Manager shall or shall instruct, in writing, the Trustee or the
Security Trustee, as the case may be, to make each of the transfers described
in Section 3.03 of the Indenture.
(b) Interim Withdrawals and Transfers for Expenses and Certain Lease
Obligations. From time to time, the Cash Manager shall or shall instruct, in
writing, the Trustee or the Security Trustee, as the case may be, to make the
withdrawals and transfers provided for in Section 3.04(a) of the Indenture in
accordance with such Section.
(c) Interim Withdrawals and Transfers in Respect of Undelivered Related
Collateral. From time to time, the Cash Manager shall make the withdrawals and
transfers provided for in Section 3.04(b) of the Indenture in accordance with
such Section.
(d) Interim Deposits and Withdrawals for Modification Payments or
Dispositions of Aircraft. From time to time, the Cash Manager shall or shall
instruct, in writing, the Trustee or the Security Trustee, as the case may be,
to make the withdrawals and transfers provided for in Section 3.05 of the
Indenture in accordance with such Section.
(e) Interim Deposits and Withdrawals for Aircraft Purchases. From time to
time, the Cash Manager shall or shall instruct, in writing, the Trustee or the
Security Trustee, as the case may be, to make the deposits, withdrawals and
transfers provided for in Section 3.04 of the Indenture in accordance with such
Section.
(f) Payment Date First Step Withdrawals and Transfers. On each Payment
Date, the Cash Manager shall or shall instruct, in writing, the Trustee or the
Security, as the case may be, to make the withdrawals and transfers provided
for in Section 3.07 of the Indenture in accordance with such Section.
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(g) Payment Date Second Step Withdrawals. Subject to Section 2.06(h)
hereof, on each Payment Date, after the withdrawals and transfers provided for
in Section 2.06(f) hereof have been made, the Cash Manager shall or shall
instruct, in writing, the Trustee or the Security Trustee, as the case may be,
to distribute funds on deposit in the Collection Account and the Expense
Account as provided in Section 3.08 of the Indenture; provided, that any such
direct funds transfer shall have been authorized on or prior to the date
thereof by the Cash Manager in the form of a certificate, substantially in the
form of Exhibit A hereto, delivered to and acknowledged by the Trustee.
(h) Event of Default and Default Notice Withdrawals and Transfers.
Notwithstanding anything to the contrary contained in Section 2.06(f) or
2.06(g) hereof, following the delivery of a Default Notice to the Cash Manager
or AerCo pursuant to the Indenture or during the continuation of an
Acceleration Default, after the withdrawals and transfers provided for in
Section 2.06(f) hereof have been made, the Cash Manager shall distribute funds
on deposit in the Collection Account and the Expense Account in the amounts and
in the order of priority provided for in Section 3.08(b) of the Indenture.
(i) Defeasance/Redemption Transfers. The Cash Manager shall or shall
direct, in writing, the Trustee or the Security Trustee, as the case may be, to
transfer from time to time amounts on deposit in the Defeasance/Redemption
Account to the applicable Note Account in connection with either the redemption
of any subclass of Notes in accordance with Section 3.10 of the Indenture or
the exercise of the defeasance provisions set forth in Article XI of the
Indenture.
(j) Tax Defeasance Account Transfers. The Cash Manager shall or shall
direct, in writing, the Trustee or the Security Trustee, as the case may be, to
transfer from time to time amounts on deposit in the Defeasance/Redemption
Account to the Note Account or to the relevant Investors in connection with any
tax defeasance transactions in accordance with Section 3.10(b) of the
Indenture.
(k) Refinancing Transfers. The Cash Manager shall or shall direct, in
writing, the Trustee or the Security Trustee, as the case may be, to transfer
from time to time amounts on deposit in the Refinancing Account to the Note
Accounts in connection with any Refinancing in accordance with Section 2.10 of
the Indenture.
(l) Currency Conversions. If and to the extent that any AerCo Group
member incurs any payment obligation or other cost in a currency other than
U.S. dollars, the Cash Manager shall, to the extent practicable, convert U.S.
dollars into such other currency at the then prevailing market rate as
necessary
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to discharge such payment obligations or costs, at the expense of AerCo in
accordance with Section 13.07 of the Indenture.
For the purposes of this Section 2.06(b), neither the Trustee nor the
Security Trustee shall be liable for withdrawals or transfers made solely by
the Cash Manager without direction of either the Trusteee or Security Trustee.
SECTION 2.7. Ratings and the Accounts. Each Account shall at all times
be maintained at the Operating Bank or another Eligible Institution selected by
the Cash Manager in accordance with the Security Trust Agreement and the
Indenture; provided that one or more Rental Accounts may be maintained at any
other reputable and responsible bank in accordance with Section 3.01 of the
Indenture.
SECTION 2.8. Records. The Cash Manager shall provide such information
relating to the Accounts and the Permitted Account Investments to the Security
Trustee, the Trustee or the Rating Agencies as any of them may reasonably
request from time to time.
SECTION 2.9. Reports. The Cash Manager shall provide the reports and
other information required to be provided by it pursuant to Section 3.06(f) of
the Indenture, together with copies of such additional reports or other
information as the Trustee, the Security Trustee or the Trustee may reasonably
request, all in accordance with the terms of the Indenture.
SECTION 2.10. Additional Aircraft. In the event that AerCo Group shall
acquire any Additional Aircraft and notwithstanding that AerCo Group may retain
different Service Providers for such Additional Aircraft, the Cash Manager
hereby agrees to provide the same Cash Management Services with respect to all
such Additional Aircraft.
SECTION 2.11. Professional Advice. The Cash Manager may, on behalf of
AerCo Group, retain and instruct legal counsel and accounting, tax and other
professional advisers to represent and advise AerCo Group when the Cash Manager
considers in good faith that it is appropriate or necessary for such advisers
to be appointed to protect the interests and rights of any AerCo Group Member
or for the Cash Manager to comply with its obligations under this Agreement;
provided, however, that, in any one-month period, the Cash Manager shall not be
permitted contractually to obligate AerCo Group to pay fees to such advisers
pursuant to this Section 2.11 or any other section of this Agreement relating
to the engagement of advisers in an aggregate amount in excess of $100,000
without the prior written consent of the Board of AerCo.
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ARTICLE 3
STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY
SECTION 3.1. Standard of Performance. The Cash Manager will devote the
same amount of time and attention to, and shall be required to exercise the
same level of skill, care and diligence in the performance of its services as a
prudent businessperson would in administering such services on its own behalf
(the "STANDARD OF PERFORMANCE").
SECTION 3.2. Liability and Indemnity. (a) The Cash Manager shall not be
liable for any Losses or Taxes to or of, or payable by, any AerCo Group Member
at any time including Losses resulting from the investment in any Permitted
Account Investment or any investment losses resulting from such investment,
unless such Losses or Taxes shall arise in connection with the Cash Manager's
own gross negligence (or simple negligence in the handling of funds) , willful
misconduct, deceit or fraud or that of any of its directors, officers, agents
or employees, as the case may be.
(b) Subject to and in accordance with the provisions of the Indenture,
AerCo and the other AerCo Group Members do hereby agree to indemnify and hold
harmless the Cash Manager, its respective directors, officers, agents and
employees and each of them against any Losses or Taxes whatsoever which they or
any of them may incur or be subject to as a consequence of this Agreement or as
a result of the performance of the functions and services hereunder (including
any Losses or Taxes incurred by the Cash Manager as a result of its
indemnifying any permitted delegate of any of its functions hereunder) except
as a result of the negligence, willful default, deceit or fraud of the Cash
Manager or any of its directors, officers, agents or employees, as the case may
be. This indemnity shall expressly inure to the benefit of any existing or
future director, officer, agent or employee of the Cash Manager and to the
benefit of any successor of the Cash Manager and shall survive the termination
or expiration of this Agreement.
(c) Each of the Cash Manager, the Security Trustee, the Trustee and AerCo
acknowledges and agrees that the terms of this Agreement contemplate that the
Cash Manager shall receive the Relevant Information in order for the Cash
Manager to make required credit and debit entries and to make the calculations
and supply the information and reports required herein, and that the Cash
Manager will do the foregoing to the extent such information is so provided by
such relevant parties and on the basis of such information, without undertaking
any independent verification or recalculation of such information.
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(d) The Cash Manager agrees to indemnify, reimburse and hold harmless (on
an after-tax basis) each AerCo Group Member, the Trustee and the Security
Trustee and their respective directors, trustees and agents for any Losses
whatsoever which they or any of them may incur or be subject to in consequence
of the performance of the Cash Management Services or any breach of the terms
of this Agreement by the Cash Manager, but only to the extent such Losses arise
due to the gross negligence (or simple negligence in the handling of funds),
wilful misconduct, deceit or fraud of the Cash Manager or any of its directors,
trustees, officers, agents, permitted delegates or employees, as the case may
be.
SECTION 3.3. Conflicts of Interest. AerCo acknowledges and agrees that
(a) in addition to providing the Cash Management Services under this Agreement,
GPA Cash Manager II Limited may provide similar services for other third
parties, (b) in the course of conducting such activities, the Cash Manager may
from time to time have conflicts of interest in performing its duties on behalf
of the Security Trustee and the Trustee and the various entities in respect of
which it provides such similar services, (c) GPA Administrative Services
Limited, an Affiliate of the Cash Manager, is acting as the Administrative
Agent, (d) an Affiliate or Affiliates of the Cash Manager hold all of the Class
E Notes and (e) the Directors of AerCo Limited have approved the transactions
contemplated by this Agreement and desire that such transactions be consummated
and, in giving such approval, the Board of AerCo has expressly recognized that
such conflicts of interest may arise from time to time and that, when such
conflicts of interest arise, the Cash Manager shall promptly report the same to
the Security Trustee, AerCo and the Trustee and shall act in a manner that (i)
treats each AerCo Group Member equally with such other entities, (ii) does not
violate the Standard of Performance and (iii) would not be reasonably likely to
have a material adverse effect on the Noteholders.
ARTICLE 4
CASH MANAGER UNDERTAKINGS
SECTION 4.1. Cash Manager Undertakings. The Cash Manager hereby
covenants with the Security Trustee and the Trustee that it will conduct its
business such that it is a separate and readily identifiable business from, and
independent of, that of each AerCo Group Member (it being understood that any
AerCo Group Member may publish financial statements that are consolidated with
those of GPA Group and any of its Affiliates, if to do so is
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required by any applicable law or accounting principles from time to time
in effect) and further covenants as follows:
(a) if the Cash Manager receives (including in its capacity as agent for
the Security Trustee after the delivery of a Default Notice) any funds
whatsoever under this Agreement or any Relevant Document, which funds belong to
the Security Trustee, AerCo or the Trustee, or are to be paid to the Security
Trustee, AerCo or the Trustee or into any Account pursuant to this Agreement,
any Relevant Document or otherwise, then the Cash Manager shall (i) hold such
funds in trust for the Security Trustee, AerCo, or the Trustee, as the case may
be, (ii) keep such funds separate from all other funds belonging to the Cash
Manager and (iii) as soon as possible following receipt thereof, pay the same
into the appropriate Account in accordance with the terms hereof;
(b) the Cash Manager shall comply with all lawful directions, orders and
instructions which the Security Trustee may from time to time give to it in
writing which are in accordance with the provisions of this Agreement and the
Indenture;
(c) the Cash Manager shall not knowingly fail to comply with any legal
requirements in the performance of the Cash Management Services;
(d) the Cash Manager shall make all payments required to be made by it at
any time and from time to time pursuant to this Agreement on the required date
for payment thereof and shall turn over any amounts owed to the Security
Trustee, AerCo or the Trustee without set-off or counterclaim;
(e) the Cash Manager shall cooperate with the Security Trustee and the
Trustee and their respective agents, directors or trustees (including by
providing such information as may reasonably be requested at any time and from
time to time) to permit the Security Trustee and the Trustee or their
respective authorized agents to monitor the Cash Manager's compliance with its
obligations under this Agreement; and
(f) the Cash Manager is acting hereunder as the agent of the Security
Trustee and the Trustee and, except in relation to any money erroneously
received by the Cash Manager by way of deposit into any of the Cash Manager's
bank accounts (which shall be held in trust by the Cash Manager on behalf of
the Security Trustee and deposited into the appropriate Account as soon as
reasonably practicable), neither the Cash Manager nor any of its affiliates
shall be under any fiduciary duty or other implied obligation or duty to any
AerCo Group Member or any holder of any equity or debt security issued by
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any AerCo Group Member, any Lessee or any other Person arising out of this
Agreement;
(g) the Cash Manager shall not take any steps for the purpose of procuring
the appointment of any administrative receiver or the making of any
administrative order or for instituting any bankruptcy, reorganization,
arrangement, insolvency, winding up, liquidation, composition or any like
proceedings under the laws of any jurisdiction in respect of any AerCo Group
Member or in respect of any of their respective liabilities, including, without
limitation, as a result of any claim or interest of the Cash Manager or any of
its affiliates.
(h) the Cash Manager shall cooperate with the Security Trustee, AerCo
Group and their respective agents, trustees and directors, including any
providing such information as may reasonably be requested, to permit AerCo
Group or its authorized agents to monitor the Cash Manager's compliance with
its obligations under this Agreement;
(i) during the term of this Agreement, the Cash Manager shall observe all
corporate formalities necessary to remain a legal entity separate and distinct
from each AerCo Group Member;
(j) during the term of this Agreement, the Cash Manager shall maintain its
assets and liabilities separate and distinct from each AerCo Group Member;
(k) during the term of this Agreement, the Cash Manager shall maintain
records, books, accounts and minutes separate from those of each AerCo Group
Member;
(l) during the term of this Agreement, the Cash Manager shall pay its
obligations in the ordinary course of its business as a legal entity separate
from each AerCo Group Member;
(m) during the term of this Agreement, the Cash Manager shall keep its
funds separate and distinct from the funds of each AerCo Group Member, and it
will receive, deposit, withdraw and disburse such funds separately from the
funds of each AerCo Group Member;
(n) during the term of this Agreement, the Cash Manager shall conduct its
business in its own name and not in the name of any AerCo Group Member;
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(o) during the term of this Agreement, the Cash Manager shall not pay or
become liable for any debt of any AerCo Group Member, other than to make
payments in the form of indemnity as required by the express terms of this
Agreement;
(p) during the term of this Agreement, the Cash Manager shall not hold out
that it is a division of any AerCo Group Member, or that any AerCo Group Member
is a division of it;
(q) during the term of this Agreement, the Cash Manager shall not induce
any third party to rely on the creditworthiness of any AerCo Group Member in
order that such third party will be induced to contract with it;
(r) during the term of this Agreement, the Cash Manager shall not enter
into any agreements between it and any AerCo Group Member that are more
favorable to either party than agreements that the parties would have been able
to enter into at such time on an arm's-length basis with a non-affiliated third
party, other than any agreements in effect on the date hereof (it being
understood that the parties hereto do not intend by this covenant to ratify any
self-dealing transactions); and
(s) during the term of this Agreement, it shall observe all corporate or
other procedures required under applicable law and each of their constitutive
documents.
ARTICLE 5
UNDERTAKINGS OF AERCO GROUP
SECTION 5.1. Cooperation. The Trustee shall use its best efforts and
AerCo shall, and shall cause each AerCo Subsidiary, and, to the extent within
its power each other Service Provider, to cooperate at all times with the Cash
Manager to enable the Cash Manager to provide the Cash Management Services,
including providing the Cash Manager with all powers of attorney and such
information as may be reasonably necessary or appropriate for the Cash Manager
to perform the Cash Management Services.
SECTION 5.2. Information. AerCo will provide the Cash Manager with the
following information in respect of itself and each other AerCo Group Member:
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(a) a list of all legal advisers;
(b) copies of all Relevant Documents, including the Memorandum and
Articles of Association of AerCo, and copies of all statutory books and records
maintained on behalf thereof by such Persons;
(c) details of all bank accounts and bank mandates maintained by the Cash
Manager on behalf of the Security Trustee, the Trustee and each AerCo Group
Member;
(d) names of and contact information with respect to the board of each
AerCo Group Member and the secretary and registered office of each AerCo Group
Member;
(e) such other information as is necessary to the Cash Manager's
performance of the Cash Management Services;
The information referred to in this Section 5.02 (with the exception of
paragraph (e)) shall be provided to the Cash Manager upon execution of this
Agreement and, with respect to the information noted in paragraph (e), upon
request and, in respect of any amendment or changes to the information provided
to the Cash Manager upon execution of this Agreement, promptly following the
effectiveness of such amendments or changes.
SECTION 5.3. Scope of Services. (a) Subject to subsection (b) below, in
the event that any AerCo Group Member enters into any agreement, amendment or
other modification of any Relevant Document or shall take any other action that
has the effect of increasing in any material respect the scope, nature or level
of the Cash Management Services, the Trustee shall provide written notice
thereof to the Cash Manager (provided the Trustee has actual knowledge of
same), and the Cash Manager shall not be obligated to perform such affected
Cash Management Services to the extent of such increase unless and until the
Cash Manager, the Security Trustee and the Trustee shall agree on the terms on
which such increased Cash Management Services shall be provided. In each such
case, the Cash Manager shall not be obligated or permitted to take any action
that might reasonably be expected to result in the business of AerCo Group
ceasing to be separate and readily identifiable from, and independent of, that
of the Cash Manager and its Affiliates. The Security Trustee and the Trustee
shall, as directed in writing by AerCo, engage another Person to perform the
affected or increased Cash Management Services without the prior written
consent of the Cash Manager if they determine, in their discretion, that timely
agreement with the Cash Manager for the performance of such services cannot be
reached on commercially reasonable terms.
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(b) In the event that AerCo Group shall acquire Additional Aircraft, AerCo
Group shall so notify the Cash Manager and the Cash Manager shall be obligated
to provide the Cash Management Services with respect to such Additional
Aircraft in accordance with Section 2.10 hereof.
SECTION 5.4. Ratification. (a) AerCo and the other AerCo Group Members
hereby ratify and confirm, and agree to ratify and confirm (and shall furnish
written evidence thereof upon request of the Cash Manager), of whatever the
Cash Manager does in accordance with this Agreement in the exercise of any of
the powers or authorities conferred upon the Cash Manager under the terms of
this Agreement, it being expressly understood and agreed that no AerCo Group
Member shall have any obligation to ratify and confirm, and expressly does not
ratify and confirm, any act or omission of the Cash Manager in violation of the
Standard of Performance or for which the Cash Manager is obligated to indemnify
any AerCo Group Member under Article 3 hereof.
(b) AerCo hereby undertakes to cause, if so requested by the Cash Manager,
any subsidiary of AerCo formed or acquired after the date hereof to execute an
agreement with the Cash Manager adopting and confirming, as regards such
subsidiary, the terms of this Agreement and agreeing to ratify whatever the
Cash Manager does in accordance with this Agreement in the exercise of any
powers or authorities conferred upon the Cash Manager under the terms of this
Agreement, it being expressly understood and agreed that no AerCo Group Member
shall have any obligation to ratify and confirm, and expressly does not ratify
and confirm, any act or omission of the Cash Manager in violation of the
Standard of Performance or for which the Cash Manager is obligated to indemnify
any AerCo Group Member under Article 3 hereof.
SECTION 5.5. Accounts and Cash Arrangements. (a) No new bank or other
account shall be established other than in accordance with this Agreement, the
Security Trust Agreement and the Indenture. The Security Trustee shall not
authorize the Trustee, AerCo, any other AerCo Group Member or any other Person
other than the Cash Manager and its authorized agents to make disbursements
from any such accounts on their behalf or on behalf of the Trustee, AerCo, or
any AerCo Group Member.
(b) Except as provided in Section 2.07, neither the Cash Manager nor any
AerCo Group Member shall modify any arrangement with respect to the flow of
cash in connection with payments, remittances and investment of funds or the
creation, maintenance or termination of any Account (other than in accordance
with this Agreement and the Indenture) without the written consent of the
Security Trustee, the Trustee and AerCo.
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SECTION 5.6. Further Assurances. Each of the Cash Manager and AerCo
agrees that, at any time and from time to time, upon the written request of the
Security Trustee or the Trustee, it shall execute and deliver such further
documents and do such further acts and things and, solely with respect to
AerCo, shall cause each AerCo Subsidiary to execute and deliver such further
documents and do such further acts and things, in each case as the Security
Trustee or the Trustee may reasonably request in order to effect the purposes
of this Agreement.
SECTION 5.7. Covenants of AerCo Group. Each AerCo Group Member covenants
with the Cash Manager that it shall conduct its business in every way possible
such that it is a separate and readily identifiable business from that of the
Cash Manager and its Affiliates (it being understood that any AerCo Group
Member may publish financial statements that are consolidated with those of GPA
Group plc and any of its Affiliates, if to do so is required by any applicable
law or accounting principles from time to time in effect) and, to the extent
possible, shall cause each of its Subsidiaries to do the same, and further
covenants as follows:
(a) during the term of this Agreement, it will observe, and shall cause
each AerCo Subsidiary to observe, all corporate formalities necessary to remain
legal entities separate and distinct from the Cash Manager;
(b) during the term of this Agreement, it will maintain, and shall cause
each AerCo Subsidiary to maintain, its assets and liabilities separate from
those of the Cash Manager;
(c) during the term of this Agreement, it will maintain, and shall cause
each AerCo Subsidiary to maintain, records, books, accounts, and minutes
separate from those of the Cash Manager;
(d) during the term of this Agreement, it shall pay, and shall cause each
AerCo Subsidiary to pay, its obligations in the ordinary course of business as
a legal entity separate from the Cash Manager;
(e) during the term of this Agreement, it shall keep, and shall cause each
AerCo Subsidiary to keep, its funds separate and distinct from any funds of the
Cash Manager, and shall receive, deposit, withdraw and disburse such funds
separately from any funds of the Cash Manager;
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(f) during the term of this Agreement, it shall conduct, and shall cause
each AerCo Subsidiary to conduct, its business in its own name, and not in the
name of the Cash Manager;
(g) during the term of this Agreement, it shall conduct, and shall cause
each AerCo Subsidiary not to agree, to pay or become liable for any debt of the
Cash Manager, other than to make payments in the form of indemnity as required
by the express terms of this Agreement;
(h) during the term of this Agreement, it shall not hold out, and shall
cause each AerCo Subsidiary not to hold out, that it or any of them is a
division of the Cash Manager, or that the Cash Manager is a division of any of
them;
(i) during the term of this Agreement, it shall not induce, and shall
cause each AerCo Subsidiary not to induce, any third party to rely on the
creditworthiness of the Cash Manager in order that such third party will be
induced to contract with it.
(j) during the term of this Agreement, it shall not enter into, and shall
cause each AerCo Subsidiary not to enter into, any transaction between any of
them and the Cash Manager that is more favorable to either party than
transactions that the parties would have been able to enter into at such time
on an arm's-length basis with a non-affiliated third party; other than any
agreements in effect on the date hereof (it being understood that the parties
hereto do not intend by this covenant to ratify any self-dealing transactions);
and
(k) during the term of this Agreement, it shall observe, and shall cause
each other AerCo Group Member to observe, all material corporate procedures and
other procedures required under applicable law and each of their constitutive
documents.
ARTICLE 6
EFFECTIVENESS
SECTION 6.1. Effectiveness. The effectiveness of this Agreement and all
obligations of the parties hereunder shall be conditions upon the executive
hereof by all parties to this Agreement.
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ARTICLE 7
CASH MANAGEMENT FEES AND EXPENSES
SECTION 7.1. Cash Management Fees. (a) In consideration of the Cash
Manager's performance of the Cash Management Services, AerCo shall pay to the
Cash Manager an annual fee (the "CASH MANAGEMENT FEE") equal to $250,000 (as
such amount may be adjusted for each annual period by reference to the
inflation factor at the commencement of such annual period on each March 15),
payable monthly in arrears in equal installments on the Payment Date commencing
August 17, 1998; provided that the Cash Manager shall receive payment for the
period between the Closing Date and August 17, 1998 in arrears on August 17,
1998.
SECTION 7.2. Expenses. The Cash Manager shall be responsible for all
costs and expenses relating to or associated with the Cash Manager's
performance of its duties as set forth in this Agreement, other than such costs
as are expressly stated herein to be an expense or cost of AerCo Group or costs
incurred as a result of the breakage of investments.
ARTICLE 8
TERM; REMOVAL OF OR TERMINATION BY THE CASH MANAGER
SECTION 8.1. Term. This Agreement shall have a term commencing on the
Closing Date and expiring on the date of payment in full of all amounts
outstanding to be paid on the Notes and any other securities issued by AerCo as
relating to Additional Aircraft owned by AerCo Group. During such term, this
Agreement shall not be terminable by either party except as expressly provided
in this Article 8.
SECTION 8.2. Right to Terminate. (a) At any time during the term of this
Agreement, the Security Trustee, on behalf and at the written direction of the
Secured Parties, or AerCo shall be entitled to terminate this Agreement on 120
days written notice if:
(i) the Cash Manager shall materially breach its obligations under
this Agreement and, after written notice from AerCo, the Cash Manager
has failed to cure such breach within 30 days; or
(ii) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction
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seeking relief in respect of the Cash Manager, or of a substantial
part of the property or assets of the Cash Manager, under Title 11 of
the United States Code, as now constituted or hereafter amended, or any
other U.S. Federal or state or foreign bankruptcy, insolvency,
receivership or similar law, and such proceeding or petition shall
continue undismissed for 75 days or an order or decree approving or
ordering any of the foregoing shall be entered or the Cash Manager shall
go into liquidation, suffer a receiver or mortgagee to take possession
of all or substantially all of its assets or have an examiner appointed
over it or if a petition or proceeding is presented for any of the
foregoing and not discharged within 75 days; or
(iii) the Cash Manager shall (A) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other U.S. Federal or state or foreign bankruptcy, insolvency,
receivership or similar law, (B) consent to the institution of, or fail
to contest the filing of, any petition described in clause (ii) above,
(C) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, or (D) make a general
assignment for the benefit of its creditors.
(b) Following the delivery of a Default Notice or during the continuance
of an Acceleration Default, the Security Trustee, on behalf of the Secured
Parties, shall be entitled to terminate on 5 days' written notice the authority
granted to the Cash Manager to perform the Cash Management Services set forth
in Section 2.01 and in the Indenture.
(c) At any time during the term of this Agreement, the Cash Manager shall
be entitled to terminate this Agreement on 60 days written notice if:
(i) any AerCo Group Member shall fail to pay in full when due (A0
any installment of the Cash Management Fee within 30 days after the
effectiveness of written notice from the Cash Manager of such failure or
(B0 any other amount payable to the Cash Manager hereunder within 60
days after written notice from the Cash Manager of such failure;
(ii) any AerCo Group Member shall fail to perform or observe or
shall violate in any material respect any material term, covenant,
condition or agreement to be performed or observed by it in respect of
this Agreement for 30 days after AerCo Group shall have received notice
of such failure (other than with respect to payment obligations referred
to in clause (c)(i) of this Section 8.02);
21
<PAGE> 24
(iii) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
relief in respect of AerCo or any other AerCo Group Member, or of a
substantial part of the property or assets of AerCo or any other AerCo
Group Member, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other U.S. federal or state or
foreign bankruptcy, insolvency, receivership or similar law, and such
proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered or AerCo or any other AerCo Group Member shall go into
liquidation, suffer a receiver or mortgagee to take possession of all or
substantially all of its assets or have an examiner appointed over it or
if a petition or proceeding is presented for any of the foregoing and
not discharged within 60 days; or
(iv) AerCo or any other AerCo Group Member shall (A) voluntarily
commence any proceeding or file any petition seeking relief under any
U.S. federal or state or foreign bankruptcy, insolvency, receivership or
similar law, (B) consent to the institution of, or fail to contest the
filing of, any petition described in clause (b)(iii) above, (C) file an
answer admitting the material allegations of a petition filed against it
in any such proceeding or (D) make a general assignment for the benefit
of its creditors.
(d) No termination of this Agreement by the Security Trustee or AerCo
pursuant to Section 8.02(a) and no termination or resignation by the Cash
Manager pursuant to Section 8.02(c) shall become effective prior to the date of
appointment by AerCo Group of a successor cash manager and the acceptance of
such appointment by such successor cash manager; provided, however, that in the
event that a successor cash manager shall not have been appointed within 90
days after such termination or resignation, the Cash Manager may petition any
court of competent jurisdiction for the appointment of a successor cash
manager. Upon action by either party pursuant to the provisions of this
Section 8.02(d), the Cash Manager shall be entitled to the payment of any
compensation owed to it hereunder in connection with all services rendered by
it hereunder, as provided in Article 7 hereof, and for so long as the Cash
Manager is continuing to perform any of the Cash Management Services for any
AerCo Group Member, the Cash Manager shall be entitled to continue to be paid
all amounts due to it hereunder, net of any amounts that shall have been
finally adjudicated by a court of competent jurisdiction to be owed by the Cash
Manager to AerCo Group or not to be due to the Cash Manager, until a successor
cash manager shall have been appointed
22
<PAGE> 25
and shall have accepted such appointment in accordance with the provisions of
Section 8.03(c).
(e) Subject to Section 9.01, the parties hereto agree not to amend this
Agreement to reduce the scope of the Cash Management Services to be provided by
the Cash Manager hereunder unless a third party reasonably acceptable to the
parties hereto and to the Servicer becomes a party to this Agreement and agrees
to provide such Cash Management Services in the place of the Cash Manager.
SECTION 8.3. Consequences of Termination. (a) Notices. (i) Following the
termination of this Agreement by the Security Trustee or resignation of the Cash
Manager pursuant to Section 8.02 and the replacement of the Cash Manager by a
successor cash manager pursuant to Section 8.02 and 9.01, the former Cash
Manager will promptly forward to the successor cash manager, the Security
Trustee, AerCo, the Trustee and, where applicable, any AerCo Group Member, any
notices and accounting reports (or copies thereof) received by it during the
year immediately after such termination or resignation.
(ii) AerCo Group will promptly notify any relevant third party,
including the Rating Agencies and the Trustee of the removal of or
resignation by the Cash Manager under this Agreement and will request
that all such notices and accounting reports and communications to the
Cash Manager thereafter be made or given directly to the successor cash
manager and AerCo Group.
(b) Accrued Rights. A termination of this Agreement by the Security
Trustee or the resignation by the Cash Manager hereunder shall not affect the
respective rights and liabilities of any party hereto accrued prior to such
removal or resignation in respect of any prior breaches hereof or otherwise.
Upon action by any party hereto pursuant to the provisions of Section 8.02, the
Cash Manager shall be entitled to the payment of any compensation owed to it by
AerCo Group hereunder.
(c) Replacement. If this Agreement is terminated by the Security Trustee
or the Cash Manager resigns under Section 8.02 and the Cash Manager is replaced
by a successor cash manager under Section 9.01, such former Cash Manager will
cooperate with such successor cash manager, including providing such successor
cash manager with all information and documents reasonably requested.
SECTION 8.4. Survival. Notwithstanding any termination or the expiration
of this Agreement, the respective obligations of AerCo Group and the Cash
Manager under Sections 3.02, 7.01 (to the extent any fees due and owing
23
<PAGE> 26
through such date of termination remain unpaid) and 8.03 hereof shall survive
such termination or expiration, as the case may be.
ARTICLE 9
APPOINTMENT OF SUCCESSOR CASH MANAGER
SECTION 9.1. Appointment of Successor Cash Manager. In the event of the
removal or resignation of the Cash Manager pursuant to Section 8.02 hereof, the
Security Trustee, on behalf of the Secured Parties, may appoint a successor
cash manager or any other Person as successor cash manager. Any successor cash
manager so appointed following the removal or resignation of the Cash Manager
pursuant to the provisions of Section 8.02 hereof shall execute and deliver to
the former Cash Manager, the Security Trustee, AerCo Group and the Trustee an
instrument accepting such appointment. Thereupon, such successor cash manager
shall, without any further act, deed or conveyance, become vested with all the
authority, rights, powers, immunities, duties and obligations of the Cash
Manager, and with like effect as if originally named as Cash Manager under this
Agreement, and the former Cash Manager shall thereupon be obligated to transfer
and deliver such relevant records or copies thereof maintained by the Cash
Manager in connection with the performance of its obligations under this
Agreement and each of the other Relevant Documents.
ARTICLE 10
ASSIGNMENT AND DELEGATION
SECTION 10.1. Assignment and Delegation. (a) The Cash Manager may
delegate the performance of any of the Cash Management Services (provided that
any such delegation shall not release the Cash Manager from its obligations
hereunder), such delegation to be procured by delivery to the Trustee of a
Certificate in the form of Exhibit B hereto.
(b) Except as set forth in this Section 10.01, none of the parties to this
Agreement shall assign or delegate this Agreement or all or any part of its
rights or obligations hereunder to any other person without the prior written
consent of the other parties thereto.
(c) Without limiting the foregoing, any Person who shall become a
successor by assignment or otherwise of the Cash Manager (or any respective
24
<PAGE> 27
successors thereof) in accordance with this Section 10.01 shall be required, as
a condition to the effectiveness of any such assignment or other arrangements,
to become a party to this Agreement.
ARTICLE 11
GUARANTEE
SECTION 11.1. Guarantee. The Guarantor hereby fully and unconditionally
guarantees to the Security Trustee, the Trustee and AerCo Group (i) the due and
punctual performance by the Cash Manager of all agreements, covenants and other
obligations required to be performed by the Cash Manager hereunder or under any
other Relevant Document (including, without limitation, the punctual payment
when due of all amounts now or hereafter payable by the Cash Manager hereunder
or under any other Relevant Document) (all such agreements, covenants and other
obligations being the "GUARANTEED OBLIGATIONS"), all in accordance with the
terms of this Agreement and the other Relevant Documents, and agrees to pay any
and all expenses (including counsel fees and expenses) incurred by any of the
parties hereto or any of their respective officers, directors or agents in
enforcing any right under this Section 11.01. The liability of the Guarantor
under this Section 11.01 is limited to the maximum amount that will result in
the obligations of the Guarantor not constituting a fraudulent conveyance or
fraudulent transfer under applicable law.
The Guarantor hereby waives diligence, presentment, filing of claims with
a court in the event of merger or bankruptcy of the Cash Manager, any right to
require a proceeding first against the Cash Manager, and the benefit of
discussion, protest or notice with respect to any and all demands for
performance or payment hereunder whatsoever (except as specified above), and
covenants that this Article 11 shall not be discharged except by performance or
payment in full of all of the Guaranteed Obligations.
The Guarantor hereby irrevocably waives any claim or other rights which it
may now or hereafter acquire against the Cash Manager that arise from the
existence, payment, performance or enforcement of the Guarantor's obligations
under this Agreement or any other Relevant Document, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of any party
against the Cash Manager, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without
25
<PAGE> 28
limitation, the right to take or receive from the Cash manager, directly or
indirectly, in cash or other property or in any other manner, payment or
security on account of such claim or other rights, until all of the Guarantor's
obligations under this Agreement have been satisfied. If any amount shall be
paid to the Guarantor in violation of the preceding sentence and this Agreement
shall not have been terminated, such amount shall be deemed to have been paid
to the Guarantor for the benefit of, and held in trust for the benefit of, the
Security Trustee, the Trustee and AerCo Group, and shall forthwith be paid to
the Security Trustee for its benefit and the benefit of the Trustee and AerCo
Group. The Guarantor acknowledges that it will receive direct and indirect
benefits from the execution, delivery and performance by the Cash Manager of
this Agreement and that the waiver set forth in this paragraph is knowingly
made in contemplation of such benefits.
SECTION 11.2. Reinstatement. The Guarantor hereby agrees that the
guarantee provided for in Section 11.01 shall continue to be effective or be
reinstated, as the case may be, if at any time, payment, or any part thereof,
of any Guaranteed Obligations or interest thereon is rescinded or must
otherwise be restored to the Cash Manager upon the bankruptcy or insolvency of
the Cash Manager or the Guarantor or otherwise.
SECTION 11.3. Unconditional Nature of Guarantee. The Guarantor hereby
agrees that its obligations under the guarantee set forth in Section 11.01
shall be irrevocable and unconditional, irrespective of the invalidity,
irregularity or unenforceability of this Agreement or any other Relevant
Document against the Cash Manager, the absence of any action to enforce the
Cash Manager's obligations hereunder or under any other Relevant Document, any
waiver or consent by any party hereto with respect to any provisions thereof,
any amendment to the terms hereof or of any other Relevant Document, the
bankruptcy of the Cash Manager or any circumstance which might otherwise
constitute a legal or equitable discharge of defense of a guarantor; provided,
however, that the Guarantor shall be entitled to exercise any right that the
Cash Manager could have exercised under this Agreement to cure any default in
respect of its obligations hereunder or under any other Relevant Document, if
any, but only to the extent such right, if any, is provided to the Cash Manager
hereunder or under any other Relevant Document.
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<PAGE> 29
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. Notices. (a) All notices, consents, directions,
approvals, instructions, requests and other communications required or
permitted by this Agreement to be given to any Person shall be in writing, and
any such notice shall become effective five Business Days after being deposited
in the mails, certified or registered, return receipt requested, with
appropriate postage prepaid for first class mail, or if delivered by hand or
courier service or in the form of a facsimile, when received (and, in the case
of a facsimile, receipt of such facsimile is confirmed to the sender), and
shall be directed to the address or facsimile number of such Person set forth
below:
If to AerCo and the other AerCo Group Members, to:
AerCo Limited
22 Grenville Street
St. Helier
Jersey, JE4 8PX
Channel Islands
Attention: Mourant & Co. Secretaries Limited
- Company Secretary
Fax: 44-1534-609-333
With a copy to:
Davis Polk & Wardwell
1 Frederick's Place
London EC2R 8AB
Attention: Mr. Tom Reid
Fax: + 44-171-418 1400
and
GPA Administrative Services Limited
as Administrative Agent
GPA House
Shannon, County Clare
Ireland
Attention: General Counsel
Fax: + 353-61-360-113
27
<PAGE> 30
If to the Trustee or the Security Trustee, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
Telecopy: (212) 250-6439
Telephone: (212) 250-6137
If to the Cash Manager, to it at:
GPA Cash Manager II Limited
GPA House
Shannon, County Clare
Ireland
Attention: Corporate Secretary
Fax: + 353-61-360-220
If to the Guarantor, to:
GPA Group plc
GPA House
Shannon, County Clare
Ireland
Attention: Corporate Secretary
Fax: + 353-61-360-220
If to the Servicer, to:
Babcock & Brown Limited
Oracle House
Herbert Street, Dublin 2
Ireland
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is conclusively presumed to have been duly given
whether or not the addressee receives it.
From time to time any party to this Agreement may designate a new address
or number for purposes of notices thereunder by notice to each of the other
parties thereto.
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<PAGE> 31
SECTION 12.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 12.3. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 12.01 shall
be deemed effective service of process on such party.
SECTION 12.4. Agent for Service of Process. Each of AerCo and its
Subsidiaries hereby appoint Corporation Service Company, 375 Hudson Street, New
York, N.Y., U.S.A. 10014 as its nonexclusive agent for service of process in
the United States in connection with the Cash Management Agreement. The
parties may use any legally available means of service of process. Each of
AerCo and its Subsidiaries will promptly notify the other persons listed in
Section 12.01 of any change in the address of the respective agents; provided,
however, that each of AerCo and its Subsidiaries will at all times maintain an
agent located within New York State for service of process in connection with
the Cash Management Agreement, the identity of any successor agent to be
reasonably satisfactory to the Cash Manager.
SECTION 12.5. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 12.6. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each
party
29
<PAGE> 32
hereto shall have received a counterpart hereof signed by the other party
hereto. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 12.7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 12.8. Table of Contents; Headings. The table of contents and
headings of the various articles, sections and other subdivisions of such
agreement are for convenience of reference only and shall not modify, define or
limit any of the terms or provisions of such agreement.
SECTION 12.9. Restrictions on Disclosure. The Cash Manager agrees that
it shall not, prior to the termination or expiration of this Agreement or
within the three years after such termination or expiration, disclose to any
Person any confidential or proprietary information, whether of a technical,
financial, commercial or other nature, received directly or indirectly from
AerCo Group regarding AerCo Group or its business or the Aircraft, except as
authorized in writing by AerCo Group or otherwise permitted by this Agreement,
and except:
(a) to Representatives of the Cash Manager and any of its affiliates in
furtherance of the purposes of this Agreement, provided that any such
Representatives shall have agreed to be bound by the restrictions on disclosure
set forth in this Section 12.09;
(b) to the extent (x) required by Applicable Law or by judicial or
administrative process, including pursuant to any subpoena, civil investigative
demand or similar demand or request of any court, regulatory authority,
arbitrator or arbitration to which the Cash Manager or an affiliate thereof is
a party, or (xi) reasonably necessary in order to enable the Cash Manager to
perform the Cash Management Services, but in the case of clause (i) above, in
the event of proposed disclosure, the Cash Manager shall seek the assistance of
AerCo Group to protect information in which AerCo Group has an interest to the
maximum extent achievable;
(c) to the extent such information is required to be included in any
preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated by the Indenture and
the Related Documents approved in advance by AerCo.
30
<PAGE> 33
(d) to the extent that the information:
(i) was generally available in the public domain;
(ii) was lawfully obtained from a source under no obligation of
confidentiality, directly or indirectly, to AerCo Group;
(iii) was disclosed to the general public with the approval of
AerCo Group;
(iv) was in the files, records or knowledge of the Cash Manager or
any affiliates of the Cash Manager prior to initial disclosure thereof
to the Cash Manager or any Affiliates of the Cash Manager by AerCo
Group;
(v) was developed independently by the Cash Manager or any
affiliates of the Cash Manager; and
(vi) to the extent the Cash Manager reasonably deems necessary to
protect and enforce its rights and remedies under this Agreement;
provided, however, that in such an event the Cash Manager shall act in a
manner reasonably designed to prevent disclosure of such confidential
information; and provided further, that prior to disclosure of such
information the Cash Manager shall inform AerCo Group of such
disclosure.
SECTION 12.10. No Partnership. (a) It is expressly recognized and
acknowledged that this Agreement is not intended to create a partnership, joint
venture or other similar arrangement between any AerCo Group Member or Members
on the one part and the Cash Manager on the other part. It is also expressly
understood that any actions taken on behalf of any AerCo Group Member by the
Cash Manager shall be taken as agent for such AerCo Group Member, either naming
the relevant AerCo Group Member, or naming the Cash Manager as agent for an
undisclosed principal. No AerCo Group Member shall hold itself out as a
partner of the Cash Manager, and the Cash Manager will not hold itself out as a
partner of any AerCo Group Member.
(b) The Cash Manager shall not have any fiduciary duty or other implied
obligations or duties to any AerCo Group Member, any Lessee or any other Person
arising out of this Agreement.
31
<PAGE> 34
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first written above.
AERCO LIMITED
By: /s/ Frederick W. Bradley Jr.
_____________________________________________
Name: Frederick W. Bradley, Jr.
Title: Director
GPA CASH MANAGER II LIMITED
By: /s/ John Redmond
_____________________________________________
Name: John Redmond
Title: Director
GPA GROUP PLC
By: /s/ John Redmond
_____________________________________________
Name: John Redmond
Title: Secretary
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as Security Trustee
By: /s/ Craig M. Kantor
_____________________________________________
Name: Craig M. Kantor
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as trustee under
the Indenture
By: /s/ Craig M. Kantor
_____________________________________________
Name: Craig M. Kantor
Title: Vice President
<PAGE> 35
AERCO IRELAND LIMITED
By: /s/ John Redmond
___________________________________
Name: John Redmond
Title: Director
AERCO IRELAND II LIMITED
By: /s/ John Redmond
___________________________________
Name: John Redmond
Title: Director
AERFI BELGIUM N.V.
By: /s/ John Redmond
___________________________________
Name: John Redmond
Title: Director
AERCOUSA INC.
By: /s/ Stephanie Rudolph
___________________________________
Name: Stephanie Rudolph
Title: President
AIRCRAFT LEASE PORTFOLIO
SECURITIZATION 94-1 LIMITED
By: /s/ George Adrian Robinson
___________________________________
Name: George Adrian Robinson
Title: Director
<PAGE> 36
ALPS 94-1 (BELGIUM) N.V.
By: /s/ George Adrian Robinson
____________________________________
Name: George Adrian Robinson
Title: Director
PERGOLA LIMITED
By: /s/ Michael Horgan
____________________________________
Name: Michael Horgan
Title: Director
<PAGE> 37
APPENDIX A
AerCo Ireland Limited
AerCo Ireland II Limited
AerCoUSA Inc.
AerFi Belgium N.V.
Aircraft Lease Portfolio Securitization 94-1 Limited
ALPS 94-1 (Belgium) N.V.
Pergola Limited
<PAGE> 38
SCHEDULE 1
ACCOUNTS
BANKERS TRUST ACCOUNTS
<TABLE>
<CAPTION>
Trustee Account Number
<S> <C>
1. RENTAL ACCOUNTS
(a) Bankers Trust Company, as Trustee for AerCo 00-377-799
(b) Bankers Trust Company, as Trustee for AerCo 00-377-801
2. EXPENSE ACCOUNT
Bankers Trust Company, as Trustee for AerCo 00-377-828
3. OTHER ACCOUNTS PURSUANT TO THE CASH MANAGEMENT AND INDENTURES
AerCo Expense Account 26071
AerCo Purchase Account 26076
AerCo Note Account 26070
AerCo Lessee Funded Account 26072
AerCo Collection Account 26073
AerCo Defeasance/Redemption Account 26075
AerCo Refinancing Account 26074
4. ADDITIONAL BANK ACCOUNTS
Account Name: ALPS 1994 -- 1 Belgium NV
Bank: Generale de Bank, Brussels
Account No.: 210-0079736-54
Currency: Belgian Franc
Account Name: GPA Belgium NV
Bank: Citibank Brussels
Account No.: 570-1192500-40
Currency: Belgian Franc
</TABLE>
<PAGE> 39
Account Name: GPA Belgium NV
Bank: Citibank Brussels
Account No.: 570-1192510-50
Currency: US Dollar
<PAGE> 40
EXHIBIT A
FORM OF CERTIFICATE REQUESTING DIRECT FUNDS TRANSFER
[Date]
Bankers Trust Company, as
Trustee under
the Indenture
Four Albany Street
New York, New York 10006
Re: Cash Management Agreement:
Request for Direct Funds Transfer
Sirs:
The undersigned hereby requests that all amounts distributable to the
Expense payee named below pursuant to Section 2.06(f) of the Cash Management
Agreement dated as of July 15, 1998 (the "Cash Management Agreement"; terms
used herein but not otherwise defined herein being used herein as therein
defined), among the Cash Manager, GPA Group plc, as the Guarantor, AerCo
Limited, the Trustee, the Security Trustee and the other entities named
therein, be transferred on each Payment Date to the following account:
[Name of Expense Payee]
[Name of Bank]
Account No.
[Location]
Attention: ]
Please acknowledge your approval of the foregoing payment instructions by
executing a copy of this letter and returning it to at .
GPA CASH MANAGER II LIMITED
By: _________________________________
Name:
Title:
<PAGE> 41
Acknowledged and Approved:
BANKERS TRUST COMPANY, not in its individual
capacity, but solely as trustee under the Indenture
By: _________________________________
Name:
Title:
<PAGE> 42
EXHIBIT B
FORM OF CERTIFICATE AUTHORIZING DELEGATION OF SERVICES
[Date]
Bankers Trust Company, as
Trustee under the
Indenture
Four Albany Street
New York, New York 10006
Re: Cash Management Agreement:
Delegation of Certain Cash Management Services
Sirs:
Pursuant to Section 10.01 of the Cash Management Agreement dated as of
July 15, 1998 (the "Cash Management Agreement"; terms used herein but not
otherwise defined herein being used herein as therein defined), among the Cash
Manager, GPA Group plc, as the Guarantor, AerCo Limited, the Trustee, the
Security Trustee and the other entities named therein, the Cash Manager hereby
requests your approval to the delegation by it to [name] of cash disbursement
and related services.
The Cash Manager acknowledges and agrees that the foregoing delegation of
services does not in any way release the Cash Manager from its obligations
under the Cash Management Agreement.
GPA CASH MANAGER II LIMITED
By: ___________________________________
Name:
Title:
<PAGE> 43
Acknowledged and Approved:
BANKERS TRUST COMPANY, not in its individual
capacity, but solely as trustee under the Indenture
By: ____________________________________
Name:
Title:
Acknowledged and Agreed:
[NAME]
By: ____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
SECURITY TRUST AGREEMENT
Dated as of July 15, 1998
<PAGE> 2
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Definitions....................................................... 4
1.02. Construction and Usage............................................ 14
ARTICLE II
SECURITY
2.01. Grant of Security................................................. 15
2.02. Security for Obligations.......................................... 18
2.03. Grantors Remain Liable............................................ 18
2.04. Delivery of Collateral............................................ 18
2.05. Maintenance of Accounts.......................................... 19
2.06. Maintaining the Non-Trustee Accounts............................. 19
2.07. Representations and Warranties of the Grantors................... 20
2.08. Further Assurances............................................... 22
2.09. Place of Perfection; Records..................................... 23
2.10. Voting Rights; Dividends; Etc.................................... 23
2.11. As to the Assigned Agreements and Assigned Leases................ 24
2.12. Transfers and Other Encumbrances; Additional Shares or Interests. 25
2.13. Security Trustee Appointed Attorney-in-Fact...................... 25
2.14. Security Trustee May Perform..................................... 26
2.15. Covenant to Pay.................................................. 26
2.16. As to Permitted Account Investments.............................. 26
2.17. As to Irish Law.................................................. 27
ARTICLE III
REMEDIES
3.01. Remedies......................................................... 28
</TABLE>
i
<PAGE> 3
<TABLE>
ARTICLE IV
REGISTRATION RIGHTS
<S> <C> <C>
4.01. Registration Rights............................................... 29
ARTICLE V
SECURITY INTEREST ABSOLUTE
5.01. Security Interest Absolute........................................ 30
ARTICLE VI
THE SECURITY TRUSTEE
6.01. Authorization and Action.......................................... 31
6.02. Absence of Duties................................................. 31
6.03. Representations or Warranties..................................... 32
6.04. Reliance; Agents; Advice of Counsel............................... 32
6.05. Not Acting in Individual Capacity................................. 34
ARTICLE VII
SUCCESSOR TRUSTEES
7.01. Resignation and Removal of Security Trustee....................... 34
7.02. Appointment of Successor.......................................... 34
ARTICLE VIII
AGREEMENT AMONG CERTAIN SECURED PARTIES
8.01. Subordination and Priority....................................... 35
8.02. Exercise of Remedies............................................. 35
8.03. Further Agreements of Subordination.............................. 36
8.04. Possession of Collateral......................................... 38
8.05. Rights of Subrogation............................................ 38
8.06. Further Assurances of Subordinated Representatives............... 38
8.07. No Change in Rights in Collateral................................ 38
8.08. Waiver of Marshalling and Similar Rights......................... 38
8.09. Enforcement...................................................... 39
8.10. Obligations Hereunder Not Affected............................... 39
8.11. Waiver........................................................... 39
8.12. Senior Obligations and Subordinated Obligations Unimpaired....... 40
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.13. Upon Discharge of Obligations.................................... 40
ARTICLE IX
INDEMNITY AND EXPENSES
9.01. Indemnity........................................................ 40
9.02. Noteholders' Indemnity........................................... 41
9.03. No Compensation from Secured Parties............................. 41
9.04. Security Trustee Fees............................................ 41
ARTICLE X
MISCELLANEOUS
10.01. Amendments; Waivers; Etc........................................ 41
10.02. Addresses for Notices........................................... 42
10.03. No Waiver; Remedies............................................. 42
10.04. Severability.................................................... 42
10.05. Continuing Security Interest; Assignments....................... 42
10.06. Release and Termination......................................... 43
10.07. Currency Conversion............................................. 43
10.08. Governing Law.................................................. 44
10.09. Jurisdiction................................................... 44
10.10. Limitations on Liability of Lively............................. 44
10.11. Letter of Quiet Enjoyment...................................... 45
10.12. Counterparts................................................... 45
10.13. Table of Contents, Headings, Etc............................... 46
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule I Pledged Stock and Pledged Debt
Schedule II Non-Trustee Account Information
Schedule III Trade Names
Schedule IV Chief Place of Business and Chief Executive or Registered Office
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Credit Facility Provider Supplement
Exhibit B Form of Swap Provider Supplement
Exhibit C Form of Security Trust Agreement Supplement
Exhibit D Form of Account Letter
Exhibit E Form of Consent and Agreement
Exhibit F Form of Service Provider Supplement
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Exhibit G Form of Tax-Related Disposition Agreement Supplement
Exhibit H Form of Quiet Enjoyment Letter
</TABLE>
iv
<PAGE> 6
SECURITY TRUST AGREEMENT
SECURITY TRUST AGREEMENT dated as of July 15, 1998, among AerCo LIMITED, a
limited liability company incorporated under the laws of Jersey, Channel
Islands ("AerCo" or the "Issuer"), the ISSUER SUBSIDIARIES listed on the
signature pages hereof, LIVELY LIMITED, a limited liability company
incorporated under the laws of Jersey, Channel Islands ("Lively"), as nominee
shareholder or shareholder of shares in certain of the Issuer Subsidiaries
(each of the Issuer, each such Issuer Subsidiary and Lively, a "Grantor"), GPA
ADMINISTRATIVE SERVICES LIMITED, a company incorporated under the laws of
Ireland (the "Administrative Agent"), GPA CASH MANAGER II LIMITED, a limited
liability company organized under the laws of Ireland (the "Cash Manager"), GPA
GROUP PLC, a public limited company incorporated under the laws of Ireland, as
the initial representative of the Class E Noteholders (the "Class E Note
Representative"), BABCOCK & BROWN LIMITED, a limited liability company
organized under the laws of Ireland, in its capacity as servicer (the
"Servicer") under the Servicing Agreement (as defined in the Indenture),
MOURANT & CO. SECRETARIES LIMITED, a limited liability company incorporated
under the laws of Jersey, Channel Islands (the "Company Secretary"), BANKERS
TRUST COMPANY, not in its individual capacity (except as otherwise provided in
the Indenture (as defined below)), but solely in its capacity as trustee under
the Indenture (in such capacity, the "Trustee"), BANKERS TRUST COMPANY, as the
Book-Entry Depositary under the Deposit Agreement (as defined in the Indenture)
(the "Book-Entry Depositary"), BANKERS TRUST COMPANY, as the initial Reference
Agent under the Reference Agency Agreement (as defined in the Indenture) (the
"Reference Agent"), and BANKERS TRUST COMPANY, not in its individual capacity
(except as otherwise provided pursuant to Sections 6.03(i) and (ii) hereof),
but solely as the initial Security Trustee (the "Security Trustee").
PRELIMINARY STATEMENTS:
(1) The Trustee has entered into an Indenture dated as of the date hereof
with the Issuer (the "Indenture"), pursuant to which the Issuer is issuing the
Notes. The Issuer has entered into Intercompany Loan Agreements (as defined
below) with the Aircraft-Owning Subsidiaries (as defined below) existing on the
date hereof.
(2) The Issuer is the owner of (i) all of the outstanding ordinary shares,
U.S.$1.00 par value (the "ALPS 94-1 Shares") of Aircraft Lease Portfolio
Securitization 94-1 Limited, a company incorporated with limited liability
under the laws of Jersey, Channel Islands ("ALPS 94-1"), 150,000 ordinary
shares, U.S.$1 per ordinary share and one Irish Pound share of IRL.1
(collectively with the one Irish Pound share of IRL.1 held by Lively for the
benefit of the Issuer, the "AerCo Ireland Shares") of AerCo Ireland Limited, a
limited liability company organized under the laws of Ireland ("AerCo
Ireland"), 150,000 ordinary shares, U.S.$1 per ordinary share and one Irish
Pound share of IRL.1 (collectively with the one Irish Pound share of IRL.1 held
by Lively for the benefit of the Issuer, the "AerCo Ireland II Shares") of
AerCo Ireland II Limited, a limited liability company organized under the laws
of Ireland ("AerCo Ireland II"), and all of the outstanding capital stock (the
"AerCoUSA Shares") of AerCoUSA Inc., a corporation incorporated under the
<PAGE> 7
2
laws of the State of Delaware ("AerCoUSA"), described in Schedule I hereto
and (ii) certain rights and claims under the intercompany loan agreements (as
amended from time to time, the "Intercompany Loan Agreements"), described in
Schedule I hereto (the "Pledged Debt"). The AerCoUSA Shares have been
deposited with First Security Bank, National Association, as voting trustee
(the "Voting Trustee"), pursuant to the Voting Trust Agreement and the Voting
Trustee has issued voting trust certificates in respect thereof (the "Voting
Trust Certificates"). AerCo Ireland II is the owner of 1249 ordinary shares
(collectively with the one ordinary share owned by Lively, the "AerFi Shares")
of AerFi Belgium N.V., a company organized under the laws of Belgium ("AerFi"),
described in Schedule I hereto. ALPS 94-1 is the owner of one Irish Pound
share of IRL.1 (collectively with the one Irish Pound share of IRL.1 held by
Lively for the benefit of ALPS 94-1, the "Pergola Shares") of Pergola Limited,
a limited liability company organized under the laws of Ireland ("Pergola"),
499 ordinary shares, FRF 100 per ordinary share (collectively with the one
ordinary share held by Lively for the benefit of ALPS 94-1, the "ALPS 94-1
(France) Shares") of ALPS 94-1 (France) S.A.R.L., a limited liability company
organized under the laws of France ("ALPS 94-1 (France)") and 1249 ordinary
shares (collectively with the one ordinary share owned by Lively, the "ALPS
94-1 (Belgium) Shares") of ALPS 94-1 (Belgium) N.V., a limited liability
company organized under the laws of Belgium ("ALPS 94-1 (Belgium)"), described
in Schedule I hereto. The ALPS 94-1 Shares, the AerCo Ireland Shares, the
AerCo Ireland II Shares, the Voting Trust Certificates, the AerFi Shares, the
Pergola Shares, the ALPS 94-1 (France) Shares and the ALPS 94-1 (Belgium)
Shares are referred to herein as the "Pledged Stock".
(3) In accordance with the terms of the Indenture, the Issuer may enter
into one or more Eligible Credit Facilities from time to time providing that
each provider thereunder is entitled to the benefits of this Agreement. Upon
the execution and delivery to the Security Trustee of a supplement to this
Agreement in substantially the form of Exhibit A hereto (a "Credit Facility
Provider Supplement") by each provider of any such Eligible Credit Facility,
such facility shall be a "Secured Credit Facility" hereunder and each provider
party thereto shall be a "Secured Credit Facility Provider" hereunder.
(4) ALPS 94-1, AerCo Ireland, AerCo Ireland II, AerCoUSA, AerFi, Pergola
and ALPS 94-1 (Belgium) are parties to lease and sub-lease contracts with
respect to the Initial Aircraft and may enter into lease and sub-lease
contracts with respect to Additional Aircraft.
(5) In accordance with Section 9.05(a) of the Indenture, the Issuer may
enter into one or more Swap Agreements from time to time providing that each
Swap Provider party thereto is entitled to the benefits of certain security
under this Agreement. Upon the execution and delivery to the Security Trustee
of a supplement to this Agreement in substantially the form of Exhibit B hereto
(a "Swap Provider Supplement") by each Swap Provider party to any such Swap
Agreement, such Swap Agreement shall be a "Secured Swap Agreement" hereunder
and each Swap Provider party thereto shall be a "Secured Swap Provider"
hereunder.
<PAGE> 8
3
(6) In accordance with the terms of the Indenture, the Issuer may enter
into one or more agreements providing for services to AerCo Group in addition
to the Service Provider Documents from time to time providing that each
provider thereunder is entitled to the benefits of certain security under this
Agreement. Upon the execution and the delivery to the Security Trustee of a
supplement to this Agreement in substantially the form of Exhibit F hereto (a
"Service Provider Supplement") by each such party to any such Agreement, such
agreement shall be a "Secured Service Provider Document" hereunder and each
provider party thereto shall be a "Secured Service Provider" hereunder.
(7) In accordance with the terms of the Indenture, the Guarantor
Noteholders are entitled to the benefits of certain security under this
Agreement upon the fulfillment of certain conditions. Upon the execution and
delivery to the Security Trustee of a supplement to this Agreement in
substantially the form of Exhibit C hereto (a "Security Trust Agreement
Supplement") by the Guarantor and/or any Guarantor Subsidiary, the Guarantee in
respect of such Guarantor Noteholders shall be a "Secured Guarantee" hereunder
and such Guarantor Noteholders shall be "Secured Guarantor Noteholders"
hereunder.
(8) In accordance with the terms of the Indenture, the Issuer may enter
into one or more permitted Tax-Related Dispositions from time to time pursuant
to documentation (each, a "Tax-Related Disposition Agreement) providing that
the party or parties thereto (other than members of the AerCo Group) is
entitled to the benefits of certain security under this Agreement. Upon the
execution and delivery to the Security Trustee of a supplement to this
Agreement in substantially the form of Exhibit G hereto (a "Tax Related
Disposition Supplement") by such party or parties to any such Tax-Related
Disposition Agreement, such Tax-Related Disposition Agreement shall be a
"Secured Tax-Related Disposition Agreement" and each such party thereto shall
be a "Secured Tax-Related Disposition Party" hereunder.
(9) The Issuer and the Issuer Subsidiaries may from time to time grant
additional security for the benefit of the relevant Secured Parties (as defined
below). Upon the execution and delivery to the Security Trustee of a Security
Trust Agreement Supplement by the Issuer or any Issuer Subsidiary, the relevant
Secured Parties shall be entitled to the benefit of the Collateral thereunder.
(10) It is a condition precedent to the issuance of the Notes by the Issuer
and a condition precedent to the advance of loans under the Intercompany Loan
Agreements that each Grantor shall have granted the assignments and security
interests and made the pledges and assignments contemplated by this Agreement.
(11) Each Grantor shall derive substantial direct and indirect benefit from
the transactions contemplated by the Indenture and the other Related Documents.
<PAGE> 9
4
NOW, THEREFORE, in consideration of the premises, each Grantor hereby
agrees with the Security Trustee for its benefit and the benefit of the
relevant Secured Parties as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) Certain Defined Terms.
As used herein, the following terms have the meanings set forth below:
"1881 Act" has the meaning specified in Section 2.17.
"Acceleration Default" means any Event of Default of the type
described in Section 4.01(f) or 4.01(g) of the Indenture.
"Account Letters" has the meaning specified in Section 2.06(a).
"Additional Grantor" has the meaning specified in Section 10.01.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"AerCo Ireland" has the meaning specified in the preliminary
statements to this Agreement.
"AerCo Ireland II" has the meaning specified in the preliminary
statements to this Agreement.
"AerCo Ireland II Shares" has the meaning specified in the
preliminary statements to this Agreement.
"AerCo Ireland Shares" has the meaning specified in the preliminary
statements to this Agreement.
"AerCoUSA" has the meaning specified in the preliminary statements
to this Agreement.
"AerCoUSA Shares" has the meaning specified in the preliminary
statements to this Agreement.
"AerFi" has the meaning specified in the preliminary statements to
this Agreement.
<PAGE> 10
5
"AerFi Shares" has the meaning specified in the preliminary
statements to this Agreement.
"Agreed Currency" has the meaning specified in Section 10.07.
"Agreement Collateral" has the meaning specified in Section 2.01.
"Aircraft-Owning Subsidiaries" means each of ALPS 94-1, AerCo
Ireland, AerCo Ireland II, AerCoUSA and any Issuer Subsidiary that owns
any Aircraft.
"ALPS 94-1" has the meaning specified in the preliminary statements
to this Agreement.
"ALPS 94-1 Shares" has the meaning specified in the preliminary
statements to this Agreement.
"ALPS 94-1 (Belgium)" has the meaning specified in the preliminary
statements to this Agreement.
"ALPS 94-1 (Belgium) Shares" has the meaning specified in the
preliminary statements to this Agreement.
"ALPS 94-1 (France)" has the meaning specified in the preliminary
statements to this Agreement.
"ALPS 94-1 (France) Shares" has the meaning specified in the
preliminary statements to this Agreement.
"Assigned Agreements" has the meaning specified in Section 2.01.
"Assigned Leases" has the meaning specified in Section 2.01.
"Bankers Trust Fee Letter" means the fee agreement dated as of July
15, 1998 between the Issuer and Bankers Trust.
"Book-Entry Depositary" has the meaning specified in the recital of
parties to this Agreement.
"Cash Collateral" has the meaning specified in Section 2.01.
"Cash Manager" has the meaning specified in the recital of parties
to this Agreement.
"Certificated Security" means (i) a certificated security as defined
defined in Section
<PAGE> 11
6
8-102(a)(17) of the UCC with respect thereto, but does not include any
Government Security.
"Class" means any class of AerCo Group Notes.
"Class E Note Representative" has the meaning specified in the
recital of parties to this Agreement.
"Collateral" has the meaning specified in Section 2.01.
"Company Secretary" has the meaning specified in the recital of
parties to this Agreement.
"Conduit Companies" means each of AerFi, ALPS 94-1 (Belgium), Pergola
and any other Issuer Subsidiary (other than an Aircraft-Owning Subsidiary)
that enters into or has entered into (as lessor or vendor) an aircraft
lease agreement, conditional sale agreement, hire purchase agreement or
other similar arrangement with a Person not an AerCo Group Member (as
lessee or purchaser) in respect of an Aircraft title to which is held by
an Aircraft-Owning Subsidiary.
"Credit Facility Provider Supplement" has the meaning specified in
the preliminary statements to this Agreement or such other agreement
approved by the Administrative Agent providing for a credit facility
provider to become a Secured Party hereunder.
"Government Security" means (i) any security issued or guaranteed by
the United States of America or an agency or instrumentality thereof that
is maintained in book-entry form on the records of the Federal Reserve
Bank of New York and (ii) any security entitlement, as defined in Section
8-102(a)(17) of the UCC, with respect thereto.
"Grantor" has the meaning specified in the preliminary statements to
this Agreement.
"Indenture" has the meaning specified in the preliminary statements
to this Agreement.
"Indenture Obligations" means, in respect of any Class of AerCo
Group Notes, all obligations of the Issuer and any Guarantor under and in
respect of such Class of AerCo Group Notes and the Guarantees, if any, of
such Class of AerCo Group Notes, including, without limitation, all
obligations of the Issuer and any Guarantor to make payments of principal
of, interest on (including interest following the filing of a petition
initiating any proceeding referred to in Section 8.03(a)) and Redemption
Premium, if any, on such Class of AerCo Group Notes, all obligations to
pay any fees, expenses or other amounts under or in respect of such Class
of
<PAGE> 12
7
AerCo Group Notes, the Indenture, any Guarantor Indenture or any Related
Document in respect of such Class of AerCo Group Notes, and all
obligations in respect of any amendment, modification, extension, renewal
or refinancing of such Class of AerCo Group Notes.
"Instrument" means any "instrument" as defined in Section
9-105(1)(i) of the UCC.
"Intercompany Loan Agreements" has the meaning specified in the
preliminary statements to this Agreement.
"Intercompany Obligations" means, with respect to each
Aircraft-Owning Subsidiary, its obligations (including, without
limitation, under the guarantee contained therein, if any) to the Issuer
under the Intercompany Loan Agreement with respect to such
Aircraft-Owning Subsidiary or any other agreement providing for repayment
by any Aircraft-Owning Subsidiaries of loans or advances from the Issuer.
"Investment Collateral" has the meaning specified in Section 2.01.
"Issuer" has the meaning specified in the recital of parties to this
Agreement.
"Lease Collateral" has the meaning specified in Section 2.01.
"Lease Obligations" means, with respect to each Conduit Company, its
obligations (as lessee and/or purchaser) to each AerCo Group Member under
each aircraft lease agreement, conditional sale agreement, hire purchase
agreement or other similar agreement with such AerCo Group Member (as
lessor or vendor).
"Lively" has the meaning specified in the recital of parties to this
Agreement.
"Non-Trustee Account Banks" has the meaning specified in Section
2.06.
"Non-Trustee Account Collateral" has the meaning specified in
Section 2.01.
"Obligor" has the meaning specified in Section 2.06.
"Pergola" has the meaning specified in the preliminary statements to
this Agreement.
"Pergola Shares" has the meaning specified in the preliminary
statements to this Agreement.
"Pledged Debt" has the meaning specified in the preliminary
statements to this Agreement.
<PAGE> 13
8
"Pledged Stock" has the meaning specified in the preliminary
statements to this Agreement.
"Received Currency" has the meaning specified in Section 10.07.
"Reference Agent" has the meaning specified in the recital of
parties to this Agreement.
"Secured Credit Facility" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Credit Facility Provider" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Guarantee" has the meaning specified in the preliminary
statements to this Agreement.
"Secured Guarantor Noteholders" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Intercompany Obligations" has the meaning specified in
Section 2.02.
"Secured Issuer Obligations" has the meaning specified in Section
2.02.
"Secured Lease Obligations" has the meaning specified in Section
2.02.
"Secured Obligations" has the meaning specified in Section 2.02.
"Secured Other Credit Facility Obligations" means the obligations of
the Issuer and any Guarantor now or hereafter existing under any Secured
Credit Facilities other than the Primary Eligible Credit Facilities.
"Secured Parties" means with respect to (i) the assignments, pledges
and security interests granted by AerCo and by Lively as nominee holder
of one AerCo Ireland Share and one AerCo Ireland II Share: the Service
Providers, the Noteholders, the Secured Credit Facility Providers, the
Secured Swap Providers, the Secured Service Providers, the Secured
Tax-Related Disposition Parties and the Secured Guarantor Noteholders,
(ii) the assignments, pledges and security interests granted by each
Aircraft-Owning Subsidiary and by Lively as nominee holder of one Pergola
Share, by Lively as owner of one AerFi Share and one ALPS 94-1 (Belgium)
Share: AerCo and (iii) the assignments, pledges and security interests
granted by each Conduit Company and: the AerCo Group Member which enters
into or has entered into (as lessor or vendor) an aircraft lease
agreement, conditional sale
<PAGE> 14
9
agreement, hire purchase agreement or other similar arrangement with
such Conduit Company.
"Secured Primary Eligible Credit Facility Obligations" means the
obligations of the Issuer and any Guarantor now or hereafter existing
under any Primary Eligible Credit Facilities.
"Secured Service Provider" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Service Provider Document" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Subordinated Swap Provider Obligations" means the
obligations of the Issuer and any Guarantor now or hereafter existing
under the Secured Swap Agreements that are subordinated to payments
having the priorities specified in Section 3.08 of the Indenture or any
Guarantor Indenture.
"Secured Swap Agreement" has the meaning specified in the
preliminary statements to this Agreement.
"Secured Swap Provider" has the meaning specified in the preliminary
statements to this Agreement.
"Secured Swap Provider Obligations" means the obligations of the
Issuer now or hereafter existing under the Secured Swap Agreements other
than Secured Subordinated Swap Provider Obligations.
"Secured Tax-Related Disposition Agreement" has the meaning
specified in the preliminary statements to this Agreement.
"Secured Tax-Related Disposition Party" has the meaning specified in
the preliminary statements to this Agreement.
"Secured Tax-Related Disposition Party Obligations" means the
obligations of the Issuer now or hereafter existing under the Secured
Tax-Related Disposition Agreements.
"Securities Account" means a securities account as defined in
Section 8-501 of the UCC maintained in the name of the Security Trustee
with a Securities Intermediary of which the "securities intermediary's
jurisdiction" (within the meaning of Section 8-110(e) of the UCC) is the
State of New York.
<PAGE> 15
10
"Securities Intermediary" means any "securities intermediary" of the
Security Trustee as defined in 31 C.F.R. Section 357.2, Section
8-102(a)(14) of the UCC or any similar provision of state or federal law.
"Security Collateral" has the meaning specified in Section 2.01(a).
"Security Trust Agreement Supplement" has the meaning specified in
the preliminary statements to this Agreement.
"Security Trustee" has the meaning specified in the recital of
parties to this Agreement.
"Senior Creditors" means, at any time, the holders and owners of
Senior Obligations.
"Senior Obligations" means:
(i) with respect to the Secured Primary Eligible Credit
Facility Obligations, the Service Provider Obligations;
(ii) with respect to the Indenture Obligations in respect of
the AerCo Group Class A Notes and the Secured Swap Provider
Obligations, (A) the Secured Primary Eligible Credit Facility
Obligations and (B) the Service Provider Obligations;
(iii) with respect to the Indenture Obligations in respect of
the AerCo Group Class B Notes, (A) the Indenture Obligations in
respect of the AerCo Group Class A Notes, (B) the Secured Swap
Provider Obligations, (C) the Secured Primary Eligible Credit
Facility Obligations and (D) the Service Provider Obligations;
(iv) with respect to the Indenture Obligations in respect of
the AerCo Group Class C Notes, (A) the Indenture Obligations in
respect of the AerCo Group Class B Notes, (B) the Indenture
Obligations in respect of the AerCo Group Class A Notes, (C) the
Secured Swap Provider Obligations, (D) the Secured Primary Eligible
Credit Facility Obligations and (E) the Service Provider
Obligations;
(v) with respect to the Indenture Obligations in respect of
the AerCo Group Class D Notes, (A) the Indenture Obligations in
respect of the AerCo Group Class C Notes, (B) the Indenture
Obligations in respect of the AerCo Group Class B Notes, (C) the
Indenture Obligations in respect of the AerCo Group Class A Notes,
(D) the Secured Swap Provider Obligations, (E) the Secured Primary
Eligible Credit Facility Obligations and (F) the Service Provider
Obligations;
<PAGE> 16
11
(vi) with respect to the Secured Other Credit Facility
Obligations, (A) the Indenture Obligations in respect of the AerCo
Group Class D Notes, (B) the Indenture Obligations in respect of the
AerCo Group Class C Notes, (C) the Indenture Obligations in respect
of the AerCo Group Class B Notes, (D) the Indenture Obligations in
respect of the AerCo Group Class A Notes, (E) the Secured Swap
Provider Obligations, (F) the Secured Primary Eligible Credit
Facility Obligations and (G) the Service Provider Obligations;
(vii) with respect to the Secured Subordinated Swap Provider
Obligations, (A) the Secured Other Credit Facility Obligations, (B)
the Indenture Obligations in respect of the AerCo Group Class D
Notes, (C) the Indenture Obligations in respect of the AerCo Group
Class C Notes, (D) the Indenture Obligations in respect of the AerCo
Group Class B Notes, (E) the Indenture Obligations in respect of the
AerCo Group Class A Notes, (F) the Secured Swap Provider Obligations,
(G) the Secured Primary Eligible Credit Facility Obligations and (H)
the Service Provider Obligations; and
(viii) with respect to the Secured Tax-Related Disposition Party
Obligations, (A) the Secured Subordinated Swap Provider Obligations,
(B) the Secured Other Credit Facility Obligations, (C) the Indenture
Obligations in respect of the AerCo Group Class D Notes, (D) the
Indenture Obligations in respect of the AerCo Group Class C Notes,
(E) the Indenture Obligations in respect of the AerCo Group Class B
Notes, (F) the Indenture Obligations in respect of the AerCo Group
Class A Notes, (G) the Secured Swap Provider Obligations, (H) the
Secured Primary Eligible Credit Facility Obligations and (I) the
Service Provider Obligations; and
(ix) with respect to the AerCo Group Class E Notes, (A) the
Secured Tax-Related Disposition Party Obligations, (B) the Secured
Subordinated Swap Provider Obligations, (C) the Secured Other Credit
Facility Obligations, (D) the Indenture Obligations in respect of the
AerCo Group Class D Notes, (E) the Indenture Obligations in respect
of the AerCo Group Class C Notes, (F) the Indenture Obligations in
respect of the AerCo Group Class B Notes, (G) the Indenture
Obligations in respect of the AerCo Group Class A Notes, (H) the
Secured Swap Provider Obligations, (I) the Secured Primary Eligible
Credit Facility Obligations and (J) the Service Provider Obligations.
"Senior Representative" means the Senior Trustee; provided, however, that
if, at any time prior to the payment in full of the Service Provider
Obligations, the holders of a majority in interest of the accrued and unpaid
Service Provider Obligations at such time agree upon another Person to serve as
Senior Representative, such Person shall be the Senior Representative until the
payment in full of the Service Provider Obligations
<PAGE> 17
12
"Service Provider Documents" means the Administrative Agency
Agreement, the Cash Management Agreement, the Indenture, the Deposit
Agreement, any Guarantor Indenture, the Reference Agency Agreement, the
Servicing Agreement, the Secretarial Services Agreement, any Additional
Servicing Agreement, the Bankers Trust Fee Agreement and this
Agreement.
"Service Provider Obligations" means, collectively, the
obligations now or hereafter existing of the Issuer or any AerCo Group
Member to pay fees, expenses, indemnities and other amounts under the
Service Provider Documents (other than the Secured Primary Eligible
Credit Facility Obligations, the Secured Swap Provider Obligations, the
Indenture Obligations in respect of the AerCo Group Class A Notes, the
Indenture Obligations in respect of the AerCo Group Class B Notes, the
Indenture Obligations in respect of the AerCo Group Class C Notes, the
Indenture Obligations in respect of the AerCo Group Class D Notes, the
Secured Other Credit Facility Obligations, the Secured Subordinated
Swap Provider Obligations, the Secured Tax-Related Disposition Party
Obligations and the Indenture Obligations in respect of the AerCo Group
Class E Notes).
"Service Provider Supplement" has the meaning given to such
term in the preliminary statements to this Agreement.
"Servicer" has the meaning specified in the preliminary
statements to this Agreement.
"Subordinated Creditors" means, at any time, the holders
and owners of Subordinated Obligations.
"Subordinated Obligations" means:
(i) with respect to the Service Provider Obligations,
(A) the Secured Primary Eligible Credit Facility Obligations,
(B) the Indenture Obligations in respect of the AerCo Group
Class A Notes and the Secured Swap Provider Obligations, (C)
the Indenture Obligations in respect of the AerCo Group Class
B Notes, (D) the Indenture Obligations in respect of the AerCo
Group Class C Notes, (E) the Indenture Obligations in respect
of the AerCo Group Class D Notes, (F) the Secured Other Credit
Facility Obligations, (G) the Secured Subordinated Swap
Provider Obligations, (H) the Secured Tax-Related Disposition
Party Obligations and (I) the Indenture Obligations in respect
of the AerCo Group Class E Notes;
(ii) with respect to the Secured Primary Eligible
Credit Facility Obligations, (A) the Indenture Obligations in
respect of the AerCo Group Class A Notes and the Secured Swap
Provider Obligations, (B) the Indenture Obligations in respect
of the AerCo Group Class B Notes, (C) the Indenture
Obligations in respect of the AerCo Group Class C Notes, (D)
the Indenture
<PAGE> 18
13
Obligations in respect of the AerCo Group Class
D Notes, (E) the Secured Other Credit Facility Obligations,
(F) the Secured Subordinated Swap Provider Obligations, (G)
the Secured Tax-Related Disposition Party Obligations and (H)
the Indenture Obligations in respect of the AerCo Group Class
E Notes;
(iii) with respect to the Indenture Obligations in
respect of the AerCo Group Class A Notes and the Secured Swap
Provider Obligations, (A) the Indenture Obligations in respect
of the AerCo Group Class B Notes, (B) the Indenture
Obligations in respect of the AerCo Group Class C Notes, (C)
the Indenture Obligations in respect of the AerCo Group Class
D Notes, (D) the Secured Other Credit Facility Obligations,
(E) the Secured Subordinated Swap Provider Obligations, (F)
the Secured Tax-Related Disposition Party Obligations and (G)
the Indenture Obligations in respect of the AerCo Group Class
E Notes;
(iv) with respect to the Indenture Obligations in
respect of the AerCo Group Class B Notes, (A) the Indenture
Obligations in respect of the AerCo Group Class C Notes, (B)
the Indenture Obligations in respect of the AerCo Group Class
D Notes, (C) the Secured Other Credit Facility Obligations,
(D) the Secured Subordinated Swap Provider Obligations, (E)
the Secured Tax-Related Disposition Party Obligations and (F)
the Indenture Obligations in respect of the AerCo Group Class
E Notes;
(v) with respect to the Indenture Obligations in
respect of the AerCo Group Class C Notes, (A) the Indenture
Obligations in respect of the AerCo Group Class D Notes, (B)
the Secured Other Credit Facility Obligations, (C) the Secured
Subordinated Swap Provider Obligations, (D) the Secured
Tax-Related Disposition Party Obligations and (E) the
Indenture Obligations in respect of the AerCo Group Class E
Notes;
(vi) with respect to the Indenture Obligations in
respect of the AerCo Group Class D Notes, (A) the Secured
Other Credit Facility Obligations, (B) the Secured
Subordinated Swap Provider Obligations, (C) the Secured
Tax-Related Disposition Party Obligations and (D) the
Indenture Obligations in respect of the AerCo Group Class E
Notes;
(vii) with respect to the Secured Other Credit
Facility Obligations, (A) the Secured Subordinated Swap
Provider Obligations, (B) the Secured Tax-Related Disposition
Party Obligations and (C) the Indenture Obligations in respect
of the AerCo Group Class E Notes;
(viii) with respect to the Secured Subordinated Swap
Provider Obligations, (A) the Secured Tax-Related Disposition
Party Obligations and
<PAGE> 19
14
(B) the Indenture Obligations in respect of the AerCo Group
Class E Notes; and
(ix) with respect to the Secured Tax-Related
Disposition Obligations, the Indenture Obligations in respect
of the AerCo Group Class E Notes.
"Subordinated Representative" means, at any time, any trustee
or representative of any holders or owners of any obligations other
than the Senior Representative at such time.
"Swap Provider Supplement" has the meaning specified in the
preliminary statements to this Agreement or such other agreement
approved by the Administrative Agent providing for a Swap Provider to
become a Secured Party hereunder.
"Tax-Related Disposition Supplement" has the meaning specified
in the preliminary statements to this Agreement or such other agreement
approved by the Administrative Agent for a party pursuant to a
Permitted Tax-Related Disposition to become a Secured Party hereunder.
"Trustee" has the meaning specified in the recital of parties
to this Agreement.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of
mandatory provisions of law, the perfection or the effect of perfection
or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than New York, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.
"Uncertificated Security" means (i) an uncertificated
security, as defined in Section 8-102(a)(18) of the UCC, and (ii) any
security entitlement, as defined in Section 8-102(a)(17) of the UCC,
with respect thereto, but does not include any Government Security.
"Voting Trust" has the meaning specified in the preliminary
statements to this Agreement.
"Voting Trust Certificates" has the meaning specified in
the preliminary statements to this Agreement.
<PAGE> 20
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(b) Terms Defined in the Indenture. For all purposes of this
Agreement, all capitalized terms used herein but not defined herein shall have
the respective meanings assigned to such terms in the Indenture.
SECTION 1.02. Construction and Usage . The conventions of
construction and usage set forth in the Indenture are hereby incorporated by
reference herein.
ARTICLE II
SECURITY
SECTION 2.01. Grant of Security . Each Grantor hereby assigns
and pledges to the Security Trustee for the benefit of the Secured Parties in
respect of such Grantor, and hereby grants to the Security Trustee for the
benefit of the Secured Parties in respect of such Grantor a security interest
in, all of its right, title and interest in and to the following (collectively,
the "Collateral"):
(a) with respect to each Grantor, all of the following
(the "Security Collateral"):
(i) subject to any prior security interest created
under any other Security Document, the Pledged Stock held by
it or any nominee on its behalf, and the certificates
representing such Pledged Stock, and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Stock (including, in
the case of the Voting Trust Certificates, all rights of the
Issuer to receive the AerCoUSA Shares upon termination of the
Voting Trust Agreement);
(ii) subject to any prior security interest created
under the Jersey Debt Security Agreement and the Irish
Subsidiary Share Mortgage, the Pledged Debt owed to it, and
the instruments evidencing such Pledged Debt, and all
interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Pledged Debt;
(iii) all additional shares of Stock and voting trust
certificates from time to time acquired by such Grantor in any
manner, including the Stock of any AerCo Group Member that may
be formed from time to time, and the certificates representing
such additional shares or voting trust certificates and all
dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all such additional shares or
voting trust certificates; and
<PAGE> 21
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(iv) all additional indebtedness from time to time
owed to such Grantor by any AerCo Group Member and the
instruments evidencing such indebtedness, and all interest,
cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(b) with respect to each Grantor, all of the following
(collectively, the "Non-Trustee Account Collateral"):
(i) all of the Non-Trustee Accounts in such Grantor's
name, all funds or any other interest held or required by the
terms of the Indenture or any Guarantor Indenture to be held
therein and all certificates and instruments, if any, from
time to time representing or evidencing such Non-Trustee
Accounts;
(ii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed by the Security
Trustee for or on behalf of such Grantor in substitution for
or in addition to any or all of the then existing Non-Trustee
Account Collateral of such Grantor; and
(iii) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the then existing Non-Trustee Account Collateral of
such Grantor;
(c) with respect to each Grantor, all of the following
(collectively, the "Cash Collateral"):
(i) all funds or any other interest of such Grantor
held or required by the terms of the Indenture or any
Guarantor Indenture to be held in the Accounts and all
certificates and instruments, if any from time to time
representing or evidencing such funds;
(ii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed by the Security
Trustee for or on behalf of such Grantor in substitution for
or in addition to any or all of the then existing Cash
Collateral of such Grantor; and
(iii) all interest, dividends, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
then existing Cash Collateral of such Grantor;
<PAGE> 22
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(d) with respect to each Grantor, all "investment property"
(as defined in Section 9-115(1)(f) of the UCC) of such Grantor and all
of the following (the "Investment Collateral"):
(i) all Permitted Account Investments made or
acquired from or with the proceeds of any Non-Trustee Account
Collateral or Cash Collateral of such Grantor from time to
time and all certificates and instruments, if any, from time
to time representing or evidencing such Permitted Account
Investments;
(ii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed by the Security
Trustee for or on behalf of such Grantor in substitution for
or in addition to any or all of the then existing Investment
Collateral of such Grantor; and
(iii) all interest, dividends, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
then existing Investment Collateral of such Grantor;
(e) with respect to each Grantor, all of the following (the
"Agreement Collateral"):
(i) all of such Grantor's rights hereunder in respect
of the Secured Intercompany Obligations owed to it and all of
such Grantor's right, title and interest in and to all other
security assignments, cash deposit agreements and other
security agreements executed in its favor by any Issuer
Subsidiary, in each case as such agreements may be amended or
otherwise modified from time to time (collectively, the
"Assigned Agreements"); and
(ii) all of such Grantor's right, title and interest
in and to all deposit accounts, all funds held therein, all
certificates and instruments, if any from time to time
representing or evidencing such deposit accounts and all other
property of whatever nature, in each case pledged, assigned or
transferred to it or mortgaged or charged in its favor
pursuant to any Assigned Agreement;
(f) with respect to each Grantor, all of the following (the
"Lease Collateral"):
(i) all of such Grantor's right, title and interest
in and to all Leases to which such Grantor is or may from time
to time be party and in any lease, conditional sale agreement,
hire purchase agreement or other similar agreement with
another AerCo Group Member under which it is the
<PAGE> 23
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lessor or vendor (all such Leases, the "Assigned Leases"),
including without limitation, (A) all rights of such Grantor
to receive moneys due and to become due under or pursuant to
such Assigned Leases, (B) all rights of such Grantor to
receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to such Assigned Leases, (C) claims of
such Grantor for damages arising out of or for breach or
default under such Assigned Leases and (D) the right of such
Grantor to terminate such Assigned Leases, to perform
thereunder and to compel performance and otherwise exercise
all remedies thereunder, whether arising under such Assigned
Leases or by statute or at law or in equity; and (g) all
proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute
property of the types described in subsections (a), (b),
(c), (d), (e) and (f) of this Section 2.01).
SECTION 2.02. Security for Obligations . This Agreement
secures the payment and performance of (i) with respect to the Issuer, all
obligations of the Issuer now or hereafter existing under the Service Provider
Documents, the AerCo Group Notes, the Secured Guarantee, the Secured Credit
Facilities, the Secured Swap Agreements and the Secured Tax-Related Disposition
Agreements, whether for principal, interest, fees, expenses or otherwise (all
such obligations of the Issuer being the "Secured Issuer Obligations"), (ii)
with respect to each Aircraft-Owning Subsidiary, all Intercompany Obligations of
such Grantor now or hereafter existing, whether for principal, interest, fees,
expenses or otherwise (all such obligations of each such Grantor being the
"Secured Intercompany Obligations" of each Grantor) and (iii) with respect to
each Conduit Company, all Lease Obligations of such Grantor now or hereafter
existing, whether for rental, fees, expenses or otherwise (all such obligations
of each such Grantor being the "Secured Lease Obligations" of such Grantor and,
collectively with the Secured Lease Obligations of each other Grantor, the
Secured Intercompany Obligations of each Grantor and the Secured Issuer
Obligations, the "Secured Obligations"). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts that constitute
part of the Secured Obligations and would be owed by any Grantor to the Secured
Parties with respect to such Grantor but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Grantor.
SECTION 2.03. Grantors Remain Liable . Anything contained
herein to the contrary notwithstanding, (a) each Grantor shall remain liable
under the contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by the
Security Trustee of any of its rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) no Secured Party shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall any Secured Party be obligated to perform
any of the obligations or duties of any
<PAGE> 24
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Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 2.04. Delivery of Collateral . All certificates or
instruments representing or evidencing any Collateral, if deliverable, shall be
delivered to and held by or on behalf of the Security Trustee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Security Trustee. In the case of the ALPS 94-1
Shares, the Issuer shall forthwith, upon the grant of the security interest in
respect of such shares pursuant to the Jersey Share Security Agreement, cause
such shares to be registered in the name of the Security Trustee or such of its
nominees as the Security Trustee shall direct. In the case of any other
Collateral, the Security Trustee shall have the right, at any time in its
discretion and without notice to the Issuer or the relevant Aircraft-Owning
Subsidiary, as the case may be, to transfer to or to register in the name of the
Security Trustee or any of its nominees any or all of the Security Collateral,
subject only to the revocable rights specified in Section 2.10(a). In addition,
the Security Trustee shall have the right at any time to exchange certificates
or instruments representing or evidencing any Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 2.05. Maintenance of Accounts . So long as any Secured
Obligations shall remain unpaid, the Security Trustee shall have sole dominion
and control over each Account other than any Non-Trustee Account, and no Grantor
shall, at any time, establish any bank account other than pursuant to Article
III of the Indenture, any Guarantor Indenture or in compliance with Section
2.06(a).
SECTION 2.06. Maintaining the Non-Trustee Accounts . So
long as any Secured Obligations shall remain unpaid:
(a) Each Grantor shall maintain each Non-Trustee Account in
its name only with banks ("Non-Trustee Account Banks") that have
entered into letter agreements in substantially the form of Exhibit D
hereto (or made such other arrangements as are acceptable to the
Administrative Agent) with such Grantor and the Security Trustee (the
"Account Letters"); provided that in the case of any Non-Trustee
Account of AerFi existing on the date hereof, AerFi shall, as soon as
practicable after the date hereof, cause the banks where such
Non-Trustee Accounts are held to execute Account Letters to the
Security Trustee.
(b) Each Grantor (i) shall immediately instruct each Person
obligated at any time to make any payment to such Grantor for any
reason (an "Obligor") to make such payment to an Account or a
Non-Trustee Account meeting the requirements of Section 2.06(a), (ii)
shall instruct each of its Non-Trustee Account Banks to transfer to the
Collection Account, in immediately available funds, within one Business
Day of receipt thereof, an amount equal to the credit balance of the
Non-Trustee Account in such Non-Trustee Account Bank (other than any
amount
<PAGE> 25
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required to be left on deposit for local tax or other regulatory or
legal purposes), and (iii) shall transfer or cause its Non-Trustee
Account Banks to transfer to the Security Trustee for deposit in the
Collection Account, within each Business Day, all other proceeds of
Non-Trustee Account Collateral, Cash Collateral and proceeds of
Collateral.
(c) Upon any termination of any Account Letter or other
agreement with respect to the maintenance of a Non-Trustee Account by
any Grantor or any Non-Trustee Account Bank, such Grantor shall
immediately notify all Obligors that were making payments to such
Non-Trustee Account to make all future payments to an Account or to
another Non-Trustee Account meeting the requirements of Section
2.06(a). Subject to the terms of any Lease, upon request by the
Security Trustee, each Grantor shall, and, if prohibited from so doing
by the terms of any Lease, shall use its best efforts to seek the
consent of the relevant lessee to, terminate any or all of its
Non-Trustee Accounts.
SECTION 2.07. Representations and Warranties of the Grantors .
Each Grantor represents and warrants as of the date of this Agreement and as of
each subsequent Closing Date as follows:
(a) If it is a Grantor who holds Pledged Stock as nominee for
the benefit of an AerCo Group Member, it is the legal owner of such
Collateral and in any other case it is the legal owner (other than in
respect of any Pledged Stock held in the name of a nominee for its
benefit) and beneficial owner of the Collateral pledged and assigned by
it hereunder free and clear of any Encumbrance, other than the security
interest created by this Agreement or any other Security Documents and
the restrictions created by the Voting Trust Agreement. No effective
financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording office,
except (i) such as may have been filed in favor of the Security Trustee
relating to this Agreement, (ii) such as may have been filed in respect
of the obligations of ALPS 94-1 under the Deed of Charge, Assignment
and Priorities dated as of August 24, 1994 among ALPS 94-1 and the
other parties thereto and (iii) such as may have been filed in respect
of the obligations of any Issuer Subsidiaries, all of which obligations
under (ii) and (iii) above have been or are being discharged on the
date hereof.
(b) This Agreement, the pledge of the Security Collateral
pursuant hereto and the pledge and assignment on the date hereof and
from time to time hereafter of the other Collateral pursuant hereto
create, as regards such Grantor, a valid and perfected (other than with
respect to the ALPS 94-1 (France) Shares) security interest therein
and, in the case of the Voting Trust Certificates, in the AerCoUSA
Shares described in Schedule I hereto, securing, in each case, the
payment of the Secured Obligations specified in Section 2.02, subject
in priority to no other claims other than any claims pursuant to any
other Security Document.
<PAGE> 26
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(c) Such Grantor has no trade names except as set forth on
Schedule III hereto.
(d) Such Grantor has no subsidiaries that conduct any business
that are not Grantors hereunder.
(e) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other third party is
required either (i) for the grant by such Grantor of the assignment and
security interest granted hereby, for the execution, delivery or
performance of this Agreement by such Grantor or (ii) for the
perfection or maintenance of the pledge, assignment and security
interest created hereby, except for (1) the filing of financing and
continuation statements under the UCC, (2) the filing of particulars of
charges in the Irish Companies Registration Office and (3) such other
filings as are required under other relevant local law, all of which
filings in respect of Leases existing on the date hereof have been duly
made.
(f) The chief place of business and chief executive or
registered office of such Grantor and, with respect to any Grantor
which is incorporated or conducts business in the United States of
America, the office where such Grantor keeps records of each Assigned
Lease to which it is a party, are located at the address specified
opposite the name of such Grantor on Schedule IV hereto.
(g) All Pledged Stock pledged by such Grantor constitutes the
percentage of the issued and outstanding shares of stock of the issuers
thereof indicated on Schedule I hereto and the Voting Trust
Certificates represent 100% of all outstanding AerCoUSA Shares.
(h) All Pledged Stock pledged by such Grantor has been duly
authorized and validly issued and is fully paid up and nonassessable.
The Pledged Debt has been duly authorized, authenticated or issued and
delivered, is the legal, valid and binding obligation of each obligor
thereunder and is not in default.
(i) The Assigned Agreements and the Assigned Leases to which
such Grantor is party, true and complete copies of which have been
furnished to the Security Trustee, have been duly authorized, executed
and delivered by the relevant Grantors, are in full force and effect
and, to the best of such Grantor's knowledge, are binding upon and
enforceable against all parties thereto in accordance with their terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar or other laws affecting
creditors' rights generally. There exists no default by such Grantor
under any Assigned Agreement or any Assigned Lease to which it is
party. Each party to any Assigned Agreement to which such Grantor is
party other than such Grantor and the Security Trustee has executed and
delivered to the Security Trustee a consent, in substantially the form
of Exhibit E (or any other form approved in writing by the
Administrative Agent), to the
<PAGE> 27
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assignment of the relevant Agreement Collateral to the Security
Trustee pursuant to this Agreement (in the case of parties who are
also party to this Agreement, such parties' consent is adequately
evidenced by their execution of this Agreement). Each party other than
any AerCo Group Member to any Assigned Lease which by its terms
requires the lessor thereunder to obtain the consent of the lessee
thereunder to the assignment thereof, has executed and delivered to
the Security Trustee a consent, in substantially the form of Exhibit E
(or any other form approved in writing by the Administrative Agent),
to the assignment of the relevant Lease Collateral to the Security
Trustee pursuant to this Agreement. Each Conduit Company agrees and
acknowledges that this Agreement constitutes due notice to it of the
assignment of the relevant Lease Collateral hereunder.
SECTION 2.08. Further Assurances . (a) Each Grantor agrees
that from time to time, at the expense of such Grantor, such Grantor shall
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Security Trustee
may request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereby or to enable the Security
Trustee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral. Without limiting the generality of the foregoing, each
Grantor shall: (i) mark conspicuously each Assigned Agreement and Assigned Lease
to which it is a party and each of its records pertaining to the Collateral with
a legend, indicating that such Collateral is subject to the security interest
granted hereby; (ii) if any Collateral shall be evidenced by a promissory note
or other instrument or chattel paper, deliver and pledge to the Security Trustee
hereunder such note or instrument or chattel paper duly indorsed and accompanied
by duly executed instruments of transfer or assignment; and (iii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Security Trustee may reasonably request, in order to perfect and preserve the
pledge, assignment and security interest granted or purported to be granted
hereby.
(b) Each Grantor hereby authorizes the Security Trustee to
file one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of such
Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) Each Grantor shall furnish to the Security Trustee from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Security Trustee may reasonably request, all in reasonable detail.
<PAGE> 28
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(d) Each Grantor shall give notice of assignment of the Lease
Collateral granted by such Grantor to the Security Trustee to each party other
than any Grantor party to such Assigned Lease.
(e) Each Grantor shall, immediately upon (i) the incorporation
or acquisition by such Grantor of any Issuer Subsidiary or Guarantor Subsidiary
or (ii) the commencement of operation of leasing activities of any Aircraft by
any Issuer Subsidiary or Guarantor Subsidiary not a Grantor under this
Agreement, cause such Issuer Subsidiary or Guarantor Subsidiary, as the case may
be, to enter into a Security Trust Agreement Supplement and such Grantor shall
take all necessary steps to perfect any security interest in any Security
Collateral in respect of such Issuer Subsidiary or Guarantor Subsidiary not
already perfected.
SECTION 2.09. Place of Perfection; Records . Each Grantor
shall keep its chief place of business and, in the case of a Grantor which is
incorporated or conducts business in the United States of America, chief
executive office or, in the case of any other Grantor, its registered office at
the location therefor specified in Schedule IV or, upon 30 days' prior written
notice to the Security Trustee, at such other locations in a jurisdiction where
all actions required by Section 2.08 shall have been taken with respect to the
Collateral with respect to such Grantor.
SECTION 2.10. Voting Rights; Dividends; Etc. (a) So long as
no Default Notice shall have been delivered to the Issuer or any Guarantor
and no Acceleration Default shall have occurred and be continuing:
(i) Each of the Grantors shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Security
Collateral pledged by such Grantor or any part thereof for any purpose
not inconsistent with the terms of this Agreement, the charter
documents of such Grantor, the Indenture and any Guarantor Indenture;
provided, however, that such Grantor shall not exercise or refrain from
exercising any such right if in its judgment such action would have a
material adverse effect on the value of the Security Collateral or any
part thereof.
(ii) The Security Trustee shall execute and deliver (or cause
to be executed and delivered) to such Grantor all such proxies and
other instruments as such Grantor may reasonably request for the
purpose of enabling such Grantor to exercise the voting and other
rights that it is entitled to exercise pursuant to Section 2.10(a)(i).
(iii) Each Grantor shall be entitled to receive and retain any
and all distributions, dividends and interest paid in respect of the
Security Collateral pledged by such Grantor; provided, however, that
any and all:
(A) distributions, dividends and interest paid or
payable other than in cash in respect of, and instruments and
other property received, receivable
<PAGE> 29
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or otherwise distributed in respect of, or in exchange for,
such Security Collateral;
(B) distributions, dividends and other distributions
paid or payable in cash in respect of such Security Collateral
in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange
for, such Security Collateral
shall be, and shall be forthwith delivered to the Security Trustee to
hold as, Security Collateral and, if received by such Grantor, shall be
received in trust for the benefit of the Secured Parties in respect of
such Grantor, be segregated from the other property or funds of the
Security Trustee and, if by nature deliverable, be forthwith delivered
to the Security Trustee as Security Collateral in the same form as so
received (with any necessary indorsement).
(b) Upon notice to such Grantor by the Security Trustee
following the delivery of a Default Notice to the Issuer or any Guarantor or
following the occurrence and during the continuance of an Acceleration Default,
all rights of such Grantor (i) to exercise or refrain from exercising the voting
and other consensual rights that it would otherwise be entitled to exercise
pursuant to Section 2.10(a)(i) and (ii) to receive the distributions, dividends
and interest payments that it would otherwise be entitled to receive and retain
pursuant to Section 2.10(a)(iii) shall cease, and all such rights shall
thereupon become vested in the Security Trustee, which shall thereupon have the
sole right to exercise or refrain from exercising such voting and other
consensual rights.
(c) All distributions, dividends and interest payments that
are received by such Grantor contrary to the provisions of Section 2.10(a) or
(b) shall be received in trust for the benefit of the Secured Parties in respect
of such Grantor, shall be segregated from other funds of such Grantor and shall
be forthwith paid over to the Security Trustee as Security Collateral in the
same form as so received (with any necessary indorsement).
SECTION 2.11. As to the Assigned Agreements and Assigned
Leases. (a) Each Grantor shall at its expense:
(i) perform and observe all the terms and provisions of the
Assigned Agreements and Assigned Leases to be performed or observed by
it, maintain the Assigned Agreements and Assigned Leases in full force
and effect and enforce the Assigned Agreements and Assigned Leases in
accordance with their terms, to the extent (in the case of the Assigned
Leases) consistent with the reasonable commercial practices of leading
international aircraft operating lessors and take all
<PAGE> 30
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such action to such end as may be from time to time reasonably
requested by the Security Trustee; and
(ii) furnish to the Security Trustee promptly upon receipt
thereof copies of all amendments, modifications, extensions or renewals
of any of the Assigned Agreements or Assigned Leases, and from time to
time (A) furnish to the Security Trustee such information and reports
regarding the Collateral as the Security Trustee may reasonably request
and (B) upon request of the Security Trustee make to each other party
to any Assigned Agreement or Assigned Lease such demands and requests
for information and reports or for action as such Grantor is entitled
to make thereunder.
(b) No Grantor shall cancel or terminate any Assigned
Agreement or consent to or accept any cancellation or termination thereof or
amend or otherwise modify any Assigned Agreement.
SECTION 2.12. Transfers and Other Encumbrances; Additional
Shares or Interests . (a) No Grantor shall (i) sell, assign (by operation of law
or otherwise, other than pursuant to any other Security Document) or otherwise
dispose of, or grant any option with respect to, any of the Collateral except
that the Voting Trust Certificates may be surrendered to the Voting Trustee in
accordance with the terms of the Voting Trust Agreement and, provided that AerCo
pledges for the benefit of the Secured Parties, in a manner reasonably
satisfactory to the Security Trustee, all of the AerCoUSA Shares received upon
surrender of the corresponding Voting Trust Certificates or the voting trust
certificates received in connection with the creation of a new voting trust or
(ii) create or suffer to exist any Encumbrance upon or with respect to any of
the Collateral of such Grantor, other than the pledge, assignment and security
interest created by this Agreement or by any other Security Document.
(b) Except as otherwise provided pursuant to Section 5.02(l)
of the Indenture, each Aircraft-Owning Subsidiary and Conduit Company shall not,
and the Issuer shall not permit any Aircraft-Owning Subsidiary or Conduit
Company to, issue, deliver or sell any shares, interests, participations or
other equivalents. Any stock or other securities or interests issued in respect
of or in substitution for the Pledged Stock shall be issued to the Security
Trustee to be held as security on the terms set out in this Agreement or, in the
case of the AerCoUSA Shares, to the extent contemplated by the Voting Trust
Agreement to the Voting Trustee.
SECTION 2.13. Security Trustee Appointed Attorney-in-Fact .
Each Grantor hereby irrevocably appoints the Security Trustee such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Security
Trustee's discretion, to take any action and to execute any instrument that the
Security Trustee may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
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(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, indorse and collect any drafts or other
instruments and documents in connection with Section 2.12(a);
(c) to file any claims or take any action or institute any
proceedings that the Security Trustee may reasonably deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Security Trustee with respect to any of the
Collateral; and
(d) to execute and file any financing or continuation
statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, in order to perfect and
preserve the pledge, assignment and security interest granted hereby.
SECTION 2.14. Security Trustee May Perform . If any Grantor
fails to perform any agreement contained herein, the Security Trustee may (but
shall not be obligated to) itself perform, or cause performance of, such
agreement, and the expenses of the Security Trustee incurred in connection
therewith shall be payable by such Grantor.
SECTION 2.15. Covenant to Pay . Each Grantor covenants with
the Security Trustee for the benefit of the Secured Parties in respect of such
Grantor that it will pay or discharge any monies and liabilities whatsoever that
are now, or at any time hereafter may be, due, owing or payable by such Grantor
in any currency, actually or contingently, as principal or surety on any account
whatsoever pursuant to (i) in the case of the Issuer, the Service Provider
Documents, the Indenture, any Guarantor Indenture, the AerCo Group Notes, the
Secured Guarantee, the Secured Swap Agreements, the Secured Credit Facilities
and the Secured Tax-Related Disposition Agreements in accordance with their
terms, (ii) in the case of each Aircraft-Owning Subsidiary, its respective
Intercompany Loan Agreement and any other agreement under which its Intercompany
Obligations arise and (iii) in the case of each Conduit Company, the Leases and
any other agreement under which its Lease Obligations arise.
SECTION 2.16. As to Permitted Account Investments . (A) The
Cash Manager, acting on behalf of the Security Trustee, shall cause each
Permitted Account Investment made or acquired from or with the proceeds of any
Non-Trustee Account Collateral or Cash Collateral to be delivered to the
Security Trustee as follows (or shall take any and all other actions necessary
to create in favor of the Security Trustee a valid, perfected, first-priority
security interest in each Permitted Account Investment made or acquired in
accordance with this Agreement under laws and regulations (including without
limitation Articles 8 and 9 of the UCC and regulations of the U.S. Department of
the Treasury
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governing transfers of interests in Government Securities) in effect at the
time of such making or acquisition):
(i) in the case of each Certificated Security or Instrument,
by (A) causing the delivery of such Certificated Security or Instrument
to the Security Trustee in the State of New York, registered in the
name of the Security Trustee or duly endorsed by an appropriate person
to the Security Trustee or in blank and, in each case, held by the
Security Trustee in the State of New York, or (B) if such Certificated
Security or Instrument is registered in the name of a Securities
Intermediary on the books of the issuer thereof or on the books of any
securities intermediary of such Securities Intermediary, by requesting
such Securities Intermediary to continuously credit by book entry such
Certificated Security or Instrument to a Securities Account and
confirming that it has been credited;
(ii) in the case of each Uncertificated Security, by (A)
causing such Uncertificated Security to be continuously registered on
the books of the issuer thereof in the name of the Security Trustee or
(B) if such Uncertificated Security is registered in the name of such
Securities Intermediary on the books of the issuer thereof or on the
books of any securities intermediary of such Securities Intermediary,
by requesting such Securities Intermediary to continuously credit by
book entry such Uncertificated Security to a Securities Account and
confirming that it has been credited; and
(iii) in the case of each Government Security registered in
the name of such Securities Intermediary on the books of the Federal
Reserve Bank of New York or on the books of any securities intermediary
of such Securities Intermediary, by requesting the Securities
Intermediary to continuously credit by book entry such security to a
Securities Account and confirming that it has been credited.
(b) Each of the Issuer and Security Trustee hereby represents
that it has not entered into, and hereby agrees that it will not enter into, any
agreement (i) with any of the other parties hereto or any Securities
Intermediary specifying any jurisdiction other than the State of New York as the
Securities Intermediary's jurisdiction in connection with a Securities Account
with such Securities Intermediary referred to in Section 2.16(a) for purposes of
31 C.F.R. ss.357.11(b), Section 8-110(e) of the UCC or any similar state or
federal law, or (ii) with any other person relating to any Securities Account
pursuant to which it has agreed that a Securities Intermediary may comply with
entitlement orders made by such person. The Security Trustee represents that it
will, by express agreement with each Securities Intermediary, provide for each
item of property held in each Securities Account, other than cash, to be treated
as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC.
(c) Without limiting the foregoing, the Issuer and the Cash
Manager on behalf of the Security Trustee agree, and the Security Trustee shall
cause the Securities Intermediary, to take such different or additional action
as the Security Trustee may
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reasonably request in order to maintain the perfection and priority of the
security interest of the Security Trustee in the event of any change in
applicable law or regulation, including without limitation Articles 8 and 9 of
the UCC and regulations of the U.S. Department of the Treasury governing
transfers of interests in Government Securities.
SECTION 2.17. As to Irish Law . Notwithstanding anything to
the contrary contained in this Agreement and in addition to and without
prejudice to any other rights or power of the Security Trustee under this
Agreement or under general law in any relevant jurisdiction, at any time that
the Collateral shall become enforceable, the Security Trustee shall be entitled
to appoint a receiver under this Agreement or under the Conveyancing and Law of
Property Act, 1881 (as amended and as the same may be amended, modified or
replaced from time to time, the "1881 Act") and such receiver shall have all
such powers, rights and authority conferred under the 1881 Act, this Agreement
and otherwise under the laws of Ireland without any limitation or restriction
imposed by the 1881 Act or otherwise under the laws of Ireland which may be
excluded or removed. Sections 17 and 20 of the 1881 Act shall not apply to the
Collateral or any receiver appointed under this Agreement or under the 1881 Act
and section 24(b) of the Act shall not apply to the Collateral or to any
receiver appointed under this Agreement.
ARTICLE III
REMEDIES
SECTION 3.01. Remedies . Upon delivery of a Default Notice
pursuant to Section 4.02 of the Indenture or any Guarantor Indenture or if any
Acceleration Default under the Indenture or any Guarantor Indenture shall have
occurred and be continuing:
(a) The Security Trustee may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein, all the rights and remedies of a secured party upon default
under the UCC (whether or not the UCC applies to the affected
Collateral) and also may (i) require any Grantor to, and such Grantor
hereby agrees that it shall at its expense and upon request of the
Security Trustee forthwith, assemble all or part of the Collateral as
directed by the Security Trustee and make it available to the Security
Trustee at a place to be designated by the Security Trustee that is
reasonably convenient to both parties, (ii) without notice except as
specified below, sell or cause the sale of the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Security Trustee's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Security Trustee may
deem commercially reasonable and (iii) exercise all rights of the
Issuer under the Intercompany Loan Agreements or any other agreement in
respect of Intercompany Obligations or of any Aircraft-Owning
Subsidiary under any lease to a Conduit Company. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least
ten days' notice to such Grantor of the time and place of any public
sale or the time after which any private
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sale is to be made shall constitute reasonable notification. The
Security Trustee shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Security Trustee
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which
it was so adjourned.
(b) All cash proceeds received by the Security Trustee in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of the Security
Trustee, be held by the Security Trustee as collateral for, and/or then
or at any time thereafter applied in whole or in part by the Security
Trustee for the benefit of the relevant Secured Parties against, all or
any part of the Secured Obligations in accordance with Article VIII of
this Agreement and, in the case of the Secured Issuer Obligations,
Article III of the Indenture or any Guarantor Indenture. Any surplus of
such cash or cash proceeds held by the Security Trustee and remaining
after payment in full of all the Secured Obligations shall be paid over
to the relevant Grantors or whomsoever may be lawfully entitled to
receive such surplus. Any amount received for any sale or sales
conducted in accordance with the terms of this Section 3.01 shall be
deemed conclusive and binding on the Issuer, each Grantor and the
Secured Parties.
ARTICLE IV
REGISTRATION RIGHTS
SECTION 4.01. Registration Rights . If the Security Trustee
shall determine to exercise its right to sell all or any of the Pledged Stock
pursuant to Section 3.01, the Issuer agrees that, upon request of the Security
Trustee, the Issuer will, at its own expense:
(a) execute and deliver, and cause each issuer of the Pledged
Stock pledged by it, and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the
opinion of the Security Trustee, advisable to register such Pledged
Stock under the provisions of the Securities Act, to cause the
registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to
be furnished and to make all amendments and supplements thereto and to
the related prospectus that, in the opinion of the Security Trustee,
are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;
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(b) use its best efforts to qualify the Pledged Stock under
the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as
requested by the Security Trustee;
(c) cause each issuer to make available to its security
holders, as soon as practicable, an earnings statement that shall
satisfy the provisions of Section 11(a) of the Securities Act;
(d) provide the Security Trustee with such other information
and projections as may be necessary or, in the opinion of the Security
Trustee, advisable to enable the Security Trustee to effect the sale of
such Pledged Stock; and
(e) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Stock or any part
thereof valid and binding and in compliance with applicable law.
The Security Trustee is authorized, in connection with any sale of the Pledged
Stock pursuant to Section 3.01, to deliver or otherwise disclose to any
prospective purchaser of the Pledged Stock (i) any registration statement or
prospectus, and all supplements and amendments thereto, prepared pursuant to
Section 4.01(a), (ii) any information and projections provided to it pursuant to
Section 4.01(d) and (iii) any other information in its possession relating to
the Pledged Stock.
ARTICLE V
SECURITY INTEREST ABSOLUTE
SECTION 5.01. Security Interest Absolute . The obligations of
each Grantor under this Agreement are independent of the Secured Obligations,
and a separate action or actions may be brought and prosecuted against such
Grantor to enforce this Agreement, irrespective of whether any action is brought
against any other Grantor or whether any other Grantor is joined in any such
action or actions. All rights of the Security Trustee and the pledge,
assignment, and security interest hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of:
(a) in the case of the Secured Issuer Obligations, any lack of
validity or enforceability of any Related Document, Service Provider
Document, Secured Credit Facility, Secured Guarantee or Secured Swap
Agreement or any other agreement or instrument relating thereto, in the
case of the Secured Intercompany Obligations, any lack of validity or
enforceability of the Intercompany Loan Agreements or any other
agreement or instrument relating thereto and in the case of the Secured
Lease Obligations, any lack of validity or enforceability of any Lease
or any other agreement or instrument relating thereto;
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(b) any change in the time, manner or place of payment of, the
security for, or in any other term of, all or any of the Secured
Obligations, or in the case of the Secured Issuer Obligations, any
other amendment or waiver of or any consent to any departure from any
Related Document, Service Provider Document, Secured Credit Facility,
Secured Guarantee or Secured Swap Agreement or any other agreement or
instrument relating thereto, in the case of the Secured Intercompany
Obligations, any other amendment or waiver of or any consent to any
departure from the Intercompany Loan Agreements or any other agreement
or instrument relating thereto or, in the case of the Secured Lease
Obligations, any other amendment or waiver of or any consent to any
departure from the Leases or any other agreement or instrument relating
thereto;
(c) any taking, exchange, release or non-perfection of the
Collateral or any other collateral or taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of
the Secured Obligations;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Secured Obligations or any other assets of the Grantors;
(e) any change, restructuring or termination of the
corporate structure or existence of any Grantor; or
(f) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor or a third-party
grantor of a security interest.
ARTICLE VI
THE SECURITY TRUSTEE
SECTION 6.01. Authorization and Action . (a) Each Grantor
hereby appoints and authorizes Bankers Trust as the initial Security Trustee to
take such action as trustee on behalf of the Secured Parties with respect to
such Grantor and to exercise such powers and discretion under this Agreement and
the other Related Documents as are specifically delegated to the Security
Trustee by the terms hereof and thereof and no implied duties and covenants
shall be deemed to arise hereunder against the Security Trustee.
(b) The Security Trustee accepts such appointment and agrees
to perform the same but only upon the terms of this Agreement and agrees to
receive and disburse all moneys received by it in accordance with the terms
hereof. The Security Trustee in its individual capacity shall not be answerable
or accountable under any circumstances, except
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for its own willful misconduct or gross negligence (or simple negligence in the
handling of funds or breach of any of its representations or warranties set
forth herein) and the Security Trustee shall not be liable for any action or
inaction of any Grantor or any other parties to any of the Related Documents.
SECTION 6.02. Absence of Duties . The powers conferred on the
Security Trustee hereunder with respect to the Collateral are solely to protect
its interest herein and shall not impose any duty upon it to exercise any such
powers other than the obligation to release Collateral as set out herein. Except
for the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Security Trustee shall have no
duty as to any Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not any Secured Party has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve or perfect rights against any parties or any other rights pertaining to
any Collateral. The Security Trustee shall have no duty to ascertain or inquire
as to the performance or observance of any covenants, conditions or agreements
on the part of any Grantor or Lessee.
SECTION 6.03. Representations or Warranties . The Security
Trustee does not make and shall not be deemed to have made any representation or
warranty as to the validity, legality or enforceability of this Agreement, any
other Related Document or any other document or instrument or as to the
correctness of any statement contained in any thereof, or as to the validity or
sufficiency of any of the pledge and security interests granted hereby, except
that the Security Trustee in its individual capacity hereby represents and
warrants (i) that each such specified document to which it is a party has been
or will be duly executed and delivered by one of its officers who is and will be
duly authorized to execute and deliver such document on its behalf, and (ii)
this Agreement is the legal, valid and binding obligation of Bankers Trust,
enforceable against Bankers Trust in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally.
SECTION 6.04. Reliance; Agents; Advice of Counsel . (a) The
Security Trustee shall incur no liability to anyone as a result of acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Security Trustee may accept a copy of a resolution of the Board of any party to
this Agreement or any Related Document, certified by the Secretary or an
Assistant Secretary thereof or other duly authorized Person of such party as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been duly adopted by said Board and that the same is in full
force and effect. As to any fact or matter the manner of ascertainment of which
is not specifically described herein, the Security Trustee shall be entitled to
receive and may for all purposes hereof conclusively rely on a certificate,
signed by an officer of any duly authorized Person, as to such fact or matter,
and such certificate shall constitute full protection to the Security Trustee
for any action taken or omitted to be taken by it in good faith in reliance
thereon. The Security
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Trustee shall furnish to each Service Provider upon request such information and
copies of such documents as the Security Trustee may have and as are necessary
for such Service Provider to perform its duties under the applicable Related
Documents. The Security Trustee shall assume, and shall be fully protected in
assuming, that each other party hereto is authorized by its constitutional
documents to enter into this Agreement and to take all action permitted to be
taken by it pursuant to the provisions hereof, and shall not inquire into the
authorization of such party with respect thereto.
(b) The Security Trustee may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, including without limitation, financial advisors, or attorneys or a
custodian or nominee, and the Security Trustee shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of, any such
agent, attorney, custodian or nominee appointed with due care by it hereunder.
(c) The Security Trustee may consult with counsel and any
opinion of counsel or any advice of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such advice or
opinion of counsel.
(d) The Security Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Secured Parties, pursuant to the
provisions of this Agreement, unless such Secured Party shall have offered to
the Security Trustee reasonable security or indemnity satisfactory to it against
the costs, expenses and liabilities which may be incurred therein or thereby.
(e) The Security Trustee shall not be required to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Security Trustee to perform, or be responsible or liable
for the manner of performance of, any obligations of the Issuer or the Cash
Manager under any of the Related Documents.
(f) The Security Trustee shall not be liable for any Losses,
Taxes or the selection of Permitted Account Investments or for any investment
losses resulting from Permitted Account Investments.
(g) When the Security Trustee incurs expenses or renders
services in connection with an exercise of remedies specified in Section 3.01 or
during a proceeding described in Section 8.03(a), such expenses (including the
fees and expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law or
law relating to creditors' rights generally.
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(h) The Security Trustee shall not be charged with knowledge
of an Event of Default unless a Responsible Officer of the Security Trustee
obtains actual knowledge of such event or the Security Trustee receives written
notice of such event from any of the Secured Parties or the Cash Manager.
(i) The Security Trustee shall have no duty to monitor the
performance of the Issuer, the Cash Manager or any other party to the Related
Documents, nor shall it have any liability in connection with the malfeasance or
nonfeasance by such parties. The Security Trustee shall have no liability in
connection with compliance by the Issuer, any Guarantor, the Cash Manager or any
lessee under a Lease with statutory or regulatory requirements related to the
Collateral, any Aircraft or any Lease. The Security Trustee shall not make or be
deemed to have made any representations or warranties with respect to the
Collateral, any Aircraft or any Lease or the validity or sufficiency of any
assignment or other disposition of the Collateral, any Aircraft or any Lease.
SECTION 6.05. Not Acting in Individual Capacity . The Security
Trustee acts hereunder solely as trustee unless otherwise expressly provided;
and all Persons having any claim against the Security Trustee by reason of the
transactions contemplated hereby shall look, subject to the lien and priorities
of payment provided herein and in the Indenture, only to the property of the
Grantors for payment or satisfaction thereof.
ARTICLE VII
SUCCESSOR TRUSTEES
SECTION 7.01. Resignation and Removal of Security Trustee .
The Security Trustee may resign at any time without cause by giving at least 30
days' prior written notice to each Grantor, any Guarantor and the Senior
Representative. The Senior Representative may at any time remove the Security
Trustee without cause by an instrument in writing delivered to the Secured
Parties and the Security Trustee. No termination of this Agreement by the
Security Trustee or the Senior Representative pursuant to this Section 7.01
shall become effective prior to the date of appointment by the Senior
Representative of a successor Security Trustee and the acceptance of such
appointment by such successor Security Trustee.
SECTION 7.02. Appointment of Successor . (a) In the case of
the resignation or removal of the Security Trustee, the Senior Representative,
on behalf of the Secured Parties, shall promptly appoint a successor Security
Trustee. If a successor Security Trustee shall not have been appointed and
accepted its appointment hereunder within 60 days after the Security Trustee
gives notice of resignation as to such class or subclass, the retiring Security
Trustee or the Secured Parties may petition any court of competent jurisdiction
for the appointment of a successor Security Trustee. Any successor Security
Trustee so appointed by such court shall immediately and without further act be
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superseded by any successor Security Trustee appointed as provided in the first
sentence of this paragraph within one year from the date of the appointment by
such court.
(b) Any successor Security Trustee shall execute and deliver
to the Secured Parties an instrument accepting such appointment. Upon the
acceptance of any appointment as Security Trustee hereunder a successor Security
Trustee and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such amendments or supplements to this
Agreement, and such other instruments or notices, as may be necessary or
desirable, or as the Senior Trustee may request, in order to continue the
perfection of the liens granted or purported to be granted hereby, such Security
Trustee shall succeed to and become vested with all the rights, powers,
discretion, privileges and duties of the retiring Security Trustee, and the
retiring Security Trustee shall be discharged from its duties and obligations
under this Agreement and the other Related Documents. After any retiring
Security Trustee's resignation or removal hereunder as to any actions taken or
omitted to be taken by it while it was Security Trustee, the provisions of all
of Article VIII shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Security Trustee under this Agreement.
(c) Each Security Trustee shall be an Eligible Institution, if
there be such an institution willing, able and legally qualified to perform the
duties of a Security Trustee hereunder.
(d) Any corporation into which the Security Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Security
Trustee shall be a party, or any corporation to which substantially all the
business of the Security Trustee may be transferred, shall be the Security
Trustee under this Agreement without further act.
ARTICLE VIII
AGREEMENT AMONG CERTAIN SECURED PARTIES
SECTION 8.01. Subordination and Priority . (a) Notwithstanding
the date, manner or order of attachment or perfection or the description of any
collateral or security interests, liens, claims or encumbrances covered or
granted by Section 2.01, each Subordinated Representative agrees that the
respective rights and interest of the Subordinated Creditors in any Collateral
for which they are Secured Parties are and shall be subordinate, to the extent
and in the manner hereinafter set forth, to all rights and interest of the
Senior Creditors in such Collateral, and that the Senior Creditors shall have at
all times interests prior and senior to that of the Subordinated Creditors in
such Collateral until the payment in full of all Senior Obligations owed to such
Senior Creditors.
(b) For the purposes of this Agreement, no Senior Obligations
shall be deemed to have been paid in full until and unless the Senior
Representative in respect of
<PAGE> 41
36
such Senior Obligations shall have received payment in full in cash of such
Senior Obligations.
(c) Notwithstanding anything contained herein to the contrary,
payments from any property (or the proceeds thereof) deposited in the
Defeasance/Redemption Account pursuant to Article XI of the Indenture and any
Guarantor Indenture shall not be subordinated to the prior payment of any Senior
Creditors in respect of any Senior Obligations or subject to any other
restrictions set forth in this Article VIII, and none of the Holders shall be
obligated to pay over any payments from any such property to the Security
Trustee or any other creditor of any of the relevant Grantors.
SECTION 8.02. Exercise of Remedies . (a) Until the date on
which all the Senior Obligations shall have been paid in full, the Senior
Representative, in its sole discretion and to the exclusion of the Subordinated
Representatives, shall have, whether or not any default under the Indenture or
any Guarantor Indenture shall have occurred and be continuing and both before
and after the commencement of any proceeding referred to in Section 8.03(a), the
sole and exclusive right (as between the Senior Representative, on the one hand,
and the Subordinated Representatives, on the other) to direct the Security
Trustee to take all action with respect to the Collateral, including, without
limitation, the right to exercise or direct voting or other consensual rights,
to foreclose or forebear from foreclosure in respect of the Collateral and to
accept the Collateral in full or partial satisfaction of any Senior Obligation,
all in accordance with the terms of this Agreement. The Subordinated
Representatives agree that, until the Senior Obligations have been paid in full,
the only right of the Subordinated Creditors under this Agreement is for the
Subordinated Obligations to be secured by the Collateral for the period and to
the extent provided for herein and to receive a share of the proceeds of the
Collateral, if any.
(b) The Subordinated Representatives agree that, so long as
any of the Senior Obligations shall remain unpaid, they and the Subordinated
Creditors will not commence, or join with any creditor other than the Security
Trustee and the Senior Creditors in commencing, any enforcement, collection,
execution, levy or foreclosure proceeding with respect to the Collateral or
proceeds of Collateral. Upon request by the Senior Representative, the
Subordinated Representatives and the Subordinated Creditors will, at the expense
of the Issuer, join in enforcement, collection, execution, levy or foreclosure
proceedings and otherwise cooperate fully in the maintenance of such proceedings
by the Security Trustee, including without limitation by executing and
delivering all such consents, pleadings, releases and other documents and
instruments as the Security Trustee may reasonably request in connection
therewith, it being understood that the conduct of such proceedings shall at all
times be under the exclusive control of the Security Trustee.
(c) The Subordinated Representatives agree, upon written
request by the Senior Representative, to release the liens and security
interests in favor of the Subordinated Creditors in any Collateral and to
execute and deliver all such directions, consents, pleadings, releases and other
documents and instruments as the Senior
<PAGE> 42
37
Representative may reasonably request in connection therewith, upon any sale,
lease, transfer or other disposition of such Collateral or part thereof in
accordance with, or for application of proceeds pursuant to, Section 8.01(a).
(d) The Subordinated Representatives agree that neither they
nor any Subordinated Creditors will contest, or bring (or join in) any action or
proceeding for the purpose of contesting, the validity, perfection or priority
of, or seeking to avoid, the rights of the Senior Representative or the Senior
Creditors in or with respect to the Collateral.
(e) Nothing in the foregoing affects any Collateral for which
neither the Senior Creditors nor the Subordinated Creditors are Secured Parties.
SECTION 8.03. Further Agreements of Subordination . The
Subordinated Representatives agree as follows:
(a) Upon any distribution of all or any of the Collateral or
proceeds of Collateral to creditors of any Grantor upon the
dissolution, winding-up, liquidation, arrangement, reorganization,
adjustment, protection, relief, or composition of such Grantor or its
debts, whether in any bankruptcy, insolvency, arrangement,
reorganization, receivership, relief or similar proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of such Grantor, or otherwise, any distribution
of any kind of Collateral or proceeds of Collateral that otherwise
would be deliverable upon or with respect to the Subordinated
Obligations shall be delivered directly to the Security Trustee for
application (in the case of cash) to or as collateral (in the case of
non-cash property or securities) for the payment or prepayment of the
Senior Obligations until the Senior Obligations shall have been paid in
full.
(b) If any proceeding referred to in Section 8.03(a) is
commenced by or against any Grantor,
(i) the Security Trustee is hereby irrevocably
authorized and empowered (in its own name or in the name of
the Senior Creditors or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every
distribution referred to in subsection (a) above and give
acquittance therefor and to file claims and proofs of claim
and take such other action (including without limitation
enforcing this Agreement) as it may deem necessary or
advisable, or as the Senior Representative may direct, for the
exercise or enforcement of any of the rights or interests of
the Senior Creditors hereunder; and
(ii) the Subordinated Representatives shall duly and
promptly take such action, at the expense of the Issuer, as
the Senior Representative may request (A) to collect
Collateral and proceeds of Collateral for the account of the
Senior Creditors and to file appropriate claims or proofs of
claim in
<PAGE> 43
38
respect of Collateral and proceeds of Collateral, (B)
to execute and deliver to the Security Trustee such powers of
attorney, assignments, or other instruments as the Senior
Representative may request in order to enable it to enforce
any and all claims with respect to the Collateral and proceeds
of Collateral and (C) to collect and receive any and all
payments or distributions that may be payable or deliverable
upon or with respect to the Collateral or proceeds of
Collateral.
(c) All payments or distributions upon or with respect to the
Collateral or proceeds of Collateral that are received by the
Subordinated Representatives or the Subordinated Creditors contrary to
the provisions of this Agreement shall be received for the benefit of
the Senior Creditors, shall be segregated from other funds and property
held by the Subordinated Representatives or the Subordinated Creditors
and shall be forthwith paid over to the Security Trustee in the same
form as so received (with any necessary indorsement) to be applied (in
the case of cash) to or held as collateral (in the case of non-cash
property or securities) for the payment or prepayment of the Senior
Obligations in accordance with the terms thereof.
(d) The Senior Representative is hereby authorized to demand
specific performance of this Agreement at any time when any of the
Subordinated Representatives or the Subordinated Creditors shall have
failed to comply with any of the provisions of this Agreement
applicable to them. The Subordinated Representatives hereby irrevocably
waive, on their own behalf and on behalf of the Subordinated Creditors,
any defense based on the adequacy of a remedy at law that might be
asserted as a bar to such remedy of specific performance.
SECTION 8.04. Possession of Collateral . The Security Trustee
agrees to hold any Collateral received by it, in or against which a security
interest or lien may be perfected by possession, as bailee on behalf of the
Secured Parties with respect to the Grantor of such Collateral.
SECTION 8.05. Rights of Subrogation . The Subordinated
Representatives agree that no payment or distributions to the Senior
Representative or the Senior Creditors pursuant to the provisions of this
Agreement shall entitle any Subordinated Representative or any Subordinated
Creditor to exercise any rights of subrogation in respect thereof until all
Obligations constituting Senior Obligations with respect to such Person shall
have been paid in full.
SECTION 8.06. Further Assurances of Subordinated
Representatives . Each of the Subordinated Representatives shall, at the expense
of the Issuer, at any time and from time to time promptly execute and deliver
all further instruments and documents, and take all further action, that the
Senior Representative or the Security Trustee may reasonably request, in order
to protect any right or interest granted or purported to be granted hereby
<PAGE> 44
39
or to enable the Senior Representative and the Security Trustee to exercise and
enforce their rights and remedies hereunder.
SECTION 8.07. No Change in Rights in Collateral . The
Subordinated Representatives and the Subordinated Creditors will not sell,
assign, pledge, encumber or otherwise dispose of any of their rights in the
Collateral as such or in proceeds of Collateral as such, without the prior
written consent of the Senior Representative. Nothing in this Section 8.07 shall
limit the right of any Subordinated Creditor to transfer any Subordinated
Obligation including, without limitation, any Note.
SECTION 8.08. Waiver of Marshalling and Similar Rights . Each
of the Subordinated Representatives waives, on its own behalf and on behalf of
the Subordinated Creditors, to the fullest extent permitted by applicable law,
any requirement regarding, and agrees not to demand, request, plead or otherwise
claim the benefit of, any marshalling, appraisement, valuation or other similar
right with respect to the Collateral that may otherwise be available under
applicable law or any other similar rights a junior creditor or junior secured
creditor may have under applicable law.
SECTION 8.09. Enforcement . Each of the Subordinated
Representatives agrees that this Agreement shall be enforceable against it and
the Subordinated Creditors under all circumstances, including without limitation
in any proceeding referred to in Section 8.03(a).
SECTION 8.10. Obligations Hereunder Not Affected . All rights
and interests of the Senior Representative, the Senior Creditors and the
Security Trustee hereunder, and all agreements and obligations of the
Subordinated Representatives under this Agreement, shall remain in full force
and effect irrespective of:
(i) any lack of validity or enforceability of this Agreement,
any Service Provider Document, AerCo Group Note, Secured Credit
Facility, Secured Guarantee, Secured Tax-Related Disposition Agreement
or Secured Swap Agreement or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of,
the security for, or in any other term of, all or any of the Senior
Obligations, or any other amendment or waiver of or any consent to any
departure from this Agreement, any Service Provider Document, AerCo
Group Note, Secured Credit Facility, Secured Guarantee, Secured
Tax-Related Disposition Agreement or Secured Swap Agreement or any
other agreement or instrument relating thereto;
(iii) any taking, exchange, release or non-perfection of the
Collateral or any other collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of
the Senior Obligations; or
<PAGE> 45
40
(iv) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Subordinated
Representatives, the Subordinated Creditors, a subordinated creditor or
a secured subordinated creditor.
This Agreement shall continue to be effective or shall be revived or reinstated,
as the case may be, if at any time any payment of any of the Senior Obligations
is rescinded or must otherwise be returned by any Senior Creditor upon the
insolvency, bankruptcy or reorganization of any Grantor, or otherwise, all as
though such payment had not been made.
SECTION 8.11. Waiver . The Subordinated Representatives hereby
waive, on their own behalf and on behalf of the Subordinated Creditors, to the
fullest extent permitted by law, any right under Section 9-504(1)(c) of the
U.C.C. to application of the proceeds of disposition (other than as contemplated
by this Agreement), any right to notice and objection under Section 9-505(2) of
the U.C.C. and promptness, diligence, notice of acceptance and any other notice
with respect to any of the Senior Obligations and this Agreement and any
requirement that the Security Trustee protect, secure, perfect or insure any
security interest or lien hereunder or otherwise or any Collateral or any other
property subject thereto or exhaust any right or take any action against the
Grantors or any other person or entity or any Collateral or any other
collateral.
SECTION 8.12. Senior Obligations and Subordinated Obligations
Unimpaired . Nothing in this Agreement shall impair (i) as between the Issuer
and any party hereto, the obligations of the Issuer to such party, including
without limitation the Senior Obligations and the Subordinated Obligations, or
(ii) as between the Senior Creditors and the Subordinated Creditors, the
provisions relating to the priority of payments in the Indenture; provided that
it is understood that the enforcement of rights and remedies against the
Collateral shall be subject to the terms of this Agreement.
SECTION 8.13. Upon Discharge of Obligations . Upon the payment
in full of the Senior Obligations in respect of which it is acting as Senior
Representative, the Security Trustee shall, without any further action on its
part, be relieved of any obligation under this Agreement with respect to such
discharged Senior Obligations and this Agreement shall continue in effect as an
agreement among the remaining Secured Parties.
ARTICLE IX
INDEMNITY AND EXPENSES
SECTION 9.01. Indemnity . (a) The Issuer shall indemnify the
Security Trustee (and its officers, directors, employees and agents) for, and
hold it harmless against, any loss, liability or expense (including reasonable
legal fees and expenses) incurred by it without negligence or bad faith on its
part in connection with the acceptance or administration of this Agreement and
any other Related Documents as Security Trustee and
<PAGE> 46
41
its duties hereunder and thereunder, including the costs and expenses of
defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties and hold it harmless against, any
loss, liability or reasonable expense incurred without negligence or bad faith
on its part. The Security Trustee shall notify the Issuer promptly of any claim
asserted against the Security Trustee for which it may seek indemnity; provided,
however, that failure to provide such notice shall not invalidate any right to
indemnity hereunder. The Issuer shall defend the claim and the Security Trustee
shall cooperate in the defense. The Security Trustee may have separate counsel
and the Issuer shall pay reasonable fees and expenses of such counsel. The
Issuer need not pay for any settlements made without its consent; provided that
such consent shall not be unreasonably withheld. The Issuer need not reimburse
any expense or indemnity against any loss or liability incurred by the Security
Trustee through negligence or bad faith.
(b) The Issuer shall upon demand pay to the Security Trustee
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Security Trustee
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Security Trustee or any other Secured Party against
any Grantor hereunder or (iv) the failure by any Grantor to perform or observe
any of the provisions hereof.
SECTION 9.02. Noteholders' Indemnity . The Security Trustee
shall be entitled, subject to such Security Trustee's duty during a default to
act with the required standard of care, to be indemnified by the Senior
Creditors to the sole satisfaction of the Security Trustee before proceeding to
exercise any right or power under this Agreement at the request or direction of
the Senior Representative.
The provisions of Section 9.01 and Section 9.02 shall survive
the termination of this Agreement or the earlier resignation or removal of the
Security Trustee.
SECTION 9.03. No Compensation from Secured Parties . The
Security Trustee agrees that it shall have no right against the Secured Parties
for any fee as compensation for its services hereunder.
SECTION 9.04. Security Trustee Fees . In consideration of the
Security Trustee's performance of the services provided for under this
Agreement, the Issuer shall pay to the Security Trustee an annual fee set forth
under a separate agreement between the Issuer and the Security Trustee.
<PAGE> 47
42
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments; Waivers; Etc . (a) No amendment or
waiver of any provision of this Agreement, and no consent to any departure by
any party herefrom, shall in any event be effective unless the same shall be in
writing and signed by each Grantor, each Service Provider, the Senior Trustee
and, in the event it is adversely affected thereby, the Subordinated
Representative, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of the Security Trustee to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. In executing and delivering any
amendment or modification to this Agreement, the Security Trustee shall be
entitled to (i) an Opinion of Counsel stating that such amendment is authorized
and permitted pursuant to the Indenture and this Agreement and complies
therewith and herewith and (ii) an Officer's Certificate stating that all
conditions precedent to the execution, delivery and performance of such
amendment have been satisfied in full. The Security Trustee may, but shall have
no obligation to, execute and deliver any amendment or modification which would
affect its duties, powers, rights, immunities or indemnities hereunder.
(b) Upon the execution and delivery by any Person of a
Security Trust Agreement Supplement, (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor hereunder, and each
reference in this Agreement to "Grantor" shall also mean and be a reference to
such Additional Grantor, (ii) the annexes attached to each Security Trust
Agreement Supplement shall be incorporated into and become a part of and
supplement Schedule III and Schedule IV, and the Security Trustee may attach
such annexes as supplements to such Schedules; and each reference to such
Schedules shall mean and be a reference to such Schedules as supplemented
pursuant hereto and (iii) such Additional Grantor shall be a Grantor for all
purposes under this Agreement and shall be bound by the obligations of the
relevant Grantors hereunder.
SECTION 10.02. Addresses for Notices . All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telegraphed, telecopied,
telexed, cabled or delivered to the Issuer, the Administrative Agent, the Cash
Manager, the Servicer, the Trustee or the Security Trustee, as the case may be,
in each case addressed to it at its address specified in Section 13.05 of the
Indenture or, as to Lively, to the address of the Issuer or, as to each party,
at such other address as shall be designated by such party in a written notice
to each other party complying as to delivery with the terms of this Section
10.02. All such notices and other communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, respectively, be effective when deposited in the
mails, telecopied, delivered to the telegraph company, confirmed by telex
answerback or delivered to the cable company, respectively, addressed as
aforesaid.
<PAGE> 48
43
SECTION 10.03. No Waiver; Remedies . No failure on the part of
the Security Trustee to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 10.04. Severability . If any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired.
SECTION 10.05. Continuing Security Interest; Assignments .
Subject to Section 10.06(c), this Agreement shall create a continuing security
interest in the Collateral and shall (a) remain in full force and effect with
respect to each Grantor until the earlier of the payment in full in cash of the
Secured Obligations with respect to such Grantor and the circumstances specified
in Section 10.06(c), (b) be binding upon each Grantor, its successors and
assigns and (c) inure, together with the rights and remedies of the Security
Trustee hereunder, to the benefit of the Secured Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing subsection (c), any Secured Party may assign or otherwise transfer all
or any portion of its rights and obligations under any Related Document to which
it is a party in accordance with the terms thereof to any other Person or
entity, and such other Person or entity shall thereupon become vested with all
the rights in respect thereof granted to such Secured Party herein or otherwise.
SECTION 10.06. Release and Termination . (a) Upon any sale,
lease, transfer or other disposition of any item of Collateral in accordance
with the terms of the Indenture, the Security Trustee will, at the Issuer's
expense, execute and deliver to the Grantor of such item of Collateral such
documents as such Grantor shall reasonably request and provide to the Security
Trustee to evidence the release of such item of Collateral from the assignment
and security interest granted hereby.
(b) Except as otherwise provided in Section 10.06(c), upon the
payment in full in cash of the Secured Obligations with respect to such Grantor,
the pledge, assignment and security interest granted hereby by such Grantor
shall terminate and all rights to the Collateral granted by such Grantor shall
revert to such Grantor. Upon any such termination, the Security Trustee will, at
the Issuer's expense, execute and deliver to such Grantor such documents as such
Grantor shall prepare and reasonably request to evidence such termination.
(c) If at any time all Notes have been defeased pursuant to
Article XI of the Indenture, the pledge, assignment and security interest in the
Pledged Stock pledged by the Issuer shall be released and the certificates
representing such Pledged Stock shall be returned to the relevant Grantor and
the Security Trustee shall, at the expense of the Issuer, execute and deliver to
the Issuer such documents as the Issuer shall prepare and reasonably request to
evidence such termination.
<PAGE> 49
44
SECTION 10.07. Currency Conversion . If any amount is received
or recovered by the Security Trustee in respect of this Agreement or any part
thereof in a currency (the "Received Currency") other than the currency in which
such amount was expressed to be payable (the "Agreed Currency"), then the amount
in the Received Currency actually received or recovered by the Security Trustee,
to the extent permitted by law, shall only constitute a discharge of the
relevant Grantor to the extent of the amount of the Agreed Currency which the
Security Trustee was or would have been able in accordance with its or his
normal procedures to purchase on the date of actual receipt or recovery (or, if
that is not practicable, on the next date on which it is so practicable), and,
if the amount of the Agreed Currency which the Security Trustee is or would have
been so able to purchase is less than the amount of the Agreed Currency which
was originally payable by the relevant Grantor, such Grantor shall pay to the
Security Trustee such amount as it shall determine to be necessary to indemnify
the Security Trustee against any Loss sustained by it as a result (including the
cost of making any such purchase and any premiums, commissions or other charges
paid or incurred in connection therewith) and so that, to the extent permitted
by law, (i) such indemnity shall constitute a separate and independent
obligation of each Grantor distinct from its obligation to discharge the amount
which was originally payable by such Grantor and (ii) shall give rise to a
separate and independent cause of action and apply irrespective of any
indulgence granted by the Security Trustee and continue in full force and effect
notwithstanding any judgment, order, claim or proof for a liquidated amount in
respect of the amount originally payable by any Grantor or any judgment or order
and no proof or evidence of any actual loss shall be required.
SECTION 10.08. Governing Law . THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. UNLESS OTHERWISE DEFINED HEREIN OR IN THE INDENTURES, TERMS
USED IN ARTICLE 8 OR 9 OF THE UCC ARE USED HEREIN AS THEREIN DEFINED.
SECTION 10.09. Jurisdiction . (a) Each of the parties hereto
irrevocably agrees that the courts of New York shall have jurisdiction to hear
and determine any suit, action or proceeding, and to settle any disputes, which
may arise out of or in connection with this Agreement and, for such purposes,
irrevocably submits to the jurisdiction of such courts. Each of the parties
hereto irrevocably waives any objection which it might now or hereafter have to
the federal U.S. or New York State courts located in New York, New York being
nominated as the forum to hear and determine any suit, action or proceeding, and
to settle any disputes, which may arise out of or in connection with this
Agreement and agrees not to claim that any such court is not a convenient or
appropriate forum. Each of the parties hereto agrees that the process by which
any suit, action or proceeding is begun may be served on it by being delivered
in connection with any suit, action or proceeding in
<PAGE> 50
45
New York, New York to the Person named as the process agent of such party
in Exhibit G to the Indenture at the address set out therein or at the
principal New York City office of such process agent, if not the same.
(b) Each of the parties hereto hereby consents generally in
respect of any legal action or proceeding arising out of or in connection with
this Agreement to the giving of any relief or the issue of any process in
connection with such action or proceeding, including the making, enforcement or
execution against any property whatsoever (irrespective of its use or intended
use) of any order or judgment which may be made or given in such action or
proceeding.
SECTION 10.10. Limitations on Liability of Lively .
Notwithstanding any other provision in this Agreement, the liability of Lively
hereunder shall be limited to the amount realized by the Security Trustee from
the sale or other disposal of any Pledged Stock held in its name. The Security
Trustee hereby undertakes and agrees on behalf of itself and the Secured Parties
that it shall have no recourse to Lively or its assets other than the Pledged
Stock held in its name in respect of the Secured Obligations hereunder.
SECTION 10.11. Letter of Quiet Enjoyment . The Security
Trustee shall, if any party other than any Grantor hereunder to any Assigned
Leases requests or is expected by such Grantor to request a letter of quiet
enjoyment, upon the notification thereof by such Grantor, execute and deliver a
letter in the form of Exhibit H hereto (or such other form as the relevant
Lessee may reasonably request, in substantially similar substance) to such
party.
SECTION 10.12. Counterparts . This Agreement may be executed
in two or more counterparts by the parties hereto, and each such counterpart
shall be considered an original and all such counterparts shall constitute one
and the same instrument.
<PAGE> 51
SECTION 10.13. Table of Contents, Headings, Etc. The Table of
Contents and headings of the Articles and Sections of this Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by its representative or officer
thereunto duly authorized as of the date first above written.
AERCO LIMITED
By /s/ Frederick W. Bradley Jr.
_______________________________
Name: Frederick W. Bradley, Jr.
Title: Director
AIRCRAFT LEASE PORTFOLIO
SECURITIZATION 94-1 LIMITED
By /s/ George Adrian Robinson
_______________________________
Name: George Adrian Robinson
Title: Director
SIGNED, SEALED AND DELIVERED
for and on behalf of
AERCO IRELAND LIMITED
By /s/ Patrick J. Dalton
_______________________________
its duly authorized attorney in
the presence of:-
/s/ Ann H. Wagner
_______________________________
<PAGE> 52
SIGNED, SEALED AND DELIVERED
for and on behalf of
AERCO IRELAND II LIMITED
By /s/ John Redmond
_______________________________
its duly authorized attorney in
the presence of:-
/s/ Ann H. Wagner
_______________________________,
AERCOUSA INC.
By /s/ Patrick J Dalton
_______________________________
Name: Patrick J Dalton
Title: Director
AERFI BELGIUM N.V.
By /s/ John Redmond
_______________________________
Name: John Redmond
Title: Director
ALPS 94-1 (BELGIUM) N.V.
By /s/ George Adrian Robinson
_______________________________
Name: George Adrian Robinson
Title: Director
SIGNED, SEALED AND DELIVERED
for and on behalf of
<PAGE> 53
SIGNED, SEALED AND DELIVERED
for and on behalf of
PERGOLA LIMITED
By /s/ Michael Horgan
_______________________________
its duly authorized attorney in
the presence of:-
/s/ Ann H. Wagner
_______________________________
MOURANT & CO. SECRETARIES LIMITED
By /s/ Gareth Essex-Cater
_______________________________
Name: Gareth Essex-Cater
Title:
SIGNED, SEALED AND DELIVERED
for and on behalf of
GPA ADMINISTRATIVE SERVICES
LIMITED, as Administrative Agent
By /s/ John Redmond
_______________________________
its duly authorized attorney in
the presence of:-
/s/ Ann H. Wagner
_______________________________
SIGNED, SEALED AND DELIVERED
for and on behalf of
GPA CASH MANAGER II LIMITED,
as Cash Manager
By /s/ John Redmond
_______________________________
Name: John Redmond
Title:
SIGNED, SEALED AND DELIVERED
for and on behalf of
BABCOCK & BROWN LIMITED, as Servicer
By /s/ Brian Foley
_______________________________
Name: Brian Foley
Title: Director
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as Trustee
By /s/ Craig M. Kantor
_______________________________
Name: Craig M. Kantor
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as Book-Entry
Depositary
By /s/ Craig M. Kantor
_______________________________
Name: Craig M. Kantor
Title: Vice President
<PAGE> 54
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Reference Agent
By /s/ Craig M. Kantor
_______________________________
Name: Craig M. Kantor
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Security Trustee
By /s/ Craig M. Kantor
_______________________________
Name: Craig M. Kantor
Title: Vice President
SIGNED, SEALED AND DELIVERED
for and on behalf of
GPA GROUP PLC, as Class E Note
Representative
By /s/ Patrick J. Dalton
_______________________________
Name: Patrick J. Dalton
Title:
LIVELY LIMITED
By /s/ Gareth Essex-Cater
_______________________________
Name: Gareth Essex-Cater
Title:
<PAGE> 55
SCHEDULE I
SECURITY TRUST AGREEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
Percentage
of
Class of Certificate Number Outstanding
Grantor Stock Issuer Stock Par Value No(s). of Shares Shares
------- ------------ ---------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
AerCo Limited Aircraft Lease Portfolio Ordinary U.S.$1.00 3 10 100%
Securitization 94-1 Shares
Limited
AerCo Limited AerCo Ireland Limited Ordinary U.S.$1.00 N/A 150,000 100%
Shares
AerCo Limited AerCo Ireland Limited Irish Pound IR(pound)1.00 N/A 1 100%
Shares
Lively Limited AerCo Ireland Limited Irish Pound IR(pound)1.00 N/A 1 100%
Shares
AerCo Limited AerCo Ireland II Limited Ordinary U.S.$1.00 N/A 150,000 100%
Shares
AerCo Limited AerCo Ireland II Limited Irish Pound IR(pound)1.00 N/A 1 100%
Shares
Lively Limited AerCo Ireland II Limited Irish Pound IR(pound)1.00 N/A 1 100%
Shares
AerCo Limited AerCoUSA Inc. Voting N/A 1 10,000 100%
Trust
Certificates
AerCo Ireland II Limited AerFi Belgium N.V. Ordinary N/A N/A 1249 100%
Shares
Lively Limited AerFi Belgium N.V. Ordinary N/A N/A 1 100%
Shares
Aircraft Lease Portfolio Pergola Limited Ordinary IR(pound)1.00 N/A 1 100%
Securitization 94-1 Shares
Limited
Lively Limited Pergola Limited Ordinary IR(pound)1.00 N/A 1 100%
Shares
Aircraft Lease Portfolio ALPS 94-1 (Belgium) N.V. Ordinary N/A N/A 1249 100%
Securitization 94-1 Shares
Limited
Lively Limited ALPS 94-1 (Belgium) N.V. Ordinary N/A N/A 1 100%
Shares
Aircraft Lease Portfolio ALPS 94-1 (France) Ordinary FRF 100 N/A 499 100%
Securitization 94-1 S.A.R.L. Shares
Limited
Lively Limited ALPS 94-1 (France) Ordinary FRF 100 N/A 1 100%
S.A.R.L. Shares
</TABLE>
<PAGE> 56
PLEDGED DEBT
Promissory Note from AerCoUSA to the Issuer dated as of July 15, 1998.
Loan Expenses Apportionment and Guarantee Agreement dated as of July 15,
1998 between the Issuer and ALPS 94-1.
Loan Expenses Apportionment and Guarantee Agreement dated as
of July 15, 1998 between the Issuer and AerCo Ireland.
Loan Expenses Apportionment and Guarantee Agreement dated as of July 15,
1998 between the Issuer and AerCo Ireland II.
<PAGE> 57
SCHEDULE II
SECURITY TRUST AGREEMENT
NON-TRUSTEE ACCOUNT INFORMATION
<TABLE>
<CAPTION>
Name and Address of
Name and Address of Bank Non-Trustee Account Holder Account Number
================================================== =============================
<S> <C> <C>
Generale de Bank, Brussels ALPS 1994-1 (Belgium) N.V. 210-0079736-54
================================================== =============================
Citibank Brussels AerFi Belgium N.V. 570-1192500-40
================================================== =============================
Citibank Brussels AerFi Belgium N.V. 570-1192500-50
================================================== =============================
</TABLE>
<PAGE> 58
SCHEDULE III
SECURITY TRUST AGREEMENT
TRADE NAMES
None.
<PAGE> 59
SCHEDULE IV
SECURITY TRUST AGREEMENT
CHIEF PLACE OF BUSINESS
AND
CHIEF EXECUTIVE OR REGISTERED OFFICE
- ------------------------ -------------------- ------------------------
Name of Grantor Place of Business Chief Executive or
Registered Office
- ------------------------ -------------------- ------------------------
AerCo Limited Ireland Registered Office
22 Grenville Street
St. Helier, Jersey
JE4 8PX
Channel Islands
- ------------------------ -------------------- ------------------------
Aircraft Lease Portfolio 22 Grenville Street Registered Office
Securitization 94-1 St. Helier, Jersey 22 Grenville Street
Limited JE4 8PX St. Helier, Jersey
Channel Islands JE4 8PX
Channel Islands
- ------------------------ -------------------- ------------------------
AerCo Ireland Limited Ireland Registered Office
2 Harbourmaster Place
Custom House Dock
Dublin 1
Ireland
- ------------------------ ------------------------- ------------------------
AerCo Ireland II Limited Ireland Registered Office
2 Harbourmaster Place
Custom House Dock
Dublin 1
Ireland
- ------------------------ -------------------------- ------------------------
AerCoUSA Inc. c/o Nationwide Information c/o Nationwide Information
Services, Inc. Services, Inc.
15 North Street 15 North Street
Dover, Delaware 19901 Dover, Delaware 19901
U.S.A. U.S.A.
- ------------------------ --------------------- ------------------------
AerFi Belgium N.V. Neerveldstraat 101-103, Neerveldstraat 101-103,
Bus 3 1200 Bus 3 1200
Sint-Lambrechts-Woluwe Sint-Lambrechts-Woluwe
Brussels Brussels
Belgium Belgium
<PAGE> 60
IV-2
Chief Executive or
Registered Office
- ------------------------ ----------------------- ------------------------
ALPS 94-1 (Belgium) N.V. Neerveldstraat 101-103, Neerveldstraat 101-103,
Bus 3 1200 Bus 3 1200
Sint-Lambrechts-Woluwe Sint-Lambrechts-Woluwe
Brussels Brussels
Belgium Belgium
- ------------------------ ----------------------- ------------------------
Pergola Limited 1 Earlsfort Centre 1 Earlsfort Centre
Hatch Street Hatch Street
Dublin Dublin
Ireland Ireland
- ------------------------ ------------------------ ------------------------
<PAGE> 61
EXHIBIT A
SECURITY TRUST AGREEMENT
FORM OF CREDIT FACILITY PROVIDER SUPPLEMENT
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: [ ]
Re: Security Trust Agreement, dated as of July 15, 1998
Reference is made to the Security Trust Agreement, dated as of
July 15, 1998 (the "Security Trust Agreement"), among AerCo Limited, a limited
liability company incorporated under the laws of Jersey, Channel Islands, the
Issuer Subsidiaries party thereto, Bankers Trust Company, a New York banking
corporation, not in its individual capacity (except as otherwise provided
pursuant to Sections 6.03(i) and 6.03(ii) of the Security Trust Agreement), but
solely as the initial Security Trustee (the "Security Trustee") and the other
parties thereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Security Trust Agreement.
The undersigned hereby:
1. confirms that attached hereto is a true and complete copy of the
_________ Agreement, between the Issuer and the undersigned, dated as of
____ (the "Credit Facility Agreement"), which Credit Facility Agreement
constitutes a [Primary] [Secondary] Eligible Credit Facility under the
Indenture;
2. confirms that it has received a copy of the Security Trust Agreement
and such other documents and information as it deems appropriate to make
a decision to enter into this Credit Facility Provider Supplement;
3. confirms that upon entering into this Credit Facility Provider
Supplement, the undersigned shall become a party to the Security Trust
Agreement, subject to the terms and provisions thereof, including
Section 8.03(c) thereof, and each reference in the Security Trust
Agreement to a "Secured Party" shall also mean and be a reference to the
undersigned;
4. appoints and authorizes the Senior Trustee to take any and all
actions in respect of the Collateral as are delegated to the Senior
Trustee by the terms of the
<PAGE> 62
A-2
Related Documents, together with any such powers and discretion as are
reasonably incidental thereto;
5. confirms its agreement to the limitations and qualifications of the
Security Trustee's obligations set forth in Article VI of the Security
Trust Agreement;
6. confirms its agreement that it is entitled only to the priority of
repayment accorded to a [Primary] [Secondary] Eligible Credit Facility
Provider under Section 3.08 of the Indenture; and
7. confirms that this Credit Facility Provider Supplement shall be
governed by, and construed in accordance with, the laws of the State of
New York.
Very truly yours,
[SECURED CREDIT FACILITY
PROVIDER]
By __________________________
Name:
Title:
Acknowledged and Agreed to
as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity, but
solely as the Security Trustee
By ________________________________
Name:
Title:
<PAGE> 63
EXHIBIT B
SECURITY TRUST AGREEMENT
FORM OF SWAP PROVIDER SUPPLEMENT
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: [ ]
Re: Security Trust Agreement, dated as of July 15, 1998
Reference is made to the Security Trust Agreement, dated as of
July 15, 1998 (the "Security Trust Agreement"), among AerCo Limited, a limited
liability company incorporated under the laws of Jersey, Channel Islands, the
Issuer Subsidiaries party thereto, Bankers Trust Company, a New York banking
corporation, not in its individual capacity (except as otherwise provided
pursuant to Sections 6.02(i) and 6.03(ii) of the Security Trust Agreement), but
solely as the initial Security Trustee (the "Security Trustee") and the other
parties thereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Security Trust Agreement.
The undersigned hereby:
1. confirms that attached hereto is a true and complete copy of the
_________ Agreement, between the Issuer and the undersigned, dated as of
____ (the "Swap Agreement"), which Swap Agreement meets the requirements
of Section 9.05 of the Indenture;
2. confirms that it has received a copy of the Security Trust Agreement
and such other documents and information as it deems appropriate to make
a decision to enter into this Swap Provider Supplement;
3. confirms that upon entering into this Swap Provider Supplement, the
undersigned shall become a party to the Security Trust Agreement,
subject to the terms and provisions thereof, including Section 8.03(c)
thereof, and each reference in the Security Trust Agreement to a
"Secured Party" shall also mean and be a reference to the undersigned;
4. appoints and authorizes the Senior Trustee to take any and all
actions in respect of the Collateral as are delegated to the Senior
Trustee by the terms of the
<PAGE> 64
B-2
Related Documents, together with any such powers and discretion as are
reasonably incidental thereto;
5. confirms its agreement to the limitations and qualifications of the
Security Trustee's obligations set forth in Article VI of the Security
Trust Agreement; and
6. confirms that this Swap Provider Supplement shall be governed by,
and construed in accordance with, the laws of the State of New York.
Very truly yours,
[SECURED SWAP PROVIDER]
By _____________________________
Name:
Title:
Acknowledged and Agreed to
as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity, but
solely as the Security Trustee
By _________________________________
Name:
Title:
<PAGE> 65
EXHIBIT C
SECURITY TRUST AGREEMENT
[FORM OF SECURITY TRUST AGREEMENT SUPPLEMENT]
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: [ ]
Re: Security Trust Agreement, dated as of July 15, 1998
Gentlemen/Women:
Reference is made to the Security Trust Agreement, dated as of
July 15, 1998 (the "Security Trust Agreement"), among AerCo Limited, a limited
liability company incorporated under the laws of Jersey, Channel Islands, the
Issuer Subsidiaries party thereto, Bankers Trust Company, a New York banking
corporation, not in its individual capacity (except as otherwise provided
pursuant to Sections 6.03(i) and 6.03(ii) of the Security Trust Agreement), but
solely as the initial Security Trustee (the "Security Trustee") and the other
parties thereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Security Trust Agreement.
The undersigned hereby agrees, as of the date first above
written, to become a Grantor under the Security Trust Agreement as if it were an
original party thereto and agrees that each reference in the Security Trust
Agreement to "Grantor" shall also mean and be a reference to the undersigned.
The undersigned hereby assigns and pledges to the Security
Trustee for its benefit and the benefit of the Secured Parties with respect to
the undersigned, and hereby grants to the Security Trustee for its benefit and
the benefit of the Secured Parties with respect to the undersigned a security
interest in, all of its right, title and interest in and to:
(a) all of the following (collectively, the "Non-Trustee Account
Collateral"):
(i) all of the Non-Trustee Accounts (to the extent permitted
by applicable law) in such Grantor's name, all funds held or
required by the terms of the Indenture and any Guarantor
Indenture to be held therein and all certificates and
instruments, if any, from time to time representing or
evidencing such Non-Trustee Accounts;
<PAGE> 66
C-2
(ii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Security Trustee for
or on behalf of such Grantor in substitution for or in addition
to any or all of the then existing Non-Trustee Account
Collateral of such Grantor; and
(ii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
then existing Non-Trustee Account Collateral of such Grantor;
(b) all of the following (collectively, the "Cash Collateral"):
(i) all funds of such Grantor held or required by the terms of
the Indenture to be held in the Accounts and all certificates
and instruments, if any, from time to time representing or
evidencing such funds;
(ii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Security Trustee for
or on behalf of such Grantor in substitution for or in addition
to any or all of the then existing Cash Collateral of such
Grantor; and
(iii) all interest, dividends, instruments and other property
from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then
existing Cash Collateral of such Grantor;
(c) all "investment property" (as defined in Section
9-115(1)(f) of the UCC) of such Grantor, and all of the
following (the "Investment Collateral"):
(i) all Permitted Account Investments made or acquired from or
with the proceeds of any Non-Trustee Account Collateral or Cash
Collateral of such Grantor from time to time and all
certificates and instruments, if any, from time to time
representing or evidencing such Permitted Account Investments;
(ii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Security Trustee for
or on behalf of such Grantor in substitution for or in addition
to any or all of the then existing Investment Collateral of
such Grantor; and
(iii) all interest, dividends, instruments and other property
from time to time received, receivable or otherwise distributed
in respect of or in
<PAGE> 67
C-3
exchange for any or all of the then
existing Investment Collateral of such Grantor; and
(d) all of the following (the "Security Collateral"):
(i) [ENUMERATE THE STOCK OF THE SUBSIDIARIES PLEDGED BY SUCH
GRANTOR] (the "Pledged Stock") held by it or any nominee on its
behalf and the certificates representing such Pledged Stock,
and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Stock;
(ii) [ENUMERATE THE DEBT OF THE SUBSIDIARIES PLEDGED BY SUCH
GRANTOR] (the "Pledged Debt") owed to it and the instruments
evidencing such Pledged Debt, and all interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Debt;
(iii) all additional shares of Stock from time to time
acquired by such Grantor in any manner, and the certificates
representing such additional shares and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all such additional shares; and
(iv) all additional indebtedness from time to time owed to
such Grantor by any AerCo Group Member and the instruments
evidencing such indebtedness, and all interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness;
(e) all of such Grantor's right, title and interest in and to all
Leases to which Grantor is or may from time to time be party and in any
lease, conditional sale agreement, hire purchase agreement or other
similar agreement with another AerCo Group Member under which it is the
lessor or vendor with respect to such Leases (the "Assigned Leases"),
including without limitation, (A) all rights of such Grantor to receive
moneys due and to become due under or pursuant to such Assigned Leases,
(B) all rights of such Grantor to receive proceeds of any Insurance,
indemnity, warranty or guaranty with respect to such Assigned Leases,
(C) claims of such Grantor for damages arising out of or for breach or
default under such Assigned Leases and (D) the right of such Grantor to
terminate such Assigned Leases, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder, whether
arising under such leases or by statute or at law or in equity;
[(f) enumerate any other collateral granted by the Grantor]; and
<PAGE> 68
C-4
(g) all proceeds of any and all of the foregoing collateral (including,
without limitation, proceeds that constitute property of the types
described in subsections (a), (b), and (c), above).
The undersigned hereby makes each representation and warranty
set forth in Section 2.07 of the Security Trust Agreement (as supplemented by
the attached Annexes) and hereby agrees to be bound as a Grantor by all of the
terms and provisions of the Security Trust Agreement. Each reference in the
Security Trust Agreement to the Pledged Stock, the Pledged Debt, the Security
Collateral and the Assigned Leases shall be construed to include a reference to
the corresponding Collateral hereunder.
The undersigned hereby agrees, together with the Issuer,
jointly and severally to indemnify the Security Trustee, its officers,
directors, employees and agents in the manner set forth in Section 9.01 of the
Security Trust Agreement.
Attached is (i) an Account Letter in substantially the form of
Exhibit D to the Security Trust Agreement from the Non-Trustee Account Bank at
which such Non-Trustee Account is located and (ii) duly completed copies of
Annex I and Annex II hereto.
<PAGE> 69
C-5
This Security Trust Agreement Supplement shall be governed by,
and construed in accordance with, the laws of the State of New York.
Very truly yours,
[NAME OF GRANTOR]
By _____________________________
Name:
Title:
Acknowledged and agreed to
as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity, but
solely as the initial Security Trustee
By _________________________________
Name:
Title:
<PAGE> 70
ANNEX I
SECURITY AGREEMENT SUPPLEMENT
TRADE NAMES
<PAGE> 71
ANNEX II
SECURITY AGREEMENT SUPPLEMENT
CHIEF PLACE OF BUSINESS
AND
CHIEF EXECUTIVE OR REGISTERED OFFICE
<PAGE> 72
EXHIBIT D
SECURITY TRUST AGREEMENT
FORM OF NON-TRUSTEE ACCOUNT LETTER
_______________, 1998
[Name and address
of Account Bank]
[Name of the Grantor]
Gentlemen/women:
Reference is made to Account No. __________ into which certain
monies, instruments and other properties are deposited from time to time (the
"Pledged Account") maintained with you by ____________________ (the "Grantor").
Pursuant to the Security Trust Agreement, dated as of July 15, 1998 (the
"Security Trust Agreement"), among the Grantor, GPA Cash Manager II Limited, as
the Cash Manager (the "Cash Manager"), various other parties and Bankers Trust
Company, not in its individual capacity (except as otherwise provided pursuant
to Sections 6.03(i) and 6.03(ii) of the Security Trust Agreement), but solely as
the initial Security Trustee (the "Security Trustee"), the Grantor has granted
to the Security Trustee a security interest in certain property of the Grantor,
including, among other things, the following (the "Collateral"): the Pledged
Account, all funds held or required by the terms of the Indenture or any
Guarantor Indenture to be held therein and all certificates and instruments, if
any, from time to time representing or evidencing such Pledged Account, all
notes, certificates of deposit, deposit accounts, checks and other instruments
from time to time hereafter delivered to or otherwise possessed by the Security
Trustee for or on behalf of such Grantor in substitution for or in addition to
any or all of the then existing Collateral, and all interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the then
existing Collateral, and all proceeds of any and all of the foregoing
Collateral. It is a condition to the continued maintenance of the Pledged
Account with you that you agree to this letter agreement. Capitalized terms used
herein, unless otherwise defined herein, have the meanings assigned to them in
the Security Trust Agreement.
By signing this letter agreement, you acknowledge notice of,
and consent to the terms and provisions of, the Security Trust Agreement and
confirm to the Security Trustee that you have received no notice of any other
pledge or assignment of the Pledged Account. Further, you hereby agree with the
Security Trustee that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Pledged Account, the Pledged Account is and will be
subject to the terms and conditions of the Security Trust Agreement, and
will be subject to written
<PAGE> 73
D-2
instructions only from an officer of the Security Trustee or from
an officer of the Cash Manager.
(b) You will follow your usual operating procedures for the handling of
any remittance received in the Pledged Account, including any remittance
that contains restrictive endorsements, irregularities (such as a
variance between the written and numerical amounts), undated or
postdated items, missing signatures, incorrect payees, etc.
(c) You will transfer, in same day funds, on each of your business
days, an amount equal to the credit balance of the Pledged Account
(other than any amount required to be left on deposit for local tax or
other regulatory or legal purposes) on such day to the following account
(the "Collection Account"):
[Insert address of Operating Bank and
account number of the Collection Account]
Each such transfer of funds shall neither comprise only part of a
remittance nor reflect the rounding off of any funds so transferred.
(d) All service charges and fees with respect to the Pledged Account
shall be payable by the Grantor, and deposited checks returned for any
reason shall not be charged to such account.
(e) The Security Trustee and the Cash Manager shall be entitled to
exercise any and all rights of the Grantor in respect of the Pledged
Account in accordance with the terms of the Security Trust Agreement,
and the undersigned shall comply in all respects with such exercise.
This letter agreement shall be binding upon you and your
successors and assigns and shall inure to the benefit of the Security Trustee,
the Secured Parties and their successors, transferees and assigns. You may
terminate this letter agreement only upon 30 days' prior written notice to the
Grantor and the Security Trustee. Upon such termination you shall close the
Pledged Account and transfer all funds in the Pledged Account to the Collection
Account. After any such termination, you shall nonetheless remain obligated
promptly to transfer to the Collection Account all funds and other property
received in respect of the Pledged Account.
<PAGE> 74
D-3
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
[NAME OF GRANTOR]
By ____________________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity, but solely
as the initial Security Trustee
By ___________________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF PLEDGED ACCOUNT BANK]
By _____________________________
Name:
Title:
<PAGE> 75
EXHIBIT E
SECURITY TRUST AGREEMENT
FORM OF CONSENT AND AGREEMENT
_______________, 1998
[Name of the Grantor]
Gentlemen/women:
Reference is made to the agreement between you and the Grantor
dated [(the "Assigned Agreement")] [(the "Assigned Lease")].
Pursuant to the Security Trust Agreement, dated July 15, 1998
(the "Security Trust Agreement"), among the Grantor, Bankers Trust Company, not
in its individual capacity (except as otherwise provided pursuant to Sections
6.03(i) and 6.03(ii) of the Security Trust Agreement), but solely as the initial
Security Trustee (the "Security Trustee"), and various parties thereto, the
Grantor has granted to the Security Trustee a security interest in certain
property of the Grantor, including, among other things, the following (the
"Collateral"): [all of such Grantor's right, title and interest in and to the
Assigned Agreement] [all of such Grantor's right, title and interest in and to
the Assigned Lease, including without limitation, all rights of such Grantor to
receive moneys due and to become due under or pursuant to the Assigned Lease,
all rights of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Lease, claims of such Grantor
for damages arising out of or for breach or default under the Assigned Lease and
the right of such Grantor to terminate the Assigned Lease, to perform thereunder
and to compel performance and otherwise exercise all remedies thereunder,
whether arising under the Assigned Lease or by statute or at law or in equity.]
Capitalized terms used herein, unless otherwise defined herein, have the
meanings assigned to them in the Security Trust Agreement.
By signing this Consent and Agreement, you acknowledge notice
of, and consent to the terms and provisions of, the Security Trust Agreement and
confirm to the Security Trustee that you have received no notice of any other
pledge or assignment of the [Assigned Agreement] [Assigned Lease]. Further, you
hereby agree with the Security Trustee that:
(a) You will make all payments to be made by you under or in
connection with the [Assigned Agreement] [Assigned Lease] directly to the
[Rental Account] [Collection Account] or otherwise in accordance with the
instructions of the Security Trustee.
(b) The Security Trustee shall be entitled to exercise any and
all rights and remedies of the Grantor under the [Assigned Agreement] [Assigned
Lease] in accordance
E-2
<PAGE> 76
with the terms of the Security Trust Agreement, and you will comply in all
respects with such exercise.
(c) [ONLY WITH RESPECT TO ASSIGNED AGREEMENTS] You will not,
without the prior written consent of the Security Trustee, (i) cancel or
terminate the Assigned Agreement or consent to or accept any cancellation or
termination thereof or (ii) amend or otherwise modify the Assigned Agreement.
This Consent and Agreement shall be binding upon you and your
successors and assigns and shall inure to the benefit of the Security Trustee,
the Secured Parties and their successors, transferees and assigns.
This Consent and Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
Very truly yours,
[NAME OF GRANTOR]
By _________________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity, but solely
as the initial Security Trustee
By ________________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF OBLIGOR/LESSEE]
By _______________________________
Name:
Title:
<PAGE> 77
EXHIBIT F
SECURITY TRUST AGREEMENT
FORM OF SERVICE PROVIDER SUPPLEMENT
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: [ ]
Re: Security Trust Agreement, dated as of July 15, 1998
Reference is made to the Security Trust Agreement, dated as of
July 15, 1998 (the "Security Trust Agreement"), among AerCo Limited, a limited
liability company incorporated under the laws of Jersey, Channel Islands, the
Issuer Subsidiaries party thereto, Bankers Trust Company, a New York banking
corporation, not in its individual capacity (except as otherwise provided
pursuant to Sections 6.02(i) and 6.03(ii) of the Security Trust Agreement), but
solely as the initial Security Trustee (the "Security Trustee"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Security Trust Agreement.
The undersigned hereby:
1. confirms that attached hereto is a true and complete copy of the
_________ Agreement, between the Issuer and the undersigned, dated as of
____ (the "Service Provider Agreement");
2. confirms that it has received a copy of the Security Trust Agreement
and such other documents and information as it deems appropriate to make
a decision to enter into this Service Provider Supplement;
3. confirms that upon entering into this Service Provider Supplement,
the undersigned shall become a party to the Security Trust Agreement,
subject to the terms and provisions thereof, including Section 8.03(c)
thereof, and each reference in the Security Trust Agreement to a
"Secured Party" shall also mean and be a reference to the undersigned;
4. appoints and authorizes the Senior Trustee to take any and all
actions in respect of the Collateral as are delegated to the Senior
Trustee by the terms of the
<PAGE> 78
F-2
Related Documents, together with any such powers and discretion as are
reasonably incidental thereto;
5. confirms its agreement to the limitations and qualifications of the
Security Trustee's obligations set forth in Article VI of the Security
Trust Agreement; and
6. confirms that this Service Provider Supplement shall be governed by,
and construed in accordance with, the laws of the State of New York.
Very truly yours,
[SERVICE SWAP PROVIDER]
By ______________________________
Name:
Title:
Acknowledged and Agreed to
as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity, but
solely as the Security Trustee
By ____________________________________
Name:
Title:
<PAGE> 79
EXHIBIT G
SECURITY TRUST AGREEMENT
FORM OF TAX-RELATED DISPOSITION SUPPLEMENT
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: [ ]
Re: Security Trust Agreement, dated as of July 15, 1998
Reference is made to the Security Trust Agreement, dated as of
July 15, 1998 (the "Security Trust Agreement"), among AerCo Limited, a limited
liability company incorporated under the laws of Jersey, Channel Islands, the
Issuer Subsidiaries party thereto, Bankers Trust Company, a New York banking
corporation, not in its individual capacity (except as otherwise provided
pursuant to Sections 6.03(i) and 6.03(ii) of the Security Trust Agreement), but
solely as the initial Security Trustee (the "Security Trustee") and the other
parties thereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Security Trust Agreement.
The undersigned hereby:
1. confirms that attached hereto is a true and complete copy of the
_________ Agreement, between the Issuer and the undersigned, dated as of
____ (the "Tax-Related Disposition Agreement");
2. confirms that it has received a copy of the Security Trust Agreement
and such other documents and information as it deems appropriate to make
a decision to enter into this Tax-Related Disposition Supplement;
3. confirms that upon entering into this Tax-Related Disposition
Supplement, the undersigned shall become a party to the Security Trust
Agreement, subject to the terms and provisions thereof, including
Section 8.03(c) thereof, and each reference in the Security Trust
Agreement to a "Secured Party" shall also mean and be a reference to the
undersigned;
4. appoints and authorizes the Senior Trustee to take any and all
actions in respect of the Collateral as are delegated to the Senior
Trustee by the terms of the
<PAGE> 80
G-2
Related Documents, together with any such powers and discretion as are
reasonably incidental thereto;
5. confirms its agreement to the limitations and qualifications of the
Security Trustee's obligations set forth in Article VI of the Security
Trust Agreement;
6. confirms its agreement that it is entitled only to the priority of
repayment accorded to Subordinated Tax-Related Disposition Payments
under Section 3.08 of the Indenture; and
7. confirms that this Tax-Related Disposition Supplement shall be
governed by, and construed in accordance with, the laws of the State of
New York.
Very truly yours,
[SECURED TAX-RELATED DISPOSITION PARTY]
By __________________________________
Name:
Title:
Acknowledged and Agreed to
as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity, but
solely as the Security Trustee
By __________________________________
Name:
Title:
<PAGE> 81
EXHIBIT H
SECURITY TRUST AGREEMENT
FORM OF QUIET ENJOYMENT LETTER
[To come from McCann Fitzgerald]
<PAGE> 82
Quiet Enjoyment Letter
To: [Lessee]
From: Banker Trust Company
Date: July 1998
Dear Sirs
[ ] Aircraft
Manufacturer's Serial Number [ ] (the "Aircraft")
Aircraft Lease Agreement (as amended and novated) dated [ ] between
[ ] ("Existing Lessor") and [ ] ("Lessee") and Novation of Lease
dated [ ] between Existing Lessor. [ ] (the "New Lessor") and the
Lessee (the "Lease");
Security Trust Agreement (the "Security Agreement") dated 15 July 1998 between
AerCo Limited and its subsidiaries (of which the New Lessor is one) (the
"Assignors"), Bankers Trust Company (the "Security Trustee") and the other
parties named therein;
1. We hereby irrevocably confirm that we will not interfere with the quiet and
peaceful possession, enjoyment and use of the Aircraft by you throughout
the term of the Lease, so long as no Event of Default under the Lease has
occurred and is continuing.
2. The foregoing undertaking is not to be construed as restricting any rights
we may have under the Lease (including any rights in respect of the
Aircraft) arising pursuant to applicable provisions of the Security
Agreement. However, if we exercise such rights during the term of the Lease
and provided that no Event of Default has occurred and is continuing under
the Lease we will (subject to any requirements or restrictions imposed by
applicable law) exercise any rights subject to the terms of the Lease.
3. The rights conferred by this letter are granted only to you and do not
extend to any assignee, successor or sub-lessee.
________________________________________________
Bankers Trust Company
By:
Name:
Title:
<PAGE> 1
Exhibit 10.4
Execution Copy
===============================================================================
REFERENCE AGENCY AGREEMENT
Dated as of July 15, 1998
===============================================================================
<PAGE> 2
REFERENCE AGENCY AGREEMENT
REFERENCE AGENCY AGREEMENT, dated as of July 15, 1998 among AerCo Limited,
a Jersey limited liability company (the "Issuer"); Bankers Trust Company, a New
York banking corporation ("Bankers Trust"), not in its individual capacity but
solely in its capacities as Trustee (the "Trustee") under the Indenture, dated
as of the date hereof (the "Indenture"), among the Issuer and Bankers Trust, as
Trustee; Bankers Trust, in its capacity as reference agent (the "Reference
Agent"); and GPA Administrative Services Limited in its capacity as
administrative agent (the "Administrative Agent") pursuant to the
Administrative Agency Agreement, dated as of the date hereof, among the Issuer,
GPA Group plc, as guarantor, the Administrative Agent and the subsidiaries of
the Issuer as specified therein.
W I T N E S S E T H:
WHEREAS, on the date hereof, pursuant to the terms of the Indenture, the
Issuer is issuing and selling six separate subclasses of notes: the Subclass
A-1 Notes, the Subclass A-2 Notes, the Subclass B-1 Notes, the Subclass C-1
Notes, the Subclass D-1 Notes and the Subclass E-1 Notes (such notes of the
Issuer being, collectively, the "Initial Notes");
WHEREAS, from time to time, the Issuer may issue additional subclasses of
notes (the "Issuer Additional Notes" and, together with the Initial Notes, the
"Notes");
WHEREAS, the Subclass A-1 Notes, the Subclass A-2 Notes, the Subclass B-1
Notes and the Subclass C-1 Notes are, and certain subclasses of Issuer
Additional Notes may be, entitled to receive interest at floating rates, which
will be determined in accordance with Section 6 hereof (all such subclasses of
Notes, collectively, the "Floating Rate Notes");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
SECTION 1.01. Definitions. Unless otherwise defined herein, all
capitalized terms used but not defined herein have the meanings assigned to
such terms in the Indenture.
SECTION 1.02. Construction and Usage. The conventions of construction
and usage set forth in the Indenture are incorporated by reference herein.
<PAGE> 3
2
SECTION 2. Appointment of Reference Agent. The Issuer hereby appoints
Bankers Trust as the Reference Agent, and Bankers Trust hereby accepts such
appointment and agrees to perform the duties and obligations of Reference Agent
set forth in Section 6.
SECTION 3. Status of Reference Agent. Any acts taken by the Reference
Agent under this Agreement or in connection with any Floating Rate Note,
including the calculation of any interest rate for such Floating Rate Note,
shall be deemed to have been taken by the Reference Agent solely in its
capacity as an agent acting on behalf of the Issuer and shall not create or
imply any obligation to, or any agency, fiduciary or trust relationship with,
any of the owners or holders of the Floating Rate Notes.
SECTION 4. Reference Agent Fees and Expenses. In consideration of the
Reference Agent's performance of the services provided for under this
Agreement, the Issuer shall pay to the Reference Agent an annual fee set forth
under a separate agreement between the Issuer and Bankers Trust. In addition,
the Issuer shall reimburse the Reference Agent for all reasonable out-of-pocket
expenses, disbursements and advances (including reasonable legal fees and
expenses) incurred or made by the Reference Agent from time to time in
connection with the services rendered by it under this Agreement, except any
expenses, disbursements, or advances attributable to its negligence or wilful
misconduct.
SECTION 5. Rights and Liabilities of Reference Agent. In the absence of
negligence or wilful misconduct on the part of the Reference Agent, its
directors, officers, employees and agents, such persons may conclusively rely,
as to the truth of the statements expressed in, and shall be fully protected
and shall incur no liability for, or in respect of, any action taken, omitted
to be taken, or suffered to be taken by it, in reliance upon, any written
order, instruction, notice, request, direction, statement, certificate,
consent, report, affidavit or other instrument, paper, document or
communication, reasonably believed by it in good faith to be genuine, from the
Issuer or the Administrative Agent on behalf of the Issuer and conforming to
the requirements of this Agreement. Any written order, instruction, notice,
request, direction, statement, certificate, consent, report, affidavit or other
instrument, paper, document or communication from the Issuer or the
Administrative Agent or given by it and sent, delivered or directed to the
Reference Agent under, pursuant to, or as permitted by, any provision of this
Agreement shall be sufficient for purposes of this Agreement if such written
order, instruction, notice, request, direction, statement, certificate,
consent, report, affidavit or other instrument, paper, document or
communication is in writing and signed by any Signatory Trustee of the Issuer
or by the Administrative Agent, as the case may be. The Reference Agent may
consult with counsel satisfactory to it and the advice (to be confirmed in
writing) or opinion of such counsel shall constitute full and complete
authorization and protection of the Reference Agent with respect to any action
taken, omitted to be taken, or suffered to be taken by it hereunder in good
faith and in accordance with and in reliance upon the advice to be confirmed in
writing or opinion of such counsel. The Reference Agent shall not be liable
for any error resulting from use of or reliance on a source or publication
required to be used under
<PAGE> 4
3
Section 6 to the extent such use of or reliance on such source or publication
is contemplated by Section 6. No party shall be liable for any default
resulting from force majeure.
SECTION 6. Duties of Reference Agent. (a) The duties and obligations of
the Reference Agent shall be determined solely by the express provisions of
this Agreement and no implied covenants or obligations shall be read into this
Agreement against the Reference Agent. Subject to their duty to act without
negligence, neither the Reference Agent nor its directors, officers, employees
and agents guarantee the correctness or completeness of any data or other
information furnished hereunder.
(b) For the purpose of calculating the rate of interest payable on any
subclass of Floating Rate Notes, the Reference Agent shall determine LIBOR (a)
for the period beginning on (and including) the relevant Closing Date and
ending on (but excluding) the first Payment Date (the "initial Interest Accrual
Period"), on the date that is two Business Days before such Closing Date, and
(b) for each Interest Accrual Period following the initial Interest Accrual
Period, on the relevant Reference Date, in each case on the basis of a 360-day
year and the actual number of days elapsed in such Interest Accrual Period.
The Reference Agent shall determine LIBOR in accordance with the following
provisions:
(i) On each Reference Date, the Reference Agent will determine LIBOR
as the per annum offered rate for deposits in U.S. dollars for a period
of one month that appears on the display designated as page 3750 on the
Telerate Monitor (or such other page or service as may replace it for the
purpose of displaying LIBOR of major banks for U.S. dollar deposits) at
approximately 11:00 a.m. (London time).
(ii) If the offered LIBOR rate so appearing is replaced by the
corresponding rates of more than one bank, then paragraph (i) above shall
be applied, with any necessary consequential changes, to the arithmetic
mean of the rates (being at least two) which so appear, as determined by
the Reference Agent. If for any other reason such offered rate does not
so appear or if the relevant page is unavailable, the Reference Agent
will request that each of the banks whose offered rates would have been
used for the purposes of the relevant page if the event leading to the
application of this sentence had not happened or any duly appointed
substitute reference bank acting in each case through its principal
London office (the "Reference Banks"), to provide the Reference Agent
with its offered quotation to prime banks for dollar deposits in London
for the next Interest Accrual Period concerned as at 11:00 a.m. (London
time) on the applicable Reference Date. The floating rate of interest
for such Interest Accrual Period for each subclass of Floating Rate Notes
shall be the aggregate of the arithmetic mean of such quotations (or of
such of them, being at least two, as are so provided), as determined by
the Reference Agent, plus the applicable interest rate spread over LIBOR
as set forth in the Indenture, plus Step-Up Interest, if applicable.
<PAGE> 5
4
(iii) If, on any Reference Date, only one or none of the Reference
Banks provides such quotation, the floating rate of interest for the next
Interest Accrual Period for each subclass of Floating Rate Notes shall be
the rate per annum which the Reference Agent determines to be the
aggregate of the arithmetic mean of the U.S. dollar lending rates which
New York City banks selected by the Reference Agent are quoting on the
relevant Reference Date to leading European banks for loans in London for
the next Interest Accrual Period, plus the applicable interest rate
spread over LIBOR as set forth in the Indenture, plus, if applicable, any
Step-up Interest, except that, if the banks so selected by the Reference
Agent are not quoting as mentioned above, the applicable rate of interest
shall be the floating rate of interest in effect for the last preceding
Interest Accrual Period for such subclass of Floating Rate Notes.
(c) As soon as practicable after 11:00 A.M. London time on each Reference
Date, the Reference Agent will calculate the interest rate for each subclass of
Floating Rate Notes and calculate the amount of interest payable on the
relevant Payment Date in respect of each subclass of Floating Rate Notes. The
interest amount for each subclass of Floating Rate Notes shall be calculated by
the Reference Agent by multiplying the rate of interest for such subclass for
the relevant Interest Accrual Period by the estimated Outstanding Principal
Balance of such subclass of Floating Rate Notes on the first day of such
Interest Accrual Period and by multiplying the product by the actual number of
days in such Interest Accrual Period divided by 360 and rounding the resulting
amount to the nearest cent (with half a cent being rounded upward). The
Reference Agent's determination of LIBOR, the interest rate and the interest
amount for each subclass of Floating Rate Notes (in the absence of negligence,
wilful default, bad faith or manifest error) shall be conclusive and binding
upon all parties.
(d) As promptly as is practicable after the determination thereof, the
Reference Agent shall give notice of the applicable LIBOR, the Payment Date,
the interest rate for each subclass of Floating Rate Notes for the relevant
Interest Accrual Period and the amount of interest on each subclass of Floating
Rate Notes to the Issuer, the Listing Agent, the Luxembourg Stock Exchange, the
Trustee and the Administrative Agent.
(e) If the Reference Agent does not determine the interest rate for any
subclass of Floating Rate Notes or calculate the amount of interest on any
subclass of Floating Rate Notes for any Interest Accrual Period in accordance
with the provisions of Section 6(b) hereof by the end of the relevant Reference
Date, the Administrative Agent will determine such rate of interest or
calculate such interest amount in accordance with the provisions described
above, and each such determination or calculation shall be deemed to have been
made by the Reference Agent.
SECTION 7. Amendment of the Floating Rate Notes. The Issuer shall
deliver to the Reference Agent, at least ten Business Days prior to the
effective date of any amendment of the payment terms of the Floating Rate
Notes, written notice of such
<PAGE> 6
5
amendment describing the terms of such amendment in reasonable detail, and a
certification by the Issuer that such amendment is in compliance with the terms
of the Indenture.
SECTION 8. Ownership of Notes. The Reference Agent, its officers,
directors, employees and shareholders may become the owners of or acquire any
interest in any Notes, with the same rights that it or they would have if it
were not the Reference Agent, and may engage or be interested in any financial
or other transaction with the Issuer as freely as if it were not the Reference
Agent.
SECTION 9. Term; Termination, Resignation or Removal of Reference Agent.
(a) This Agreement shall have a noncancellable term commencing on July 15,
1998 and expiring on July 15, 2023 During such term, this Agreement shall not
be terminable by any party hereto except as expressly provided in Section 9(b).
(b) The Reference Agent may at any time resign by giving written notice to
the Issuer, the Trustee and the Administrative Agent, specifying therein the
date on which its desired resignation shall become effective; provided that
such notice shall be given no less than 30 days prior to said effective date
unless the Reference Agent, the Issuer, the Trustee and the Administrative
Agent otherwise agree in writing. The Issuer may remove the Reference Agent at
any time by giving written notice to the Reference Agent and to the holders of
the Floating Rate Notes and specifying the effective date of such removal,
which shall be at least 30 days after the date of notice; provided, however,
that no resignation by or removal of the Reference Agent shall become effective
prior to the date of appointment by the Issuer, as provided in Section 10, of a
successor reference agent and the acceptance of such appointment by such
successor reference agent; and provided, further, that in the event that an
instrument of acceptance by a successor reference agent shall not have been
delivered pursuant to Section 10 within 90 days after the giving of such notice
of resignation or removal, the Reference Agent may petition any court of
competent jurisdiction for the appointment of a successor reference agent with
respect to the Floating Rate Notes. The provisions of Sections 5, 11 and 14
hereof shall remain in effect following termination of this Agreement or the
earlier resignation or removal of the Reference Agent.
SECTION 10. Appointment of Successor Reference Agent. In the event of
the resignation by or removal of the Reference Agent pursuant to Section 9, the
Issuer shall promptly appoint a successor reference agent. Any successor
reference agent appointed by the Issuer following resignation by or removal of
the Reference Agent pursuant to the provisions of Section 9 shall execute and
deliver to the original Reference Agent, the Issuer, the Trustee and the
Administrative Agent an instrument accepting such appointment. Thereupon, such
successor reference agent shall, without any further act, deed or conveyance,
become vested with all the authority, rights, powers, immunities, duties and
obligations of the Reference Agent and with like effect as if originally named
as Reference Agent hereunder, and the original Reference Agent shall thereupon
be obligated to transfer and deliver such relevant records or copies thereof
maintained by the Reference Agent in connection with the performance of its
obligations hereunder. The Issuer shall notify the
<PAGE> 7
6
Rating Agencies of any resignation by or removal of the Reference Agent under
Section 9 and of the appointment of and acceptance by any successor Reference
Agent pursuant to this Section 10.
SECTION 11. Indemnification. The Issuer shall indemnify and hold
harmless the Reference Agent, its directors, officers, employees and agents
from and against any and all actions, claims, damages, liabilities, judgments,
losses, costs, charges and expenses (including reasonable legal fees and
expenses) relating to or arising out of actions or omissions from actions in
any capacity hereunder, except actions, claims, damages, liabilities,
judgments, losses, costs, charges and expenses caused by the negligence or
wilful misconduct of the Reference Agent, its directors, officers, employees or
agents. The Reference Agent shall be indemnified and held harmless by the
Issuer for any error resulting from use of or reliance on a source or
publication required to be used under Section 6. The Reference Agent shall be
indemnified and held harmless by the Issuer for, or in respect of, any actions
taken, omitted to be taken or suffered to be taken in good faith by the
Reference Agent in reliance upon (a) advice to be confirmed in writing or
opinion of counsel or (b) a written instruction from the Issuer or the
Administrative Agent.
SECTION 12. Merger, Consolidation or Sale of Business by Reference Agent.
Any corporation into which the Reference Agent may be merged or consolidated
or any corporation resulting from any merger or consolidation to which the
Reference Agent may be a party, or any corporation to which the Reference Agent
may sell or otherwise transfer all or substantially all of its assets and
corporation trust business, shall, to the extent permitted by applicable law,
become the Reference Agent under this Agreement without the execution or filing
of any paper or any further act by the parties hereto. The Reference Agent
shall give notice in writing to the Issuer, the Trustee and the Administrative
Agent of any such merger, consolidation or sale.
SECTION 13. Restrictions on Exercise of Certain Rights. The Reference
Agent hereby agrees with the Issuer that it shall not take any steps for the
purpose of procuring the appointment of an administrative receiver or the
making of an administrative order or for instituting any bankruptcy,
reorganization, arrangement, insolvency, winding up, liquidation, composition
or any like proceedings under the laws of Jersey or any other jurisdiction in
respect of the Issuer or in respect of any of its properties or liabilities.
SECTION 14. Miscellaneous. (a) If there should develop any conflict
between the Reference Agent and any other Person relating to the rights or
obligations of the Reference Agent in connection with calculation of the
interest rate on any subclass of Floating Rate Notes, the terms of this
Agreement shall govern such rights and obligations.
(b) The Reference Agent agrees to cooperate with the Issuer and its
agents, including the Administrative Agent, and their respective trustees or
directors and officers, including by providing such information as may
reasonably be requested to permit
<PAGE> 8
7
the Issuer or such authorized agents to monitor the Reference Agent's
compliance with its obligations under this Agreement.
(c) No party to this Agreement shall assign or delegate or otherwise
subcontract this Agreement or all or any part of its rights or obligations
hereunder to any Person without the prior written consent of the Issuer.
(d) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
(e) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
<PAGE> 9
8
IN WITNESS WHEREOF, this Agreement has been entered into on the 15th day
of July, 1998.
AERCO LIMITED
By /s/ Frederick W. Bradley, Jr.
-----------------------------------
Name: Frederick W. Bradley, Jr.
Title: Director
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Trustee and Reference Agent
By /s/ Craig M. Kantor
---------------------------------
Name: Craig M. Kantor
Title: Vice President
SIGNED AND SEALED AND DELIVERED
for and on behalf of [SEAL]
GPA ADMINISTRATIVE SERVICES LIMITED, as
Administrative Agent
By /s/ ?
---------------------------------
Its duly authorized attorney in fact
in the presence of:
/s/ Ann H. Wagner
---------------------------------
<PAGE> 1
Exhibit 10.5
EXECUTION COPY
SERVICING AGREEMENT
among
Babcock & Brown Limited
AerCo Limited
And
The Entities Listed on Appendix A Hereto
Dated as of July 15, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
APPOINTMENT; SERVICES
SECTION 2.01. Appointment....................................................10
SECTION 2.02. Services.......................................................11
SECTION 2.03. Compliance with Applicable Laws................................11
ARTICLE 3
STANDARD OF CARE; CONFLICTS OF INTEREST
SECTION 3.01. Standard of Care...............................................12
SECTION 3.02. Conflicts of Interest..........................................12
SECTION 3.03. Standard of Liability..........................................13
SECTION 3.04. Waiver of Implied Standard.....................................14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Aircraft Assets................................................15
SECTION 4.02. Aircraft Assets Related Documents..............................15
SECTION 4.03. Accounts and Cashflow..........................................16
SECTION 4.04. Organization and Standing......................................16
SECTION 4.05. Authority......................................................16
SECTION 4.06. No Conflicts...................................................17
SECTION 4.07. Compliance with Applicable Laws................................17
ARTICLE 5
SERVICER UNDERTAKINGS
SECTION 5.01. Staff and Resources............................................18
SECTION 5.02. Access.........................................................18
SECTION 5.03. Compliance with Law............................................18
SECTION 5.04. Commingling....................................................19
SECTION 5.05. Notes Offering.................................................19
<PAGE> 3
SECTION 5.06. Performance Objectives.........................................22
SECTION 5.07. Management.....................................................22
SECTION 5.08. Limitations....................................................22
SECTION 5.09. Location of Performance of Services............................22
ARTICLE 6
UNDERTAKINGS OF AERCO AND THE SUBSIDIARIES
SECTION 6.01. Cooperation....................................................23
SECTION 6.02. No Representation with Respect to Third Parties................23
SECTION 6.03. Related Document Amendments....................................23
SECTION 6.04. Other Services.................................................23
SECTION 6.05. Ratification...................................................24
SECTION 6.06. Execution, Amendment, Modification or Termination of
Aircraft Assets Related Documents..............................24
SECTION 6.07. AerCo Group Accounts and Cash Arrangements.....................24
SECTION 6.08. Notification of Bankruptcy.....................................24
SECTION 6.09. Further Assurances.............................................25
SECTION 6.10. Communications.................................................25
ARTICLE 7
AERCO GROUP RESPONSIBILITY; BUDGETS
SECTION 7.01. AerCo Group Responsibility.....................................26
SECTION 7.02. Instructions by AerCo Group....................................26
SECTION 7.03. Request for Authority..........................................26
SECTION 7.04. Operating Budget; Aircraft Asset Expenses Budget...............27
SECTION 7.05. Transaction Approval Requirements..............................30
SECTION 7.06. Approved Budgets and Transaction Approval Requirements.........31
ARTICLE 8
EFFECTIVENESS
SECTION 8.01. Effectiveness.................................................. 31
ARTICLE 9
SERVICING FEES; EXPENSES
SECTION 9.01. Servicing Fees.................................................32
SECTION 9.02. Retainer Fee...................................................32
ii
<PAGE> 4
SECTION 9.03. Rental Fee.....................................................32
SECTION 9.04. Incentive Fee..................................................33
SECTION 9.05. Sale Fees......................................................33
SECTION 9.06. Expenses.......................................................34
ARTICLE 10
TERMS; RIGHTS TO TERMINATE; CONSEQUENCES OF TERMINATION; SURVIVAL
SECTION 10.01. Term..........................................................37
SECTION 10.02. Right to Terminate............................................37
SECTION 10.03. Consequences of Termination...................................42
SECTION 10.04. Survival......................................................44
ARTICLE 11
INDEMNIFICATION
SECTION 11.01. Indemnity.....................................................44
SECTION 11.02. Procedures for Defense of Claims..............................45
SECTION 11.03. Reimbursement of Costs........................................46
ARTICLE 12
ASSIGNMENT AND DELEGATION
SECTION 12.01. Assignment and Delegation.....................................46
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices.......................................................47
SECTION 13.02. Governing Law.................................................48
SECTION 13.03. Jurisdiction..................................................48
SECTION 13.04. Waiver of Jury Trial..........................................48
SECTION 13.05. Counterparts; Third Party Beneficiaries.......................49
SECTION 13.06. Entire Agreement..............................................49
SECTION 13.07. Power of Attorney.............................................49
SECTION 13.08. Restrictions on Disclosure....................................49
SECTION 13.09. Rights of Setoff..............................................50
SECTION 13.10. Reliance..................................................... 50
iii
<PAGE> 5
SCHEDULES
APPENDIX A..........................................................Subsidiaries
SCHEDULE 2.02(a)........................................................Services
SCHEDULE 4.01...........................................................Aircraft
SCHEDULE 4.03......................................................Bank Accounts
SCHEDULE 7.04(b)(1)................One Year Initial Period Asset Expenses Budget
SCHEDULE 7.04(b)(2)..............Three Year Initial Period Asset Expenses Budget
SCHEDULE 10.01.............................................Rental Fee Percentage
SCHEDULE 8 to Schedule 2.02(a)..............Weekly, Monthly and Quarterly Report
ANNEXES
ANNEX 1................................................................Insurance
ANNEX 2......................................................Indenture Covenants
EXHIBITS
EXHIBIT A........................................................Pro Forma Lease
<PAGE> 6
SERVICING AGREEMENT dated as of July 15, 1998 (the "AGREEMENT") among
Babcock & Brown Limited (the "SERVICER"), AerCo Limited, a Jersey limited
liability company, ("AERCO"), GPA Administrative Services Limited as
Administrative Agent, GPA Cash Manager II Limited as Cash Manager, and the
entities listed on Appendix A hereto organized as set forth therein (together,
the "SUBSIDIARIES").
For the consideration set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties each
agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings. Unless otherwise defined herein, all capitalized terms used
but not defined herein have the meanings assigned to such terms in the offering
memorandum with respect to the debt securities offered in connection with the
acquisition of the Initial Aircraft (the "OFFERING MEMORANDUM").
"ADDITIONAL AIRCRAFT" shall mean any aircraft (i.e., the airframe together
with any engine owned or leased in by AerCo Group that is (i) installed on such
airframe or (ii) subsequently substituted for any such engine) acquired after
the Closing Date by AerCo or any of its Subsidiaries for which the Servicer is
appointed to provide Services pursuant to Section 2.01(d).
"ADMINISTRATIVE AGENCY AGREEMENT" means the Administrative Agency Agreement
dated the Closing Date, among GPA Administrative Services Limited, as
Administrative Agent, AerCo and the Subsidiaries.
"ADMINISTRATIVE AGENT" means GPA Administrative Services Limited, as
administrative agent under the Administrative Agency Agreement.
"AERCO GROUP" has the meaning assigned to such term in Section 2.01 of this
Agreement.
"AFFILIATE" means a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified; provided however, that AerCo and the Subsidiaries, on the
one part, and the Servicer and its subsidiaries, on the other part, shall not be
considered to be Affiliates of each other.
<PAGE> 7
"AFTER-TAX BASIS" means on a basis such that any payment received, deemed
to have been received or receivable by any Person shall, if necessary, be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction of all Federal, state, local or other foreign
Taxes, penalties, fines, interest, additions to Tax and other charges resulting
from the receipt (actual or constructive) or accrual of such payments imposed by
or under any Federal, state, local or other foreign law or Governmental
Authority (after taking into account any current deduction to which such Person
shall be entitled with respect to the amount that gave rise to the underlying
payment), be equal to the payment received, deemed to have been received or
receivable.
"AGREEMENT" has the meaning assigned to such term in the preamble hereto.
"AIRCRAFT" means the Initial Aircraft and any Additional Aircraft.
"AIRCRAFT ASSETS" means all Initial Aircraft, any Additional Aircraft, any
spare parts, spare engines or ancillary equipment or devices furnished therewith
and related lease interests owned by any Person within AerCo Group provided
however, that Aircraft Assets shall not include any Aircraft Asset (x) that
shall have ceased to be an Aircraft Asset pursuant to this Agreement, or (y) in
respect of which the Servicer or AerCo shall have terminated the Servicer's
obligation to provide Services in accordance with Article 10 of this Agreement.
"AIRCRAFT ASSET EXPENSES" has the meaning assigned to such term in Section
9.06(b)(i) of this Agreement.
"AIRCRAFT ASSETS RELATED DOCUMENTS" means all Lease Documents (as defined
in the Offering Memorandum) and other contracts and agreements of Persons within
AerCo Group the terms of which relate to or affect any of the Aircraft Assets.
"ANNUAL REVIEW" has the meaning assigned to such term in Section 3.02(c)
Schedule 2.02(a) to this Agreement.
"APPLICABLE LAW" with respect to any Person means any law, statute,
ordinance, rule or regulation or code of conduct or practice of any U.S.
Federal, state or local Governmental Authority, the foreign or international
Governmental Authority that applies to such Person or any of its properties or
assets.
"APPROVED BUDGET" has the meaning assigned to such term in Section 7.04(g)
of this Agreement.
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<PAGE> 8
"APPROVED BUDGET TARGET" has the meaning assigned to such term in Section
9.04(a).
"ASSET EXPENSES BUDGET" has the meaning assigned to such term in Section
7.04(a)(ii) of this Agreement.
"BANK ACCOUNTS" has the meaning assigned to such term in Section 6.01(b) of
Schedule 2.02(a) to this Agreement.
"BASE SALES FEE" has the meaning assigned to such term in Section 9.01(d)
of this Agreement.
"BUSINESS DAY" means a day on which U.S. dollar deposits may be dealt on
the London inter-bank market and commercial banks and foreign exchange markets
are open in New York, New York and London, England.
"CALCULATION DATE" means the calculation date as defined in the Indenture.
"CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement to be dated
as of the date hereof, among GPA Cash Manager II Limited as Cash Manager, AerCo
and Bankers Trust Company, solely in its capacity as indenture trustee and
security trustee.
"CASH MANAGER" means the Cash Manager under the Cash Management Agreement.
"CHANGED CIRCUMSTANCE" means any material event, circumstance or condition
shall have occurred or arisen and be continuing that is reasonably likely to
result in the current cash flow projections in any Year being materially less
favorable than the forecast which is the most current at the time that the
Approved Budget is finalized for that Year in accordance with this Agreement.
"CHANGE OF CONTROL" has the meaning assigned to such term in Section
10.02(a)(iv) of this Agreement.
"CLOSING DATE" means the date of the closing of the initial offering of
debt securities by AerCo.
"CONCENTRATION THRESHOLDS" has the meaning assigned to such term in Section
2.02(a) of Schedule 2.02(a).
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<PAGE> 9
"CONFLICTS STANDARD" has the meaning assigned to such term in Section
3.02(b) of this Agreement.
"CONTROL" (including, with its correlative expressions, "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means possession, directly or indirectly, of power
to direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise);
"DELIVERY DATE" means, with respect to each Aircraft and the related
Aircraft Assets, the date as of which AerCo Group directly or indirectly
acquires ownership of such Aircraft related Aircraft Assets.
"DIRECTORS" means the directors of AerCo as specified in AerCo's corporate
documents or resolutions and any replacement directors.
"DISCLOSURE DOCUMENT" has the meaning assigned to such term in Section
5.05(a) of this Agreement.
"EFFECTIVENESS DATE" has the meaning assigned to such term in Section
10.02(d)(ii) of this Agreement.
"EU" means The European Union.
"EXTRAORDINARY PLAN" has the meaning assigned to such term in Section
7.04(i) of this Agreement.
"FORECAST" has the meaning assigned to such term in Section 8.03(c) of
Schedule 2.02(a) to this Agreement.
"GROUP" has the meaning assigned to such term in Section 10.02(a)(iv) of
this Agreement.
"GOVERNMENTAL AUTHORITY" means any court, administrative agency or
commission or other governmental agency or instrumentality (or any officer or
representative thereof) domestic, foreign or international, of competent
jurisdiction including the EU.
"INCENTIVE FEE" has the meaning assigned to such term in Section 9.01(c) of
this Agreement.
"INCENTIVE PERIOD" has the meaning assigned to such term in Section 9.04(a)
of this Agreement.
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<PAGE> 10
"INDEMNIFIED PARTY" has the meaning assigned to such term in Section
11.01(b) of this Agreement.
"INDEMNIFYING PARTY" has the meaning assigned to such term in Section
11.01(b) of this Agreement.
"INDENTURE" has the meaning assigned to such term in Section 2.01(a) of
Schedule 2.02(a) to this Agreement.
"INDEPENDENT REPRESENTATIVE" has the meaning assigned to such term in
Section 3.02(c) of this Agreement.
"INITIAL AIRCRAFT" means the aircraft (i.e., the airframe together with any
engine owned or leased in by AerCo Group that is (i) installed on such airframe
or (ii) subsequently substituted for any such engine) specified in Schedule 4.01
hereto.
"INITIAL APPRAISED VALUE" means (i) for all the Initial Aircraft in
aggregate, $951,973,000 and, for each Initial Aircraft, means the dollar amount
specified opposite such Aircraft on Schedule 4.01 hereto and (ii) for the
Additional Aircraft, the "Initial Appraised Value" of such Additional Aircraft
as such term is defined in the Indenture.
"INITIAL APPROVAL BUDGETS" has the meaning assigned to such term in Section
7.04(b) to this Agreement.
"INITIAL PERIODS" has the meaning assigned to such term in Section
7.04(b).
"LEASE" means any lease agreement with respect to an Aircraft including any
and all amendments, side letters and other supplements thereto.
"LEASE DOCUMENTATION" has the meaning assigned to such term in Section
1.08(b) of Schedule 2.02(a) to this Agreement.
"LESSOR" has the meaning assigned to such term in the Offering Memorandum
and includes lessors of Additional Aircraft.
"LESSEE" means each lessee as defined in the Offering Memorandum, including
lessees under future Leases entered into in accordance with the terms of this
Agreement.
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<PAGE> 11
"LOSS" (together with "LOSSES") means any and all damage, loss, liability
and expense (including reasonable legal fees, expenses and related charges and
costs of investigation) provided however, the terms "LOSS" and "LOSSES" shall
not include any Indemnified Party's management time or overhead expenses.
"MAINTENANCE RESERVES" means the maintenance reserves under each of the
Leases.
"MONTHLY PAYMENT PERIOD" has the meaning assigned to such term in Section
6.03(a) to Schedule 2.02(a) to this Agreement.
"NET CASH PROCEEDS" has the meaning assigned to such term in Section
9.05(b) of this Agreement.
"NET GAINS" has the meaning assigned to such term in Section 9.05(b) of
this Agreement.
"NEW ACCOUNTS" has the meaning assigned to such term in Section 6.01(b) of
Schedule 2.02(a) to this Agreement.
"NON TERMINATING PARTY" has the meaning assigned to such term in Section
10.02(d)(i) of this Agreement.
"NOTES OFFERING" has the meaning assigned to such term in Section 5.05(a)
of this Agreement.
"OFFERING MEMORANDUM" has the meaning assigned to such term in Section 1.01
of this Agreement.
"OFFICER'S CERTIFICATE" means, as to any Person, a certificate of the
President, any Vice President or Assistant Vice President, the Treasurer or any
Assistant Treasurer or such other equivalent officer.
"ONE YEAR INITIAL PERIOD" has the meaning assigned to such term in Section
7.04(b).
"ONE YEAR PERIOD" has the meaning assigned to such term in Section 7.04(a)
of this Agreement.
"OPERATING BUDGET" has the meaning assigned to such term in 7.04(a)(i) of
this Agreement.
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<PAGE> 12
"OPERATING GUIDELINES" has the meaning assigned to such term in Section
5.09 of this Agreement.
"OPERATIVE AGREEMENTS" means the Agreement and all other agreements,
instruments or other documents which are required by the terms of this Agreement
to be delivered in connection herewith.
"OTHER ASSETS" has the meaning assigned to such term in Section 3.02(a) of
this Agreement.
"OVERHEAD EXPENSES" has the meaning assigned to such term in Section
9.06(a) of this Agreement.
"PAYMENT DATE" has the meaning assigned to it in the Indenture.
"PERFORMANCE OBJECTIVES" has the meaning assigned to such term in Section
5.06.
"PERIOD" has the meaning assigned to such term in Section 7.04(a) of this
Agreement.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, statutory business trust, common law trust or other entity
or organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PRECEDENT LEASE" has the meaning assigned to such term in Section 3.02(a)
of Schedule 2.02(a) to this Agreement.
"PRO FORMA LEASE" has the meaning assigned to such term in Section
3.02(a)(ii) of Schedule 2.02(a) to this Agreement.
"REIMBURSABLE EXPENSES" has the meaning assigned to such term in Section
9.06(c) of this Agreement.
"RELATED PERSON" has the meaning assigned to such term in Section
10.02(a)(iv) of this Agreement.
"RENT" has the meaning assigned to such term in Section 9.03 of this
Agreement.
"RENTAL FEE" has the meaning assigned to such term in Section 9.01(b) of
this Agreement.
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<PAGE> 13
"RENTAL FEE PERCENTAGE" has the meaning assigned to such term in Section
9.03 of this Agreement.
"REPLACEMENT SERVICER" means a replacement servicer to perform some or all
of the Services under the Servicing Agreement formerly performed by the
Servicer, which is appointed in accordance with Section 10.03(d) of this
Agreement.
"REPRESENTATIVE" with respect to any Person means the officers, directors,
employees, advisors and agents of such Person.
"RETAINER FEE" has the meaning assigned to such term in Section 9.01(a) of
this Agreement.
"SALES FEES" has the meaning assigned to such term in Section 9.01(d) of
this Agreement.
"SALES INCENTIVE FEE" has the meaning assigned to such term in Section
9.01(d) of this Agreement.
"SEC" has the meaning assigned to such term in Section 5.05(a) of this
Agreement.
"SECURITY DEPOSITS" means, at the time of calculation, with respect to each
Aircraft, all cash amounts, prepayments of rent, letters of credit and
guarantees paid by or issued on behalf of the Lessee for the benefit of the
lessor under the relevant Lease as security for obligations of such Lessee under
such Lease and related Lease Documents.
"SERVICER" means Babcock & Brown Limited.
"SERVICER REPRESENTATIVE" means any officer, director, employee, partner,
consultant, advisor or agent of the Servicer or any of its Affiliates.
"SERVICES" has the meaning assigned to such term in Section 2.02(a) of this
Agreement.
"SERVICING FEES" has the meaning assigned to such term in Section 9.01 of
this Agreement.
"STANDARD OF CARE" has the meaning assigned to such term in Section 3.01 of
this Agreement.
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<PAGE> 14
"STANDARD OF LIABILITY" has the meaning assigned to such term in Section
3.03(c) of this Agreement.
"STATED SERVICES OBLIGATION" has the meaning assigned to such term in
Section 6.03(a) to Schedule 2.02(a) to this Agreement.
"SUBSIDIARIES" means those entities listed on Appendix A hereto and any
additional direct or indirect subsidiaries of AerCo.
"TARGET SALES PRICE" has the meaning assigned to such term in Section
9.05(a) of this Agreement.
"TAX" or "TAXES" means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, registration, recording, documentary,
conveyancing, gains, withholding on amounts paid to or by any Person, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority responsible for the imposition of any such tax (domestic
or foreign) (a "TAXING AUTHORITY"), or (ii) liability for the payment of any
amounts of the type described in (i) as a result of being party to any agreement
or any express or implied obligation to indemnify any other Person.
"TECHNICAL MANAGEMENT EXPENSES" has the meaning assigned to such term in
Section 9.06(b)(i) of this Agreement.
"TECHNICAL MANAGEMENT EXPENSES RESERVE AMOUNT" has the meaning assigned to
such term in Section 7.04(f) of this Agreement.
"TERMINATING PARTY" has the meaning assigned to such term in Section
10.02(d)(i) of this Agreement.
"TERMINATION FEE" has the meaning assigned to such term in Section 10.02(e)
of this Agreement.
"TERMINATION NOTICE" has the meaning assigned to such term in Section
10.02(d)(i) of this Agreement.
"THIRD PARTY CLAIM" means a claim by a third party arising out of a matter
for which an Indemnified Party is entitled to be indemnified pursuant to the
indemnity provisions of this Agreement.
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<PAGE> 15
"THREE YEAR INITIAL PERIOD" has the meaning assigned to such term in
Section 7.04(b) of this Agreement.
"THREE YEAR PERIOD" has the meaning assigned to such term in Section
7.04(a) of this Agreement.
"TRANSACTION APPROVAL REQUIREMENTS" has the meaning assigned to such term
in Section 7.05(c) of this Agreement.
"YEAR" means each twelve month fiscal year (or such shorter fiscal period
as agreed upon by the parties hereto in the future) ended June 30 or as modified
by agreement of the parties hereto in the future.
ARTICLE 2
APPOINTMENT, SERVICES
SECTION 2.01. Appointment. Each of AerCo and the Subsidiaries hereby
appoints the Servicer as the exclusive provider of the Services (as defined in
Section 2.02 below) to AerCo and the Subsidiaries (collectively, "AERCO GROUP")
in respect of the Aircraft Assets on the terms and subject to the conditions set
forth in this Agreement.
(a) The Servicer hereby accepts such appointment and agrees to perform the
Services on the terms and subject to the conditions set forth in this Agreement.
In connection with the provision of the Services with respect to the Aircraft
Assets, the Servicer generally shall, where and to the extent practicable,
contract for or otherwise obtain goods and services (the cost of which is an
Aircraft Asset Expense) from third party providers in the name of, or as
disclosed agent for, AerCo and each of the Subsidiaries as applicable; if the
Servicer shall not have contracted for or otherwise obtained such goods and
services in the name of or as disclosed agent for AerCo or the relevant
Subsidiary, as the case may be, the Servicer shall use commercially reasonable
efforts to cause AerCo or the relevant Subsidiary, as the case may be, to be in
a position to have direct recourse against any such third party provider
providing goods and services for AerCo or the relevant Subsidiary, as the case
may be, for any breaches by such third party provider related to the provision
of such goods and services. Any third party provider discount or rebate related
directly or indirectly to the Aircraft Assets shall be made available to AerCo
Group.
(b) AerCo has advised the Servicer that each Person within AerCo Group has
appointed the Administrative Agent to act as its representative with respect to
any matter in respect of which AerCo or any other Person within AerCo
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<PAGE> 16
Group is required or permitted to take any action pursuant to the terms of this
Agreement. Accordingly, in connection with the performance of the Services,
unless earlier notified in writing by AerCo that the Administrative Agent's
appointment to act on behalf of AerCo has been revoked or terminated, the
Servicer shall in all cases be entitled to rely on the instructions (or other
actions) of the Administrative Agent as representative of each Person within
AerCo Group.
(c) AerCo has advised the Servicer that the Cash Manager has been appointed
to perform certain cash management services on behalf of AerCo Group in
accordance with the terms of the Cash Management Agreement. In connection with
the performance of the Services required to be performed by the Servicer
pursuant to 6.01, 6.02, 6.03 and 6.04 of Schedule 2.02(a) to this Agreement, the
Servicer shall in all cases be entitled to rely on instructions (or other
actions) of the Cash Manager unless earlier notified in writing by AerCo that
the Cash Management Agreement has been terminated, in which case the Servicer
shall be entitled to rely upon the instructions (or other actions) of AerCo or
the Administrative Agent in accordance with Section 2.01(b). The Servicer shall
not be liable to any Person within AerCo Group or any other Person for any
action taken or omission to act in accordance with instructions (or other
actions) of the Cash Manager for purposes of Sections 6.01, 6.02 and 6.03 of
Schedule 2.02(a).
(d) AerCo, at its sole option, may appoint the Servicer to provide Services
under the terms of this Agreement to any future aircraft or engines acquired by
AerCo and its Subsidiaries.
SECTION 2.02. Services. (a) The services to be provided by the Servicer in
respect of the Aircraft Assets (the "SERVICES") are as set forth in Schedule
2.02(a).
(b) In connection with the performance of the Services, except where
discretion has been given to the Servicer under this Agreement, the Servicer
shall in all cases only be obliged to act upon, and shall be entitled to rely
on, the instructions or other actions of AerCo or the Administrative Agent or,
if applicable, the Cash Manager on behalf of AerCo Group. The Servicer shall not
be liable to any of AerCo, the Subsidiaries or any other Person for any action
taken by the Servicer, or which the Servicer omitted to take, in accordance with
such instructions.
SECTION 2.03. Compliance with Applicable Laws. Notwithstanding anything to
the contrary in this Agreement, the Servicer shall not be obligated to take or
refrain from taking any action which would violate any Applicable Law.
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<PAGE> 17
ARTICLE 3
STANDARD OF CARE; CONFLICTS OF INTEREST;
SECTION 3.01. Standard of Care. The Servicer shall use reasonable care and
diligence at all times in the performance of the Services as if it were the
owner of the Aircraft Assets (subject to the terms and conditions of this
Agreement and the Indenture) and at all times in a manner at least consistent
with customary commercial practice of a prudent international aircraft lessor in
the management, servicing and marketing of commercial jet aircraft and related
assets (the "STANDARD OF CARE").
SECTION 3.02. Conflicts of Interest. (a) Each of AerCo and the
Subsidiaries acknowledges and agrees that: (i) in addition to managing,
servicing and marketing the Aircraft Assets under this Agreement, the Servicer
may manage, service or market and shall be entitled to manage, service or market
from time to time, the separate assets and businesses of the Servicer, its
Affiliates and other third parties ("OTHER ASSETS"); (ii) nothing in this
Agreement will prevent the Servicer from carrying on its normal investment
banking, advisory or aircraft or lease management businesses; (iii)
notwithstanding 3.02(b) below, in the course of conducting such activities, the
Servicer may from time to time have conflicts of interest in performing its
duties on behalf of AerCo on the one hand and the various entities to whom it
provides management, servicing or marketing services and with respect to the
various assets it may own or in respect of which it provides management,
servicing or marketing services on the other hand; and (iv) the Directors of
AerCo have approved the transactions contemplated by this Agreement and desire
that such transactions be consummated and, in giving such approval, the
Directors of AerCo have expressly recognized that such conflicts of interest may
arise and that when such conflicts of interest arise the Servicer shall perform
the Services in accordance with the Standard of Care and, to the extent
applicable, the Conflicts Standard.
(b) If conflicts of interest arise regarding the management, servicing or
marketing of (i) a particular Aircraft Asset, on the one hand, and another
Aircraft Asset, on the other hand, or (ii) any Aircraft Assets, on the one hand,
and Other Assets, on the other hand, the Servicer shall (A) notify AerCo as
provided in Section 3.02(c), and (B) perform the Services in good faith and to
the extent (i) such Aircraft Assets or (ii) such Aircraft Asset and such Other
Asset are substantially similar in terms of objectively identifiable
characteristics relevant for purposes of the particular Services to be
performed, the Servicer shall not discriminate among such Aircraft Assets or
between such Aircraft Assets and such Other Assets, respectively, on an
unreasonable basis (the standard set forth in this Section 3.02(b) shall be
referred to collectively as the "CONFLICTS STANDARD").
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<PAGE> 18
(c) If the Servicer determines in good faith that a conflict of interest
exists with AerCo then, as soon as practicable after becoming aware of the
conflict of interest, the Servicer shall inform AerCo of the existence of the
conflict of interest and shall promptly propose to AerCo a method of resolving
the conflict of interest, including one or more of the following: (i) a proposal
to disregard the conflict of interest on the basis of lack of materiality; (ii)
an agreement by the Servicer to give preference to the particular Aircraft
Asset; (iii) a proposal to form separate teams within the Servicer and its
Affiliates which will act at all times at arm's length and each of which will be
bound by a strict duty of confidentiality towards its respective client; or (iv)
a proposal that the Servicer withdraw from acting as Servicer with respect to
the negotiation of the issue giving rise to such conflict of interest regarding
the particular Aircraft Asset and that AerCo appoint an independent
representative (the "INDEPENDENT REPRESENTATIVE") to act on behalf of AerCo with
respect thereto. If AerCo does appoint an Independent Representative, the
Servicer will not receive fees pursuant to Sections 9.02 and 9.03 in respect of
the Aircraft Asset or Aircraft Assets giving rise to such conflict of interest
for so long as such Independent Representative is engaged. The Independent
Representative's fee will be paid by AerCo.
(d) If AerCo does not find one of the Servicer's proposed resolutions of
the conflict to be acceptable, then AerCo may propose an alternative method of
resolution to the Servicer. If the conflict cannot be resolved to the
satisfaction of AerCo in its sole discretion after negotiation in good faith
with the Servicer, then AerCo reserves the right to terminate the Servicer's
role in respect of such Aircraft Asset.
SECTION 3.03. Standard of Liability. (a) The Servicer shall not be liable
to AerCo or any of the Subsidiaries or any other Person under any circumstances
for any Losses directly or indirectly arising out of, or in connection with or
related to: (i) an Aircraft Asset being sold, leased or purchased on less
favorable terms than might have been achieved at any time, provided such
transactions were entered into on the basis of a commercial decision or
recommendation of the Servicer in accordance with the Standard of Care; (ii) the
Servicer's obligation to apply the Conflicts Standard in respect of its
performance of the Services, except, in either of case (i) or (ii), where such
Losses are finally adjudicated to have been caused directly by the negligence,
recklessness, wilful misconduct or fraud of the Servicer; (iii) the ownership,
operation, maintenance, acquisition, leasing, financing, refinancing or sale of
any of the Aircraft Assets, or any action or failure to act on the part of any
Person at any time, prior to the effectiveness of this Agreement; (iv) any
action taken, limited or terminated by the Servicer in accordance with the
instructions of AerCo pursuant to Section 7.02 of this Agreement or as
contemplated by this Agreement, the instructions of the Cash
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<PAGE> 19
Manager or the Administrative Agent; (v) a refusal by AerCo or any of the
Subsidiaries to take any action recommended by the Servicer; or (vi) the gross
negligence, recklessness, fraud or wilful misconduct of any person within AerCo
Group.
(b) The Servicer shall indemnify, reimburse and hold harmless AerCo and the
Subsidiaries on an After-Tax Basis in accordance with the provisions of Article
11 for any Loss arising as a result of the performance of any of the Services
where (i) such Loss is finally adjudicated to have been caused directly by the
negligence, recklessness, fraud or wilful misconduct of the Servicer or any of
its Affiliates or any Servicer delegate in respect of its obligations to apply
the Standard of Care or the Conflicts Standard in connection with the
performance of the Services; or (ii) such Loss is finally adjudicated to have
directly resulted from a breach by the Servicer of the express terms and
conditions of this Agreement; provided that the Servicer's obligation to
indemnify under this Agreement shall be limited to a maximum amount of $21
million in the aggregate with respect to any and all Losses (except for those
Losses that result from fraud on the part of the Servicer). The parties agree
that under no circumstances shall the foregoing provision provide for or permit
any duplicative payment to or recovery by AerCo Group. In the event that the
Servicer shall have made an indemnity payment with respect to a Loss to Aerco or
a Subsidiary and any member of AerCo Group subsequently is paid or otherwise
recovers an amount in respect of such Loss from any other person, then Aerco
shall repay such amount to the Servicer.
(c) The liability standards set forth in this Section 3.03, shall be the
("STANDARD OF LIABILITY").
SECTION 3.04. Waiver of Implied Standard. Except as expressly stated above
in this Article 3, all other warranties, conditions and representations, express
or implied, statutory or otherwise, arising under U.S. Federal, New York,
Jersey, Channel Islands or other Applicable Law in relation to either the skill,
care, diligence or otherwise in respect of any service to be performed hereunder
or to the quality or fitness for any particular purpose of any goods are hereby
excluded and the Servicer shall not be liable in contract, tort or otherwise
under U.S. Federal, New York, Jersey, Channel Islands or other Applicable Law
for any loss, damage, expense or injury of any kind whatsoever, arising out of
or in connection with the Services to be supplied pursuant to this Agreement or
any goods to be provided or sold in conjunction with such Services.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Each of AerCo and the Subsidiaries jointly and severally represents and
warrants to the Servicer as follows:
SECTION 4.01. Aircraft Assets. Schedule 4.01 contains a true and complete
list of all Aircraft Assets, the Initial Appraised Value of each Aircraft and
the Person within AerCo Group that owns such Aircraft Asset, in each case as of
the date hereof. Except as set forth on Schedule 4.01, or as disclosed in the
Offering Memorandum, each Person listed within AerCo Group as an owner of the
Aircraft Asset on Schedule 4.01 has good and marketable title to such Aircraft
Asset, free and clear of all liens.
SECTION 4.02. Aircraft Assets Related Documents. Each Aircraft Assets
Related Document provided by the previous servicer to Babcock & Brown or
subsequently delivered to the Servicer is (or at the time of such delivery will
be) in full force and effect and a legal, valid and binding agreement of the
Person in AerCo Group that is a party thereto and, to the best knowledge of such
Person within AerCo Group, each such other party thereto, and is (or at the time
of such delivery will be) enforceable against such Person within AerCo Group
that is a party thereto and, to the best knowledge of such Person within AerCo
Group, against each such other party thereto in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors' rights and remedies and to
general equity principles. To the best knowledge of AerCo after due inquiry (it
being understood that such due inquiry shall consist of a review of the Aircraft
Assets Related Documents obtained by AerCo and the Subsidiaries from the
previous servicer of the Initial Aircraft), none of the Aircraft Assets Related
Documents listed on Schedule 4.02 or subsequently delivered to Servicer has been
modified, amended or terminated except as disclosed therein. To the best
knowledge of AerCo after due inquiry (it being understood that such due inquiry
shall consist of a review of the Aircraft Assets Related Documents obtained by
AerCo and the Subsidiaries from the previous servicer of the Initial Aircraft),
except as set forth in the Aircraft Assets Related Documents with respect to
specific potential defaults, each Person within AerCo Group (and each
predecessor-in-interest of any Person) has performed or is performing all
material obligations required to be performed by it under the applicable
Aircraft Assets Related Documents and is not (with or without notice or lapse of
time or both) in breach or default in any material respect thereunder and, to
the best knowledge of AerCo, no other party to any of the Aircraft Assets
Related Document is or at the time of the delivery of such Aircraft Assets
Related Document to the Servicer will be (with or without notice or lapse of
time or both) in breach of default in any material respect thereunder.
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SECTION 4.03. Accounts and Cashflow. Schedule 4.03 hereto sets forth a
true and complete list as of the date hereof of all AerCo Group's bank or other
similar accounts relating to the Aircraft Assets.
SECTION 4.04. Organization and Standing. (a) Each Person in AerCo Group is
a corporation, limited liability company or business trust, as applicable, duly
organized and validly existing and, if applicable, in good standing under the
laws of the jurisdiction in which it is legally organized and possesses all
franchises, licenses, permits, authorizations and approvals necessary to enable
it to use its corporate or other name and to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted and as
proposed to be conducted except for such jurisdictions where the failure to be
so qualified could not, individually or in the aggregate, have a material
adverse effect on the ability of such Person within AerCo Group or the Servicer
to perform their respective obligations under this Agreement. Appendix A sets
forth a true and complete list as of the date hereof of each Person within AerCo
Group, the jurisdiction in which each such Person within the AerCo Group is
legally organized, and its officers, directors and shareholders.
(b) Each Person within AerCo Group is duly qualified to do business as a
foreign corporation, limited liability company or business trust, as applicable,
in each jurisdiction in which the nature of its business or the ownership,
leasing or holding of its properties or assets requires qualification, except
for such jurisdictions where the failure to be so qualified could not,
individually or in the aggregate, have a material adverse effect on the ability
of such Person within AerCo Group or the Servicer to perform their respective
obligations under this Agreement.
(c) No person within AerCo Group is subject to any actual or, or to the
best of its knowledge, contingent liability that could individually or in the
aggregate (i) have a material adverse effect on the ability of such Person
within AerCo Group or the Servicer to perform their respective obligations under
this Agreement or (ii) materially adversely affect the ownership, operation,
leasing, financing, refinancing or sale of any Aircraft Asset.
SECTION 4.05. Authority. (a) Each of AerCo and each other Person within
AerCo Group which is a party to an Operative Agreement has all requisite power
and authority to execute each Operative Agreement to which it is or will be a
party and to consummate the transactions and to perform its obligations
contemplated thereby. All corporate acts and other proceedings required to be
taken by each Person within AerCo Group to authorize the execution, delivery and
performance of each Operative Agreement to which it is or will be a party and
the consummation of the transactions and the performance of its obligations
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contemplated thereby have been on or before the date of entering
into the relevant Operative Agreements or will have been duly and properly
taken.
(b) Each of the Operative Agreements to which each Person within the AerCo
Group is or will be a party has been or will be duly validly executed and
delivered by such Person, as applicable, and each such Operative Agreement is,
or upon such execution and delivery will be, a legal, valid and binding
obligation of such Person, as applicable, and enforceable against it in
accordance with its terms subject to bankruptcy, insolvency fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies and to general equity principles.
SECTION 4.06. No Conflicts. Neither the execution and delivery of any
Operative Agreement with respect to which any Person within AerCo Group is a
party nor the consummation of the transactions contemplated thereby or the
performance by any Person within AerCo Group of any of its obligations
thereunder will (i) violate any provision of the constituent documents of any
such Person within the AerCo Group, (ii) violate any order, writ, injunction,
judgment or decree applicable to any Person within AerCo Group or any of their
respective properties or assets, (iii) violate in any material respect any
Applicable Law or (iv) result in any conflict with, breach of or default (or
give rise to any right of termination, cancellation or acceleration) under any
note, bond, mortgage, indenture, warrant or similar instrument or any licence,
permit, material agreement or other material obligation to which any Person
within AerCo Group or by which any Person within the AerCo Group or any of their
respective properties or assets may be bound, except such violations, breaches,
conflicts or defaults which could not individually or in the aggregate have a
material adverse effect on the ability of AerCo Group or the Servicer to perform
their respective obligations under this Agreement. No action, consent or
approval by or filing with any Governmental Authority or any other Person is
required in connection with the execution, delivery or performance by any Person
within the AerCo Group of the Operative Agreements to which it is a party or the
consummation by any Person within the AerCo Group of the transactions
contemplated thereby which has not already been obtained.
SECTION 4.07. Compliance with Applicable Laws. (a) Each of AerCo and each
other Person within AerCo Group and their respective properties, assets,
operations and businesses have been operated and are in compliance with all
Applicable Laws and any filing requirements relating thereto, except where any
non-compliance could not individually or in the aggregate have a material
adverse effect on the ability of AerCo Group or the Servicer to perform their
respective obligations under this Agreement.
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(b) Each of AerCo and each other Person within the AerCo Group has obtained
all permits, licenses and other authorizations which are required with respect
to the operation of their respective businesses and the ownership of their
respective assets and properties under all Applicable Laws, other than any
permits, licenses or authorizations which the failure to obtain could not
individually or in the aggregate have a material adverse effect on the ability
of AerCo Group or the Servicer to perform their respective obligations under
this Agreement. Each Person within AerCo Group is in compliance with all terms
and conditions of such permits, licenses and authorizations, except where any
non compliance could not individually or in the aggregate have a material
adverse effect on the ability of AerCo Group or the Servicer to perform their
respective obligations under this Agreement.
ARTICLE 5
SERVICER UNDERTAKINGS
SECTION 5.01. Staff and Resources. The Servicer shall employ or otherwise
engage such staff (including in-house legal staff) and maintain such supporting
resources as the Servicer shall reasonably deem necessary, both in number and in
quality, to enable the Servicer to perform the Services in accordance with the
terms of this Agreement.
SECTION 5.02. Access. The Servicer at such times as AerCo may reasonably
request shall grant to AerCo Group and its agents (including auditors):
(a) "READ ONLY" (including by way of hard copy) and reporting access
regarding the Servicer's management information systems, but only to that part
of such systems that relates to the Aircraft Assets and AerCo Group's business;
(b) access to the related programs for review and testing purposes only;
and
(c) access to the ledgers, documents and other records related to the
Aircraft Assets or AerCo Group's business (copies of which AerCo Group shall be
entitled to take) and to officers and employees of the Servicer, to enable AerCo
Group to monitor the performance by the Servicer under this Agreement and
otherwise for the purposes of AerCo Group's business.
SECTION 5.03. Compliance with Law. The Servicer shall, in connection with
the performance of the Services, comply in all material respects with all
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laws, rules and regulations applicable to the Servicer and with the laws, rules
and regulations of Jersey, Channel Islands, Ireland, the United Kingdom and the
United States applicable to the Aircraft Assets; provided, however, that this
Section 5.03 shall not limit the obligation of the Servicer to monitor the
performance of the obligations of Lessees under the Leases as set forth in
Article 1 of Schedule 2.02(a).
SECTION 5.04. Commingling. The Servicer shall not commingle with its own
funds any funds of any Person within AerCo Group.
SECTION 5.05. Notes Offering. (a) The Servicer agrees to use commercially
reasonable efforts to cooperate with AerCo and its Affiliates in connection with
the public or private offering and sale after the date hereof of any securities
of AerCo or any of its Affiliates (a "NOTES OFFERING") including participation
in preparation of any offering memorandum, prospectus or other offering
materials (but assuming no responsibility for the preparation, form or content
thereof, provided, however, that the Servicer will assume responsibility for the
content of any information therein provided by the Servicer regarding it),
participating, on reasonable notice and with representatives of AerCo, in
customary marketing activities relating to a Notes Offering solely in the
Servicer's capacity as Servicer of the Aircraft Assets (including road shows and
investor meetings); attending, on reasonable prior notice, all meetings with
rating agencies relating to any Notes Offering; providing AerCo and its
Affiliates, underwriters, rating agencies and other advisors with reasonable
opportunities to conduct legal and business due diligence with respect to the
Servicer and its provision of Services and with respect to the Aircraft Assets
and Leases (including, for this purpose any future lease) including providing,
to the extent that such data is in the Servicer's possession or within its
knowledge, any historical Lease and Aircraft Assets related data, including
access to and information regarding all Leases for due diligence purposes;
procuring, at AerCo's expense, opinions of counsel with respect to matters
requested by the rating agencies and relating to the Aircraft Assets, Leases and
related documents and related collateral and payments thereunder; assisting with
respect to the preparation of financial statements for AerCo Group; and (to the
extent that such data is in the Servicer's possession or within its knowledge)
providing, reviewing and, if Servicer so chooses, commenting on information
regarding the Aircraft Assets and provision of Services for inclusion in any
offering memorandum, prospectus or other offering document or any periodic
report required to be filed or furnished by AerCo with or to the United States
Securities and Exchange Commission (the "SEC") or any other Governmental
Authority (any such document or report, a "DISCLOSURE DOCUMENT"). Servicer also
shall provide information regarding the Servicer for inclusion in any Disclosure
Document and shall provide customary indemnities against material misstatements
or omissions
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with respect to such information regarding the Servicer; provided that AerCo
agrees that the Servicer has the right to approve any information in any
Disclosure Document relating to the Servicer or any Affiliate thereof and that
AerCo will not permit the inclusion in any Disclosure Document of (i) any
financial statements or financial data relating to the Servicer or any Affiliate
thereof, (ii) any performance or related data with respect to the Servicer's
management of (y) aircraft directly or indirectly owned by AerCo (it being
understood that such data shall not include financial or other data relating to
the Aircraft Assets, the Leases and the Lessees where the principal purpose for
including such data in the Disclosure Document is not to provide a measurement
or other assessment of the Servicer's performance in managing the Aircraft
Assets) or (z) any other Person's aircraft or other assets or (iii) information
relating to aircraft that do not comprise Aircraft Assets which are owned or
managed by the Servicer or any of its Affiliates (except and to the extent that
the quantities and types of aircraft currently owned or managed by the Servicer
are disclosed in summary form, which summary shall be subject to the prior
approval of the Servicer), except, in the case of clauses (ii) and (iii), to the
extent reasonably required by the SEC or other Governmental Authority or
otherwise under Applicable Law; provided that, before including any such
information so required, AerCo shall have used commercially reasonable efforts
to have (or to have caused its Representatives to have) such requirement
withdrawn or otherwise satisfied and to limit the information required to be
included. AerCo also will provide the Servicer with copies of, and an
opportunity to review and comment on, marketing materials produced in connection
with any Notes Offering. AerCo will not distribute any such marketing materials
or disseminate the information contained therein, where such materials or
information includes information relating to the Servicer or any of its
Affiliates, without the Servicer's prior written consent, which consent shall
not be unreasonably withheld.
(b) AerCo agrees that it will not submit to any rating agency any materials
relating to the Servicer or any of its Affiliates without the Servicer's prior
consent, which consent shall not be unreasonably withheld.
(c) AerCo acknowledges and agrees that neither the Servicer nor any of its
Affiliates will be a party to any underwriting agreement or any letter to,
representation to, indemnity or other agreement with, any underwriter in
connection with any Notes Offering, and shall not assume any responsibility for
any information set forth in any Disclosure Document related thereto except for
information provided by the Servicer regarding the Servicer.
(d) Except to the extent required by law, AerCo agrees, and shall cause
each other Person within AerCo Group to agree, not to issue any press release or
make any other public announcement relating to the Servicer or any of its
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Affiliates and their respective involvement in any Notes Offering without the
Servicer's prior written consent, which consent shall not be unreasonably
withheld. In the event a press release or other public announcement is required
by law, AerCo shall consult with the Servicer prior to issuing or making any
such press release or public announcement to the extent that any such press
release or public announcement relates to the Servicer or any of its Affiliates
and their respective involvement in any Notes Offering.
(e) Neither the Servicer nor any of its Affiliates shall be required to
sign any registration statement (or any similar document) in connection with any
Notes Offering or to take any other action that could reasonably be expected to
result in the Servicer or any of its Affiliates being or being deemed to be a
"control person" with respect to the applicable issuer of any securities issued
in connection with any such financing transaction under applicable securities
laws in connection with any such financing or an "underwriter" of any such
securities. The obligations of the Servicer under this Section 5.05 shall be
subject to the reasonable satisfaction of the Servicer with all the terms and
conditions of the applicable Notes Offering that relate to the Servicer or any
of its Affiliates including the customary indemnities in favour of the Servicer
and its Affiliates.
(f) At the request of the Servicer, AerCo agrees to request that its legal,
accounting and other technical advisors include the Servicer and such Affiliates
of the Servicer as the Servicer may designate as addressees of any opinions
and/or comfort letters being provided to AerCo in connection with any Notes
Offering.
(g) In the case of any Notes Offering, none of the Servicer, its Affiliates
or its Representatives shall have any liability for, and AerCo and the
Subsidiaries jointly and severally shall hold, and shall cause each other
Person, if any, for whom a Notes Offering was conducted to hold, the Servicer,
its Affiliates and its Representatives harmless from, and indemnify on an
After-Tax Basis, the Servicer, its Affiliates and its Representatives against,
any and all Losses that may be imposed on, incurred by or asserted against
(including with respect to any such claims, suits, actions or proceedings by
third parties, including the underwriters and purchasers of any securities
issued in connection with any such Notes Offering) the Servicer, its Affiliates
or its Representatives directly arising out of, in connection with or related to
the Servicer's performance of the obligations set forth in this Section 5.05
with respect to any Notes Offering (except to the extent, but only to the
extent, of any such Losses directly arising out of, in connection with or
related to the content of any information in any offering memorandum or
prospectus provided by the Servicer in writing expressly for use therein
regarding the Servicer). The joint and several obligations of AerCo and the
Subsidiaries under this Section 5.05(g) shall be in addition to any liability
that such Persons
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may otherwise have to the Servicer, its Affiliates or its Representatives and
shall not be limited or reduced with respect to the Servicer, its Affiliates or
its Representatives by any other rights to indemnification that may be available
to the Servicer, its Affiliates or its Representatives.
SECTION 5.06. Performance Objectives. The Servicer will perform the
Services in a manner that is intended to be consistent with maximizing the
present value of the cash flows derived from the lease or sale of the Aircraft
over time, subject to the constraints imposed by the Indenture and this
Agreement and by seeking to achieve a balanced and diversified portfolio
(including with respect to lessees, geography and lease expiries), in all cases
taking into account the then-existing and anticipated market conditions
affecting the operating lease of used aircraft and the commercial aviation
industry generally (the "PERFORMANCE OBJECTIVES").
SECTION 5.07. Management. The Servicer warrants that it is not under any
obligation to a third party owner or lessor of aircraft to give preference to
such aircraft in the management or remarketing of such aircraft over any
Aircraft Assets.
SECTION 5.08. Limitations. (a) Notwithstanding any other provision of this
Agreement, the Servicer shall not be obligated either initially or on a
continuing basis to provide any Person within the AerCo Group or any of their
respective Representatives any confidential or proprietary information regarding
the Servicer's or any of its Affiliates' business or the business or finances of
any Person, other than any Person within the AerCo Group, whose assets it
manages from time to time.
(b) The relationship of the Servicer is an agency relationship and, except
in relation to any money erroneously received by the Servicer into any of the
Servicer's or any of its Affiliates' bank accounts on behalf of any Person
within AerCo Group, which the Servicer will hold in trust for such Person and
deposit into one or more accounts in accordance with the instructions of the
Cash Manager as soon as reasonably practicable, neither the Servicer nor any of
its Affiliates or Representatives shall be under any fiduciary duty or other
implied obligation or duty to any Person within AerCo Group or any holder of any
equity or debt security issued by any Person within the AerCo Group, any Lessee
or any other Person arising out of this Agreement.
SECTION 5.09. Location of Performance of Services. The Servicer shall
manage and control the performance of the Services exclusively from within
Ireland. In this regard, the Servicer shall in no event (1) execute any new
lease agreement, amendment to an existing lease or any agreement in respect of a
sale
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of an Aircraft Asset outside Ireland (except pursuant to a specific power of
attorney issued on a case-by-case basis in Ireland), or (2) make any material
Operational Decision outside Ireland. For the purpose of this Section 5.09, an
"OPERATIONAL DECISION" is any decision with respect to (a) a new lease or an
amendment to a lease that concerns (i) lease rental, (ii) lease term, (iii) the
amount of security deposits and maintenance accruals, or (iv) the terms of
delivery and redelivery conditions, or (b) the sale of Aircraft Assets. The
Servicer shall adopt operating guidelines (as adopted from time to time, the
"OPERATING GUIDELINES") to carry out the purpose of this Section 5.09. The
Servicer shall provide a copy of its Operating Guidelines to AerCo for approval.
ARTICLE 6
UNDERTAKINGS OF AERCO AND THE SUBSIDIARIES
SECTION 6.01. Cooperation. Each of AerCo and the Subsidiaries shall at all
times reasonably cooperate with the Servicer to enable the Servicer to provide
the Services, including providing the Servicer with all powers of attorney or
other required documentation as may be reasonably necessary or appropriate to
perform the Services.
SECTION 6.02. No Representation with Respect to Third Parties. Each of
AerCo and the Subsidiaries agrees that as between the Servicer, on the one hand,
and any Person within AerCo Group, on the other hand, no representation is made
as to the financial condition and affairs of any Lessee of, or purchaser of, any
Aircraft Asset or any vendor or supplier utilized by the Servicer in connection
with its performance of the Services.
SECTION 6.03. Related Document Amendments. Each of AerCo and the
Subsidiaries shall not take any action that would increase in any material
respect the scope, nature or level of the Services to be provided under this
Agreement or that would affect the Servicer's rights, obligations or liabilities
(or potential liabilities) under this Agreement or with respect to the Cash
Management Agreement or otherwise, in each case without the Servicer's prior
written consent.
SECTION 6.04. Other Services. Except as provided in this Agreement without
the prior written consent of the Servicer, AerCo and the Subsidiaries shall not:
(a) enter into, or cause or permit any Person (other than the Servicer) to
enter into on their behalf, any transaction for the lease or sale of any
Aircraft
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Asset in respect of which the Servicer is at such time performing Services,
except and only to the extent expressly permitted by the terms of this
Agreement; or
(b) employ any Person other than the Servicer to perform any of the
Services.
SECTION 6.05. Ratification. Each of AerCo and the Subsidiaries hereby
ratifies and confirms and agrees to ratify and confirm whatever the Servicer
does in accordance with this Agreement in the exercise of any of the powers or
authorities conferred upon the Servicer under the terms of this Agreement.
SECTION 6.06. Execution, Amendment, Modification or Termination of Aircraft
Assets Related Documents. No later than ten Business Days after the date that
(i) any agreement, instrument or other document becomes an Aircraft Assets
Related Document or (ii) any Aircraft Assets Related Document shall have been
amended, modified or terminated, AerCo shall deliver written notice thereof to
the Servicer together with (A) in the case of any newly executed Aircraft Assets
Related Document, a true and complete copy of such Aircraft Assets Related
Document, a list of all Aircraft Assets to which it relates and a description,
in reasonable detail, of the relevance of such Aircraft Assets Related Document
to such assets or (B) in the case of any amendment, modification or termination,
a true and complete copy of the agreement, instrument or other document as so
amended, modified or terminated; provided however, that such notice or such
document shall not be required to be delivered if the Servicer was substantially
involved in the preparation and execution of such new, amended, modified or
terminated agreement, instrument or other document. The Servicer shall not be
obligated to perform any Services with respect to or in accordance or connection
with any Aircraft Assets Related Document or any amendment, modification or
termination thereof unless and until AerCo shall have provided it with a copy
thereof in accordance with the foregoing sentence.
SECTION 6.07. AerCo Group Accounts and Cash Arrangements. AerCo shall
promptly notify the Servicer of any new bank or similar account established by
or on behalf of AerCo or any of the Subsidiaries or otherwise relating to the
Aircraft Assets and of any such account relating to any Aircraft Assets that
become Aircraft Assets after the date of this Agreement and the closing of any
such account. No Person within AerCo Group shall modify any arrangement with
respect to any bank or similar account or the flow of cash in connection with
the Aircraft Assets other than in accordance with the Cash Management Agreement.
SECTION 6.08. Notification of Bankruptcy. If any of AerCo or the
Subsidiaries shall consider taking any action to:
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(a) file any petition or application, commence any proceeding, pass any
resolution or convene a meeting with respect to itself or any of its Affiliates
under any United States Federal, State or foreign or international law relating
to the appointment of a trustee in bankruptcy, liquidator or receiver with
respect to any of AerCo or the Subsidiaries or over the whole or any part of any
properties or assets of any of AerCo or the Subsidiaries or any bankruptcy,
reorganization, compromise arrangements or insolvency of any of AerCo or the
Subsidiaries; or
(b) Make an assignment for the benefit of its creditors generally;
then AerCo shall notify the Servicer, to the extent practicable, of such
consideration a reasonable period of time prior to taking any such action, but
in any event, prior to taking any such action (it being understood that the
foregoing notice requirement shall not be construed to prohibit or restrain the
taking of any action described in (a) or (b) above). If any of AerCo or the
Subsidiaries becomes aware of the intent or action of any Person (whether a
creditor or member of any of AerCo or the Subsidiaries) to appoint a trustee in
bankruptcy, liquidator or receiver, AerCo shall promptly notify the Servicer.
SECTION 6.09. Further Assurances. Each of AerCo and the Subsidiaries
agrees that at any time and from time to time upon the written request of the
Servicer, that it will execute and deliver such further documents and do such
further acts and things as the Servicer may reasonably request in order to
effect the purposes of this Agreement.
SECTION 6.10. Communications. (a) Upon the occurrence of any change in the
officers, directors or shareholders of any Person within the AerCo Group, AerCo
shall provide prompt written notice thereof to the Servicer.
(b) Each of AerCo and each other Person within the AerCo Group shall, and
shall cause the Administrative Agent and the Cash Manager to, forward promptly
to the Servicer a copy (or, if such communication is oral, notify the Servicer
by prompt written notice) of any communication received from any Person which
relates to the Services to be provided with respect to any Aircraft Asset.
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ARTICLE 7
AERCO GROUP RESPONSIBILITY; BUDGETS
SECTION 7.01. AerCo Group Responsibility. Notwithstanding the appointment
of the Servicer to perform the Services and the related delegation of authority
and responsibility to the Servicer pursuant to this Agreement, each of AerCo and
the Subsidiaries shall remain responsible for all matters related to its
business, operations, assets and liabilities.
SECTION 7.02. Instructions by AerCo Group. If AerCo, by majority vote of
the Directors, determines that an action being taken by the Servicer under this
Agreement is not in the best interests of the AerCo Group, then AerCo may
deliver written notice to the Servicer directing the Servicer to limit or
terminate such action or to take other action authorized or contemplated by this
Agreement (including leases, sales or disposals of any Aircraft Asset) or the
applicable Lease which is described in reasonable detail in such notice and,
upon receipt of such written notice, the Servicer shall comply with the terms
thereof.
SECTION 7.03. Request for Authority. (a) Subject to Section 7.03(b), if
the Servicer wishes to take or approve any action which it is not expressly
authorized under this Agreement to take or approve, it shall request authority
from AerCo to take or approve the action. The Servicer's request for authority
shall be in writing, and shall include a reasonably detailed explanation of the
reason for the request. If on or prior to the earlier of (i) the last day for a
response by AerCo as specified by the Servicer in its request (being not less
than 5 Business Days after the request) or (ii) the day following the next
meeting of the Directors following the request, AerCo does not expressly refuse
such request, the Servicer may be deemed to be authorized in writing to take or
to approve such action on behalf of AerCo Group following notification in
writing to AerCo of the Servicer's intention to proceed in accordance with its
request.
(b) If the Servicer reasonably determines that an action to protect the
interests of AerCo Group is required before the expiration of the relevant time
period specified in Section 7.03(a), then the Servicer shall notify the
Directors of such determination and, unless otherwise directed by the Directors,
the action proposed may be deemed to be authorized in writing on behalf of AerCo
Group following notification in writing to AerCo of Servicer's intention to
proceed in accordance with its request.
(c) In relation to each payment required to be made in relation to an
Aircraft Asset and not authorized under any other provision of this Agreement,
the Servicer will submit a certificate to the Administrative Agent with a copy
to
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the Directors giving reasonable details and confirming that any required
authorization for such payment pursuant to this Agreement has been obtained.
SECTION 7.04. Operating Budget; Aircraft Asset Expenses Budget. (a) AerCo,
on behalf of AerCo Group, shall adopt with respect to the Initial Periods, each
one Year period (a "ONE YEAR PERIOD") and each three Year period (a "THREE YEAR
PERIOD" and, together with a One Year Period, each a "PERIOD") during the term
of this Agreement, the following proposed budgets which are to be prepared by
the Administrative Agent on behalf of AerCo:
(i) a separate lease operating budget with respect to the Aircraft
Assets distinguishing between cash and non-cash items (an "OPERATING
BUDGET"); and
(ii) a separate budget with respect to Aircraft Asset Expenses related
to the Aircraft Assets distinguishing between cash and non-cash items (an
"ASSET EXPENSES BUDGET").
(b) The initial Operating Budget for the period from the first Delivery
Date through June 30, 1999 (the "ONE YEAR INITIAL PERIOD") and through June 30,
2001 (the "THREE YEAR INITIAL PERIOD" and, together with the One Year Initial
Period, the "INITIAL PERIODS"), and the initial Asset Expenses Budget for the
One Year Initial Period and the Three Year Initial Period shall be substantially
in the forms attached hereto as Schedule 7.04(b)(1) and 7.04(b)(2), (the
"INITIAL APPROVED BUDGETS"). The forms for the Operating Budget and Asset
Expenses Budget for future Years may be modified with the consent of the
Servicer, which consent shall not be unreasonably withheld.
(c) Operating Budgets and Asset Expenses Budgets for each Period during the
term of this Agreement shall be adopted by AerCo Group in accordance with
Section 7.04(a).
(d) The Servicer shall use reasonable commercial efforts to manage the
Aircraft Assets in accordance with this Agreement so as to achieve the Initial
Approved Budget and the Approved Budget for any Period; provided that the
Servicer shall have no liability for any Losses that may be imposed on, incurred
by or asserted against any Indemnified Party arising out of a failure by the
Servicer to achieve either the Initial Approved Budgets or the Approved Budget
for any Period.
(e) In respect of each Period during the term of this Agreement after the
Initial Periods, the Administrative Agent shall prepare, and deliver to AerCo no
later than 30 days immediately preceding the commencement of each Year, a
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proposed Operating Budget and a proposed Asset Expenses Budget for such Period
together with reasonably detailed supporting information and the assumptions
underlying such proposed Operating Budget and Asset Expenses Budget. The
proposed Operating Budget and Asset Expenses Budget for each Year shall include
the Approved Budget Target, and shall supercede prior years' budgets.
(f) In connection with AerCo's approval of such proposed Operating Budget
and Asset Expenses Budget for each Period, the Servicer shall provide AerCo and
the Administrative Agent, not later than 90 days immediately preceding the
commencement of each Year, information on a monthly basis in a form to be agreed
relating to (i) Aircraft lease rates, (ii) Aircraft downtime, (iii) direct
technical expenditures (including any costs to be capitalized) relating to the
Aircraft Assets, (iv) indirect costs relating to insurance, legal, consulting
and other similar expenses and (v) such other Aircraft Assets expense-related
information (including, in the case of the Asset Expenses Budget for any One
Year Period, an estimate of the Technical Management Expenses to be incurred
during such Period (such estimate, the "TECHNICAL MANAGEMENT EXPENSES RESERVE
AMOUNT")) as may be reasonably required to prepare such budgets, in each case
including the assumptions relating thereto. The Servicer will cooperate in good
faith with the Administrative Agent to answer the Administrative Agent's
inquiries with respect to the above items and other items in connection with
preparation of the Operating Budget and the Asset Expenses Budget. The
Administrative Agent shall prepare such proposed Operating Budget and Asset
Expenses Budget and shall, where reasonable, incorporate, use and rely upon the
information and assumptions provided by the Servicer.
(g) AerCo shall have the right during the 20-day period following its
receipt of the Administrative Agent's proposed Operating Budget and Asset
Expenses Budget to express any objections it may reasonably have to the
Administrative Agent's proposed Operating Budget and Asset Expenses Budget.
During such 20-day period, AerCo (which shall also consult with the Servicer)
and the Administrative Agent shall consult in good faith to agree on a final
Operating Budget and Asset Expenses Budget for each applicable One Year Period
and Three Year Period. The Servicer shall have the right to attend and
participate in any meetings of the Directors held for the purpose of considering
and approving the final Operating Budget and Asset Expenses Budget for each
applicable One Year Period and Three Year Period. Not later than the 10 days
immediately preceding the commencement of each Year, the Board shall adopt a
final Operating Budget and Asset Expenses Budget for each applicable One Year
Period and Three Year Period which shall, where reasonable, incorporate, use and
rely upon the information and assumptions by the Servicer (the "APPROVED
BUDGET").
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(h) If at any time the Servicer reasonably believes that the incurrence of
any Aircraft Asset Expense is reasonably likely to result in the actual
aggregate Aircraft Asset Expenses of the same category as such Aircraft Asset
Expense (taking into account all Aircraft Asset Expenses of such category
incurred to date) exceeding 120% of the line item amount included in the then
applicable Approved Budget for such Year for such category of Aircraft Asset
Expenses, the Servicer shall not incur such Aircraft Asset Expense without the
prior notification of the Administrative Agent. In connection with the
foregoing, the Servicer may request that the related line item amount included
in the then applicable Approved Asset Expenses Budget be increased to the
reasonably anticipated level of Aircraft Asset Expenses in such category for the
balance of the Period.
(i) If, at any time during any Period, AerCo, in its reasonable opinion,
determines that any Changed Circumstance shall have occurred and be continuing,
AerCo may notify the Servicer that such Changed Circumstance has occurred, and
the Administrative Agent and AerCo may modify the Approved Budget in a manner
reasonably necessary or appropriate to reflect such Changed Circumstance,
provided that any such modification shall not become effective unless and until
AerCo shall have given the Servicer at least 15 days prior written notice of
such modification, provided further that during the 15 day period following the
effectiveness of such notice, the Servicer shall have the opportunity to express
any objections it may reasonably have to the proposed modification and AerCo
shall negotiate in good faith with the Servicer to agree on such modification
(it being understood that AerCo shall not be obligated to alter its proposed
modification). In addition, if AerCo notifies the Servicer that a Changed
Circumstance has occurred, then upon the request of AerCo, the Servicer shall
develop, in consultation with AerCo, within the 30 days following such request,
an extraordinary plan (an ("EXTRAORDINARY PLAN"). The Servicer shall implement
such Extraordinary Plan.
(j) Notwithstanding the foregoing, the Approved Budgets shall not be
modified in any manner (including pursuant to an Extraordinary Plan) unless: (i)
AerCo Group shall have funds available to satisfy fully any financial obligation
that may arise from compliance with such modification; (ii) such modification
shall be consistent with, and shall not in any manner reduce, limit or
circumscribe, the delegation to the Servicer pursuant to this Agreement of a
practicable and workable level of autonomy, authority and responsibility with
respect to the performance of the Services; and (iii) such modification shall be
consistent with the express terms of this Agreement and any Aircraft Assets
Related Document then applicable to any of the Aircraft Assets.
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SECTION 7.05. Transaction Approval Requirements. (a) Consistent with the
overall business objectives of AerCo Group with respect to the Aircraft Assets,
and with the delegation to the Servicer by AerCo Group of a practicable and
workable level of autonomy, responsibility and authority regarding the
performance of the Services, the Servicer shall not do any of the following
without the express prior written approval of AerCo:
(i) except as required in accordance with the terms of any Lease
existing as of the date hereof, sell (or enter into any agreement to sell)
or otherwise dispose of any Aircraft or any engine forming part of the
Aircraft Assets;
(ii) enter into any new Lease (or any renewal or extension of an
existing Lease) of an Aircraft Asset if such Lease shall not comply with
the covenants of the Indenture (as summarized or set forth in Annex 2
hereto) and any amendments, modifications or supplements thereto or such
other covenants specifically relating to Leases as AerCo shall identify to
the Servicer in writing and provide the Servicer with copies thereof;
(iii) terminate any Lease or Leases to any single Lessee or related
Lessees with respect to any Aircraft having an aggregate depreciated net
book value on the books of the relevant Person in AerCo Group in excess of
$100,000,000;
(iv) unless provided for in the then current Approved Budget, enter
into any contract for the modification or maintenance of any Aircraft (A)
if the costs to be incurred thereunder by AerCo Group exceed the greater of
(1) the estimated aggregate cost of a heavy maintenance "D" check for the
airframe and the equivalent for engines for Aircraft of the type in
question and (2) the amount of the available maintenance reserve or other
collateral under the applicable Lease or (B) if such modification or
maintenance shall be outside the ordinary course of AerCo Group's business;
(v) enter into on behalf of AerCo or any of the Subsidiaries, any
capital commitment or confirm any order or commitment to acquire, or
acquire on behalf of AerCo Group, Aircraft or engines with any aircraft or
engine manufacturers or other third party;
(vi) issue any guarantee on behalf of, or otherwise pledge the credit
of any Person within AerCo Group other than guarantees by a member of AerCo
Group of the Lease obligations of another member of
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AerCo Group and other than with respect to trade payables in the ordinary course
of AerCo Group's business;
(vii) enter into any agreement for a particular service costing in
excess of $50,000 for such service to be provided in respect of Aircraft
Assets by third parties, the cost of which is to be borne by AerCo Group,
except in each case to the extent that the same is an Aircraft Asset
Expense provided for in the then applicable Approved Budget; or
(viii) on behalf of any Person within AerCo Group enter into, amend or
grant a waiver with respect to any transaction with the Servicer or any of
its Affiliates including without limitation for the acquisition, sale or
lease of any Aircraft Assets from or to, or the obtaining or provision of
services by, any such Person.
(b) Any transaction entered into by the Servicer on behalf of AerCo Group
(other than with Persons within AerCo Group) shall be on an arm's length basis
and on fair market value terms, unless otherwise agreed by AerCo Group or
directed by AerCo Group in accordance with Section 7.02.
(c) The transaction approval requirements (the "TRANSACTION
APPROVAL REQUIREMENTS") set forth in this Section 7.05 may only be amended by
mutual agreement of the parties, and shall not in any event be amended to reduce
or circumscribe the delegation to the Servicer of the level of autonomy,
authority and responsibility contemplated by the Transaction Approval
Requirements with respect to the performance of the Services.
SECTION 7.06. Approved Budgets and Transaction Approval Requirements.
Except as set forth in Section 7.05(a), no transaction entered into by the
Servicer on behalf of any Person within the AerCo Group in connection with the
performance by the Servicer of the Services shall require the approval of any
Person within the AerCo Group or their respective Directors or committees
thereof;
ARTICLE 8
EFFECTIVENESS
Section 8.01. Effectiveness. The effectiveness of this Agreement and all
obligations of the parties hereunder with respect to each Aircraft Asset shall
be conditioned upon:
(a) the occurrence of the Delivery Date of such Aircraft Asset, and
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(b) with respect to AerCo, the Servicer and the entities listed on
Appendix A to this Agreement, the execution hereof by those parties.
ARTICLE 9
SERVICING FEES; EXPENSES
Section 9.01. Servicing Fees. In consideration of the Servicer's
performance of the Services, AerCo shall pay to the Servicer servicing fees
consisting of the fees set forth below (collectively, the "SERVICING FEES"):
(a) Section 9.02 (the "RETAINER FEE");
(b) Section 9.03 (the "RENTAL FEE");
(c) Section 9.04 (the "INCENTIVE FEE"); and
(d) Section 9.05 (the "BASE SALES FEE" and the "SALES INCENTIVE FEE",
together, the "SALES FEES").
SECTION 9.02. Retainer Fee. (a) A Retainer Fee of ten basis points per
annum of the Initial Appraised Value of the Aircraft will be payable to the
Servicer monthly in arrears in twelve equal installments on or before the
Payment Date in the succeeding month. Ten percent (10%) of such Retainer Fee
will relate to the provision of technical services under Section 1.02 of
Schedule 2.02(a) to this Agreement.
(c) If and to the extent an Aircraft is sold, the Initial Appraised Value
of the Aircraft on which the Retainer Fee is calculated will be reduced by the
Initial Appraised Value of such Aircraft; provided that, solely for purposes of
calculating the Retainer Fee, the Initial Appraised Value shall not be reduced
below $250 million unless and until all of the Aircraft shall have been sold.
SECTION 9.03. Rental Fee. Subject to the provisions of Section 10.01, a
Rental Fee shall be payable for each month during the term of this Agreement by
AerCo to the Servicer equal to 1.00% (the "RENTAL FEE PERCENTAGE") of the
aggregate amount of the "RENT" (as defined in each Lease) actually paid by each
Lessee in such month or portion of a month the related Aircraft (and Additional
Aircraft in the event the Servicer has been appointed to provide the Services to
such Additional Aircraft) is owned by AerCo Group. All payments of the Rental
Fee shall be payable in arrears on the Payment Date immediately preceding the
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commencement of the second month following each such month or portion of month.
SECTION 9.04 Incentive Fee. (a) An Incentive Fee shall be payable during
the term of this Agreement by AerCo to the Servicer for the Initial Period and
each twelve month period (or other shorter fiscal period as agreed by the
parties) thereafter (each an "INCENTIVE PERIOD") in the event that certain pre
agreed financial targets are met or exceeded by AerCo in respect of any
Incentive Period. The Servicer and AerCo agree to negotiate in good faith prior
to the commencement of each Incentive Period in order to agree on a formula for
calculating the Incentive Fee, with the objective that, in the event that AerCo
meets the Approved Budget Target, the Incentive Fee will represent 30% of the
total fees (to include the Retainer Fee, the Rental Fee and the Incentive Fee)
which the Servicer receives in respect of such Incentive Period. In the event
that the Servicer and AerCo cannot agree on a formula for calculating the
Incentive Fee in respect of any Incentive Period, then the Incentive Fee shall
be an amount equal to (a) 12.5% multiplied by (b) the amount (if any) by which
the actual revenues available to repay holders of AerCo's publicly and privately
issued debt securities for such Year shall have exceeded 95% of the Approved
Budget Target. "APPROVED BUDGET TARGET" for any Year shall be determined
annually by AerCo reasonably, consistently and in good faith following
discussions with the Servicer and review of and reliance on the information
provided by the Servicer in the Operating Budget and the Asset Expenses Budget.
All payments of Incentive Fee shall be payable in arrears on the Payment Date
immediately preceding the thirteen month anniversary of the beginning of any
Year.
(b) In the event that Changed Circumstances have resulted in a
modification of the Approved Budget and of the Approved Budget Target, then the
Servicer and AerCo will modify the formula for calculating the Incentive Fee in
such a manner as to provide the Servicer with an opportunity to earn an
Incentive Fee of no less than the Incentive Fee that would have resulted from
achievement of the Approved Budget Target, provided that the Changed
Circumstances that have been the cause of the modification to the Approved
Budget have not resulted directly from actions by the Servicer in the management
of the Aircraft Assets.
SECTION 9.05. Sales Fees. (a) A Base Sales Fee shall be payable by AerCo to
the Servicer at any time during the term of this Agreement on the actual date of
sale of any of the Aircraft in the amount of (i) 1.25% multiplied by (ii) the
Target Sales Price for the sale of any Aircraft, net of transaction expenses,
provided that no Base Sales Fee shall be payable with respect to a sale in
connection with a refinancing, restructuring, reorganization or tax based
financing with respect to AerCo Group or the Aircraft if, after such sales, the
Servicer (i)
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remains as Servicer of such Aircraft; (ii) continues to receive a Retainer Fee
and a Rental Fee with respect to such Aircraft; and (iii) remains eligible to
earn a Base Sales Fee and a Sales Incentive Fee with respect to such Aircraft in
the future. "TARGET SALES PRICE" means, with respect to a sale of any Aircraft,
an amount initially equal to 90% of the Initial Appraised Value of the relevant
Aircraft, such valuations, in accordance with the appraisals of the Aircraft, to
be adjusted annually by AerCo, subject to any restrictions imposed by any
indenture or similar agreement binding AerCo Group. To the extent that the Net
Cash Proceeds from a sale exceed the Target Sales Price, then transaction
expenses shall not be deducted from the Target Sales Price for the purpose of
calculating the Base Sales Fee but will be deductible from the Net Cash Proceeds
for the purpose of calculating the Sales Incentive Fee.
(b) A Sales Incentive Fee shall be payable by AerCo to the Servicer at any
time during the term of this Agreement on the actual date of sale of any of the
Aircraft equal to (i) 10.0% multiplied by (ii) Net Gains earned on the sale of
any Aircraft. "NET GAINS" means, with respect to the sale of any Aircraft, the
amount (not less than zero) of the Net Cash Proceeds in excess of the Target
Sales Price in connection with such sale, provided that no Sales Incentive Fee
shall be payable with respect to a sale in connection with a refinancing,
restructuring, reorganization or tax based financing if, after such sale, the
Servicer; (i) remains as Servicer of such Aircraft; (ii) continues to receive a
Retainer Fee and a Rental Fee from such Aircraft; and (iii) remains eligible to
earn a Sales Fee and a Sales Incentive Fee from such Aircraft in the future.
"NET CASH PROCEEDS" means the gross cash proceeds of any sale of Aircraft net of
any break funding gains or losses directly associated with the sale of such
Aircraft and transaction costs (including transaction taxes and Servicer's
out-of-pocket expenses) and brokerage commissions.
SECTION 9.06. Expenses. (a) The Servicer shall be responsible for, and
shall not be entitled to reimbursement for, the Servicer's overhead expenses
("OVERHEAD EXPENSES") which shall include, without limitation:
(i) salary, bonuses and benefits of the Servicer's employees;
(ii) travel and entertainment expenses of the Servicer's employees;
(iii) office, office equipment and rental expenses other than those
incurred by third-party independent advisors hired in relation to the Aircraft;
(iv) telecommunications expenses;
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(v) advertising and promotional expenses;
(vi) legal fees and costs, other than those relating to (A) local law,
jurisdictional and tax issues, (B) the provision of legal opinions, (C)
enforcement actions, (D) litigation or (E) other matters outside the
ordinary course of business, but including, for the avoidance of doubt, the
costs associated with providing the legal services set out in Section
7.01(a) of Schedule 2.02(a);
(vii) taxes on the income, receipts, profits, gains, net worth or
franchise of the Servicer and payroll, employment and social security taxes
for employees of the Servicer;
(viii) costs of negotiating and managing the insurance arrangements
for each Aircraft Asset under the Leases, in connection with sales of
Aircraft Assets or otherwise, including all insurance renewals; and
(ix) costs in respect of technical management services provided with
respect to any Aircraft Assets as set forth in Section 1.02 of Schedule
2.02(a) (other than any such costs described in clause(b)(i) below).
(b) AerCo Group shall be responsible for all costs and expenses
relating to or associated with the Aircraft Assets other than Overhead Expenses,
("AIRCRAFT ASSET EXPENSES") which shall include, without limitation:
(i) storage, maintenance, fees and expenses in connection with
non-ordinary course technical management services, repossession (whether or
not successful) and repair expenses (all the foregoing fees and expenses,
"TECHNICAL MANAGEMENT EXPENSES") and reconfiguration and refurbishment
expenses related to Aircraft Assets, including, in each case, any expenses
incurred by the Servicer relating to compliance with airworthiness
directives and service bulletins, which includes the fees and expenses of
independent technicians and other experts (in each case as approved by the
Administrative Agent on behalf of AerCo, except in the case of any
Technical Management Expenses to the extent that the aggregate amount of
such expenses incurred during the applicable One Year Period does not
exceed the Technical Management Expenses Reserve Amount for such One Year
Period) retained for any of the foregoing purposes;
(ii) insurance expense related to Aircraft Assets, including all fees
and expenses of insurance advisors and brokers;
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(iii) fees and expenses of third-party independent advisors' in
relation to the Aircraft and approved by the Administrative Agent on behalf
of AerCo;
(iv) outside legal counsel fees and expenses and other professional
expenses related to the Aircraft Assets in connection with the provision of
advice on local law, jurisdictional and tax issues, the provision of legal
opinions, enforcement actions, litigation and other matters outside the
ordinary course of business; and
(v) third-party fees and expenses incurred in connection with the
negotiation and execution of this Agreement and any amendments thereto, the
preparation of the Offering Memorandum, any Notes Offering, any financing,
restructuring or re-financing efforts, any SEC-registered public offering
and any disclosure in public filings.
(c) The Servicer shall use commercially reasonable efforts to ensure that
Aircraft Asset Expenses shall be paid directly by the Person within AerCo Group
that owns the relevant Aircraft Assets. In the event that AerCo does not approve
the payment of any Aircraft Asset Expense, the Servicer shall be entitled to
make such payment on behalf of AerCo Group and to the extent the Servicer does
so, the funds so advanced ("REIMBURSABLE EXPENSES") shall be repaid by AerCo to
the Servicer in accordance with paragraph (b) of this Section 9.06, provided
that:
(i) the Servicer believes that failure to make such payment is
reasonably likely to prejudice or otherwise adversely affect the Servicer
or its Affiliates' business relationship with the relevant payee;
(ii) the relevant Aircraft Asset Expense (when added to all the
Aircraft Asset Expenses of the same category incurred to date during such
Year) shall not exceed 120% of the line item amount in the applicable
Approved Asset Expenses Budget for such Year or the Asset Expense shall
otherwise have been approved by AerCo; and
(iii) the Servicer shall have contracted for or otherwise committed
for such Aircraft Asset Expense prior to such time.
(d) Reimbursable Expenses shall be payable by AerCo to the Servicer
reasonably promptly following the payment of such Reimbursable Expenses by the
Servicer.
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ARTICLE 10
TERMS; RIGHTS TO TERMINATE; CONSEQUENCES OF TERMINATION; SURVIVAL
SECTION 10.01. Term. This Agreement shall expire on the tenth anniversary
of the Closing Date; provided that AerCo shall have the right, upon not less
than six months' written notice to the Servicer and subject to an increase in
the Rental Fee Percentage as set forth on Schedule 10.01, to extend the term of
this Agreement to the twenty-fifth anniversary of the Closing Date. During such
term, this Agreement shall not be terminable by either party except as expressly
provided in this Article 10.
SECTION 10.02. Right to Terminate. (a) At any time during the term of this
Agreement, AerCo and the Subsidiaries by a majority vote of the Directors shall
in accordance with this Section 10.02(a) be entitled to terminate this Agreement
with respect to one or more of the Aircraft if:
(i) the Servicer shall materially breach any of its obligations under
this Agreement and, after written notice from AerCo, the Servicer has
failed to cure such breach pursuant to Section 10.02(d); or
(ii) the Servicer ceases, or the Servicer gives notice that it intends
to cease, to be actively involved in the aircraft advisory and management
business; or
(iii) all of the public or private debt securities of AerCo are
repaid, refinanced or defeased in full in accordance with the terms of any
indenture or similar agreement binding AerCo; or
(iv) a Change of Control of the Servicer has occurred. A "CHANGE OF
CONTROL" will be deemed to have occurred at such time as either (A) any
Person or any Persons acting together that would constitute a "group" (a
"GROUP") for purposes of Section 13(d) of the Securities Exchange Act of
1934, or any successor provision thereto, together with any Affiliates or
Related Persons thereof, shall beneficially own (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, or any successor provision
thereto) at least 50% of the aggregate voting power of all classes of
voting stock of the Servicer, or (B) any Person or Group, together with any
Affiliates or Related Persons thereof, shall succeed in having a sufficient
number of its nominees elected to the Board of Directors of the Servicer
such that such nominees, when added to any existing director remaining on
the Board of Directors of the Servicer after such election who was a
nominee of or is an Affiliate or Related Person of
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such Person or Group, will constitute a majority of the Board of Directors of
the Servicer; provided that any event described in clause (A) or (B) above will
not constitute a "CHANGE OF CONTROL" where the relevant Person or Group,
together with any relevant Affiliates or Related Persons, consists exclusively
of the Servicer, any Affiliate or any Person who is an officer, director
shareholder, employee or partner of the Servicer or any Affiliate (or an entity
controlled by any of the foregoing) as of the date of this Agreement. A "RELATED
PERSON" of any Person means any other Person directly or indirectly owning (A)
5% or more of the outstanding common stock of such Person, (or, in the case of a
Person that is not a corporation, 5% or more of the equity interest in such
Person) or (B) 5% or more of the combined voting power of the voting stock of
such Person;
(v) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking relief in respect of
the Servicer or in respect of a substantial part of the property or assets of
the Servicer, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other U.S. Federal or state or foreign bankruptcy,
insolvency, receivership or similar law, and such proceeding or petition shall
continue undismissed for 100 days or an order or decree approving or ordering
any of the foregoing shall be entered or the Servicer shall go into liquidation,
suffer a receiver or mortgagee to take possession of all or substantially all of
its assets or have an examiner appointed over it or if a petition or proceeding
is presented for any of the foregoing and not discharged within 100 days; or the
Servicer shall (A) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other U.S. Federal or state or foreign bankruptcy,
insolvency, receivership or similar law, (B) consent to the institution of, or
fail to contest the filing of, any petition described in clause (A) above, (C)
file an answer admitting the material allegations of a petition filed against it
in any such proceeding, or (D) make a general assignment for the benefit of its
creditors;
(vi) upon six months' written notice, or upon shorter written notice
provided that the Servicer is paid the Retainer Fee, the Rental Fee (based on
Rent budgeted to be received) and the Incentive Fee (based on achievement of the
Approved Budget Target) for a six-month period after written notice of
termination is received, and the payment of the Termination Fee set forth in
Section 10.02(e) below; or
(vii) upon six months' written notice, or upon shorter written notice
provided that the Servicer is paid the Retainer Fee, the Rental Fee
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(based on Rent budgeted to be received) and the Incentive Fee (based on
achievement of the Approved Budget Target) for a six-month period after
written notice of termination is received, and the payment of an amount
equal to 50% of the Termination Fee set forth in Section 10.02(e) below,
it, at any time, either:
(A) the Servicer or any of its Affiliates is retained by an
entity or group of entities that are Affiliates (other than AerCo and
the Subsidiaries) to service a fleet of commercial jet aircraft on or
available for lease having an aggregate appraised value exceeding the
lesser of (x) $3.5 billion and (y) the amount which, at the time the
Servicer or any such Affiliate is so retained, represents 50% or more
(by appraised value) of all commercial jet aircraft serviced by the
Servicer and its Affiliates (including such fleet and the Aircraft
serviced by the Servicer) at the time of such retention; or
(B) the Servicer or any of its Affiliates acquires or makes an
equity investment or its equivalent (including an investment
representing an interest in the residual value of aircraft) in any
aircraft portfolio, securitization vehicle or other entity or group of
Affiliated entities that owns or leases commercial jet aircraft on or
available for lease serviced by the Servicer or any of its Affiliates
where (x) such investment represents more than 20% (by value) of the
total equity (including any interest in the residual value of
aircraft) of such aircraft portfolio, securitization vehicle or other
entity or group of entities and (y) the appraised value of the
relevant aircraft portfolio exceeds the lesser of (1) $2.5 billion and
(2) the amount which, at the time such investment is made, represents
35% or more (by appraised value) of all commercial jet aircraft
serviced by the Servicer and its Affiliates (including such aircraft
portfolio and the Aircraft Assets serviced by the Servicer) at the
time such investment is made.
The Servicer agrees to provide AerCo with written notice of any event
described in clause (A) or (B) above within 60 days of its occurrence.
(b) Subject to the following conditions, at any time during the term of
this Agreement, AerCo and the Subsidiaries by a majority vote of the Directors
shall, in accordance with this Section 10.02(b) be entitled to terminate this
Agreement in respect of any Aircraft to which one or more of the following
conditions apply:
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(i) in the case of marketing for re-lease of Aircraft, such Aircraft
has been off-lease and is reasonably available for re-lease for more than
180 days after expiry of the agreed lease marketing period; or
(ii) the Servicer fails, within a reasonable period of time (not to
exceed 180 days), to submit to AerCo a bona fide third party offer to
purchase an Aircraft after written direction from AerCo to arrange such a
sale; or
(iii) the Servicer recommends a course of action in respect of an
Aircraft Asset to AerCo which AerCo does not approve and, after negotiation
in good faith, the Servicer refuses to amend, withdraw or replace such
recommendation with one that is consistent with the performance of the
Services pursuant to this Agreement.
(c) At any time during the term of this Agreement, the Servicer shall in
accordance with this Section 10.02(c) be entitled to terminate this Agreement
if:
(i) AerCo shall fail to pay in full when due (A) any Servicing Fees
within five Business Days after the effectiveness of written notice from
the Servicer of such failure or (B) any other amount payable by any Person
within AerCo Group hereunder or under other Operative Agreement, within ten
Business Days after the effectiveness of written notice from the Servicer
of such failure; or
(ii) any Person within the AerCo Group shall fail to perform or
observe or shall violate in any material respect any material term,
covenant, condition or agreement to be performed or observed by it in
respect of this Agreement or any other Operative Document (other than with
respect to the payment obligations of AerCo referred to in clause (c)(i) of
this Section 10.02; or
(iii) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking relief
in respect of AerCo or any Subsidiary or in respect of a substantial part
of the property or assets of AerCo or any Subsidiary under Title 11 of the
Unites States Code, as now constituted or hereafter amended, or any other
U.S. Federal or state or foreign bankruptcy, insolvency, receivership or
similar law, and such proceeding or petition shall continue undismissed for
100 days or an order or decree approving or ordering any of the foregoing
shall be entered or AerCo or any Subsidiary shall go into liquidation,
suffer a receiver or mortgagee to take possession of all or substantially
all of its assets or have an examiner appointed over it
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or if a petition or proceeding is presented for any of the foregoing and
not discharged within 100 days; or AerCo or any Subsidiary shall (A)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other U.S. Federal or state or foreign bankruptcy,
insolvency receivership or similar law, (B) consent to the institution of,
or fail to contest the filing of, any petition described in clause (A)
above, (C) file an answer admitting the material allegations of a petition
filed against it in any such proceeding or (D) make a general assignment of
the benefit of its creditors; or
(iv) the Servicer or any of its Affiliates becomes obligated to pay
(or indemnify) Taxes as a result of its provision of the Services, (other
than Taxes on net income derived by the Servicer under this Agreement),
which Taxes it is unable to avoid using reasonable commercial efforts, and
AerCo fails to indemnify the Servicer or its Affiliate for such Taxes; or
(v) the Servicer reasonably determines that directions given by AerCo
or any Subsidiary are, or if carried out would be, unlawful under
Applicable Law.
(d)(i) Either AerCo or the Servicer, as applicable (the "TERMINATING
PARTY") may, at any time during the term of this Agreement, by written notice
("TERMINATION NOTICE") to the other (the "NON TERMINATING PARTY"), set forth its
determination to terminate this Agreement pursuant to this Section 10.02;
provided however, that, except in the case of the right of AerCo to terminate
this Agreement pursuant to Section 10.02(a)(v), this Agreement shall not
terminate until and unless a Replacement Servicer shall have been appointed and
shall have accepted such appointment in accordance with Section 10.03(d);
provided further that failure by the Terminating Party to provide such
Termination Notice shall not affect such party's rights under this Section
10.02. Any Termination Notice shall set forth in reasonable detail the basis for
such termination.
(ii) No later than the fifth Business Day following the effectiveness of
the Termination Notice (the "EFFECTIVENESS DATE"), the Non Terminating Party
shall advise the Terminating Party in writing whether the Non Terminating Party
(A) intends to cure the basis for such termination and, if so, the action it
intends to take to effectuate such cure or (B) does not intend to cure the basis
for such termination (it being understood that failure of the Non Terminating
Party to deliver such notice by such day shall be deemed to constitute notice
that it does not intend to cure the basis for termination). In the event that
the Non Terminating Party notifies (or is deemed to have notified) the
Terminating Party that it does
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<PAGE> 47
not intend to cure the basis for such termination, then this Agreement shall
terminate immediately or on such later date as the Terminating Party shall have
indicated in the Termination Notice. In the event that the Non Terminating Party
notifies the Terminating Party by such fifth day that it intends to cure the
basis for such termination, then the Non Terminating Party shall (A) have 30
days from the Effectiveness Date to effectuate such cure to the satisfaction of
the Terminating Party or (B) if such cure cannot reasonably be expected to be
effectuated within a 30 day period, (1) demonstrate to the satisfaction of the
Terminating Party that substantial progress is being made toward the
effectuation of such cure and (2) effectuate such cure to the reasonable
satisfaction of the Terminating Party no later than the sixtieth day following
the Effectiveness Date. Upon the failure of the Non Terminating Party to
effectuate a cure in accordance with the immediately preceding sentence, this
Agreement shall terminate on the later of (A) the day immediately following the
expiration of such 30 or 60 day period, as the case may be, (B) such later date
as shall be indicated in the Termination Notice or (C) the date as of which a
Replacement Servicer has been engaged to perform the Services with respect to
the Aircraft and has accepted such appointment in accordance with the provisions
of Section 10.03(d).
(e) The Termination Fee shall be calculated as follows:
<TABLE>
<CAPTION>
Termination Fee
(percentage of Initial
Appraised Value as of
Date of Termination: the date of termination):
- -------------------- -------------------------
<S> <C>
On or after 31 March 1998 but prior to 31 March 2001 0.20%
On or after 31 March 2001 but prior to 31 March 2003 0.15%
On or after 31 March 2003 but prior to 31 March 2005 0.10%
Thereafter Nil
</TABLE>
SECTION 10.03. Consequences of Termination. (a) Upon the expiration or
termination of this Agreement in accordance with this Article 10, or upon the
removal of the Servicer with respect to the performance of the Services for any
Aircraft, the Servicer will promptly forward to AerCo any notices, reports and
communications received by it from any relevant Lessee within 30 days after
termination or expiration.
(b) AerCo will notify promptly each relevant Lessee and any relevant third
party of the termination or expiration of the Servicer under this Agreement in
relation to any of the Aircraft and will request that all such notices, reports
and communications thereafter be made or given directly to or as directed by
AerCo.
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<PAGE> 48
(c) A termination or resignation in relation to any or all Aircraft shall
not affect the respective rights and liabilities of either party accrued prior
to such termination in respect of any prior breaches hereof or otherwise.
(d) (i) Upon the expiration or termination of this Agreement in accordance
with this Article 10, or upon the removal of the Servicer with respect to the
performance of the Services for any Aircraft, the Servicer will cooperate with
any Replacement Servicer, including providing all information, documents and
records relating to the Aircraft for a 12 month period following the termination
or expiration.
(ii) this Agreement may not be terminated with respect to the Servicer, in
either case in whole or in part, unless a Replacement Servicer has been
appointed and has accepted such appointment; provided that in the event that a
Replacement Servicer shall not have been appointed within 90 days after the
expiration or termination of this Agreement, or the removal of the Servicer with
respect to the performance of the Services for any Aircraft, the Servicer may
petition any court of competent jurisdiction for the appointment of a
Replacement Servicer.
(e) (i) Upon the termination of this Agreement in accordance with this
Article 10, or upon the removal of the Servicer with respect to the performance
of the Services for any Aircraft, AerCo shall continue to pay the Servicing Fees
and Reimbursable Expenses to the Servicer until a Replacement Servicer shall
have been appointed and shall have accepted such appointment in accordance with
the provisions of Section 10.03(d).
(ii) if a Replacement Servicer is appointed with respect to any Aircraft in
accordance with Section 10.03(d) and during the three-month period following the
effectiveness of such appointment such Aircraft is sold by any Person within
AerCo Group to a customer to whom the Servicer had been actively engaged in
marketing such Aircraft and with whom the Servicer had been engaged in
substantive discussions at any time during the three-month period prior to the
appointment and acceptance of such Replacement Servicer, the Servicer shall be
paid Sales Incentive Fees in respect of such Aircraft as if the Servicer had
arranged for the sale of such Aircraft. Following any such appointment of a
Replacement Servicer, the Servicer will, upon the request of AerCo, provide
AerCo with a list of customers with respect to which the Servicer had been
actively engaged in marketing such Aircraft and with which the Servicer had been
engaged in substantive discussions at any time during such three-month period.
Such list shall be treated as confidential by AerCo and shall not be disclosed
to any person other than the Directors and the Administrative Agent or used for
any
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<PAGE> 49
purpose other than as a basis for determining any Sales Incentive Fees payable
to the Servicer pursuant to the first sentence of this Section 10.03(e)(ii).
(f) Upon the termination of this Agreement in accordance with this Article
10, or upon the removal of the Servicer with respect to the performance of the
Services for any Aircraft, the Servicer shall promptly (but no later than 30
days after the appointment and acceptance of a Replacement Servicer) return the
originals (and all copies) within its possession of all applicable Aircraft
Assets Related Documents and other documents related to the Aircraft Assets to
AerCo and shall provide access to other documentation and information relating
to the business of AerCo Group (and, to the extent practicable, copies thereof)
within its possession as is reasonably necessary to the conduct of AerCo Group's
business.
SECTION 10.04. Survival. Notwithstanding any termination or the expiration
of this Agreement, the obligations of AerCo, and the Subsidiaries under Article
9, Section 10.03, this Section 10.04, Article 11 and Section 13.08 of this
Agreement and the Servicer's obligations or limitations on liability under
Sections 3.03, 10.03, this Section 10.04, Article 11 and Section 13.08, and the
limitations on Servicer's liability under Sections 2.01(c), 2.02, 3.03, 3.04,
5.05, 5.08, 7.04(d), 13.10 and Schedule 2.02(a) shall survive such termination
or expiration, as the case may be.
ARTICLE 11
INDEMNIFICATION
Section 11.01. Indemnity. (a) Notwithstanding anything to the contrary set
forth herein or in any other Operative Agreement, AerCo and the Subsidiaries do
hereby jointly and severally assume liability for, and do hereby jointly and
severally agree to indemnify, reimburse and hold harmless on an After-Tax Basis,
the Servicer, its Affiliates and the Servicer Representatives from any and all
Losses that may be imposed on, incurred by or asserted against any such Person,
directly or indirectly, arising out of, in connection with or related to (i) the
Servicer's performance under this Agreement, errors in judgment or omissions by
the Servicer under this Agreement or any action which the Servicer is requested
to take or requested to refrain from taking by AerCo, or as contemplated by this
Agreement, by the Cash Manager or the Administrative Agent; provided that the
indemnity pursuant to this clause (i) shall not extend to (A) any Loss which is
finally adjudicated to have been caused directly by the negligence,
recklessness, fraud or wilful misconduct of the Servicer in respect of its
obligations to apply the Standard of Care or the Conflicts Standard in respect
of the performance of the
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<PAGE> 50
Services or (B) any other Loss for which the Servicer has agreed to indemnify
AerCo and its Affiliates pursuant to this Agreement or (ii) any of the
circumstances described in clauses (iii) - (vi) of Section 3.03(a).
(b) Any person who may seek indemnification pursuant to Section 3.03 or
Section 11.01(a), (such person the "INDEMNIFIED PARTY") agrees to give the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
prompt notice of any action, claim, demand, discovery of fact, proceeding or
suit for which the Indemnified Party intends to assert a right to
indemnification under this Agreement; provided, however, that failure to give
such notification shall not affect the Indemnified Party's entitlement to
indemnification under this Section 11.01 unless and only to the extent such
failure results in actual irreparable prejudice to the Indemnifying Party.
SECTION 11.02. Procedures for Defense of Claims. (a) If a Third Party
Claim is made against the Indemnified Party, the Indemnified Party shall
promptly notify the Indemnifying Party in writing of such claim (which notice
shall include all relevant information reasonably necessary for the Indemnifying
Party to understand such claim which is in the possession or under the control
of, or can be obtained by, the Indemnified Party at the time of such notice,
subject to Applicable Laws and confidentiality obligations), and the Indemnified
Party or the Indemnifying Party (as agreed between them) will undertake the
defense thereof. The failure to notify the Indemnifying Party promptly shall not
relieve the Indemnifying Party of its obligations under Section 3.03 or Section
11.01(a) unless such failure results in actual prejudice to the Indemnifying
Party.
(b) If agreed and accepted by the Indemnified Party, the Indemnifying Party
shall within 30 days, undertake the conduct and control, through counsel of its
own choosing (subject to the consent of the Indemnified Party, such consent not
to be unreasonably withheld or delayed) and at the Indemnifying Party's sole
risk and expense, the good faith settlement or defense of such claim, and the
Indemnified Party shall cooperate fully with the Indemnifying Party in
connection therewith; provided that (i) at all times the Indemnified Party shall
be entitled to participate in such settlement or defense through counsel chosen
by it, and the fees and expenses of such counsel shall be borne by the
Indemnified Party, and (ii) the Indemnifying Party shall not be entitled to
settle such claims unless it shall have confirmed in writing the obligation of
the Indemnifying Party to indemnify the Indemnified Party for the liability
asserted in such claim.
(c) So long as the Indemnifying Party is reasonably contesting any such
claim in good faith, the Indemnified Party shall fully cooperate with the
Indemnifying Party in the defense of such claim as is reasonably required by the
Indemnifying Party. Such cooperation shall include the retention and the
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<PAGE> 51
provision of records and information which are reasonably relevant to such Third
Party Claim and the availability on a mutually convenient basis of directors,
officers and employees to provide additional information. The Indemnified Party
shall not settle or compromise any claim without the written consent of the
Indemnifying Party unless the Indemnified Party agrees in writing to forego any
and all claims for indemnification from the Indemnifying Party with respect to
such claims.
(d) If, within five days after notice of any such claim, the Indemnified
Party and the Indemnifying Party are unable to agree on which of them will
defend such Third Party Claim, the Indemnified Party will have the right to
undertake the defense, compromise or settlement of such claim.
SECTION 11.03. Reimbursement of Costs. The costs and expenses, including
fees and disbursements of counsel (except as provided in Section 11.02(b)(i))
and expenses of investigation, incurred by the Indemnified Party in connection
with any Third Party Claim, shall be reimbursed on a quarterly basis by the
Indemnifying Party upon the submission of evidence reasonably satisfactory to
the Indemnifying Party that such expenses have been incurred, without prejudice
to the Indemnifying Party's right to contest the Indemnified Party's right to
indemnification and subject to refund in the event that the Indemnifying Party
is ultimately held not to be obligated to indemnify the Indemnified Party.
ARTICLE 12
ASSIGNMENT AND DELEGATION
Section 12.01. Assignment and Delegation. (a) No party to this Agreement
shall assign or delegate this Agreement or all or any part of its rights or
obligations hereunder to any Person without the prior written consent of each of
the other parties; provided however that (i) the Servicer may delegate any
portion of its obligations to Babcock & Brown Inc, or to any subsidiary of
Babcock & Brown Inc. and (ii) the foregoing provisions on assignment and
delegation shall not limit the ability of the Servicer to contract with any
Person, including any of its Affiliates, for services in respect of Aircraft
Assets. Any assignment or delegation pursuant to this Section 12.01(a) shall not
require any approval pursuant to Section 7.05 as long as such assignment or
delegation is at the cost of the Servicer.
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<PAGE> 52
(b) Without limiting the foregoing, any Person who shall become a successor
by assignment or otherwise of any of AerCo, the Subsidiaries or the Servicer (or
any of their respective successors) in accordance with this Section 12.01 shall
be required as a condition to the effectiveness of any such assignment or other
arrangement to become a party to this Agreement.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to AerCo, to:
AerCo Limited
c/o GPA Administrative Services Limited
as Administrative Agent
GPA House
Shannon
Ireland
Attention: General Counsel
Fax: 353-61-360-113
and
22 Grenville Street
St. Helier
Jersey, JE4 8PX
Channel Islands
Attention: Mourant & Co. Secretaries Limited--Company Secretary
Fax: 44-1534-609-333
with a copy to:
Davis Polk & Wardwell
1 Frederick's Place
London EC2R 8AB
Attention: Mr. Tom Reid
Fax: 44-171-418 1400
if to Servicer, to:
Babcock & Brown Limited
Oracle House
47
<PAGE> 53
Herbert Street
Dublin 2
Ireland
Attention: Managing Director
Fax: +353-1-661-6506
with a copy to:
Babcock & Brown Inc.
2 Harrison Street
San Francisco
CA94105
Attention: General Counsel
Fax: + 1-415-267-1500
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding business day in the place of
receipt.
SECTION 13.02. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 13.03. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 13.01 shall be deemed
effective service of process on such party.
SECTION 13.04. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR
48
<PAGE> 54
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13.05. Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 13.06. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 13.07. Power of Attorney. Each of AerCo and the Subsidiaries shall
appoint the Servicer and its successors, and its permitted designees and
assigns, as their true and lawful attorney-in-fact. All services to be performed
and actions to be taken by the Servicer pursuant to this Agreement shall be
performed to and on behalf of each of AerCo and the Subsidiaries. The Servicer
shall be entitled to seek and obtain from each of AerCo and the Subsidiaries a
power of attorney or such other appropriate documentation in respect of the
execution of any specific deems appropriate.
SECTION 13.08. Restrictions on Disclosure. The Servicer agrees that it
shall not, prior to the termination or expiration of this Agreement or within
the three years after such termination or expiration, disclose to any Person any
confidential or proprietary information, whether of a technical, financial,
commercial or other nature, received directly or indirectly from any Person
within AerCo Group regarding AerCo Group's business or the Aircraft Assets or
the Leases, except as authorized in writing by AerCo, and except:
(a) To Representatives of the Servicer and any of its Affiliates in
furtherance of the purpose of this Agreement;
(b) To the extent required by Applicable Law or by judicial or
administrative process, but in the event of proposed disclosure, the Servicer
shall seek the assistance of AerCo to protect information in which AerCo has an
interest to the maximum extent achievable;
(c) To the extent that the information: (i) was generally available in the
public domain; (ii) was, to the Servicer's knowledge, lawfully obtained from a
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<PAGE> 55
source under no obligation of confidentiality, directly or indirectly, to any
Person within AerCo Group; (iii) was disclosed to the general public with the
approval of any Person with AerCo Group; or (iv) was developed independently by
the Servicer of any of the Servicer's Affiliates; and
(d) To the extent the Servicer deems necessary to protect and enforce its
rights and remedies under this Agreement.
SECTION 13.09. Rights of Setoff. To the extent permitted by Applicable
Law, the Servicer hereby waives any right it may have under Applicable Law to
exercise any rights of setoff it has under Applicable Law with respect to any
assets it holds owned by, or money or monies it owes to, any Person within AerCo
Group pursuant to and in accordance with the terms and conditions of this
Agreement; provided however that this Section 13.09 shall not affect any rights
of setoff or other rights that the Servicer has or may have under the express
terms and conditions of this Agreement.
SECTION 13.10. Reliance. The Servicer shall be entitled to rely on the
provisions of this Agreement, including Schedule 2.02(a), any Approved Budget,
any direction of, or certification by, AerCo or the Directors (or any duly
appointed committee thereof) or the Administrative Agent or the Cash Manager, to
the extent set forth in Sections 2.01(b) and 2.01(c), respectively, and the
Transaction Approval Requirements in carrying out its obligations hereunder, and
each of AerCo and each other Person within the AerCo Group hereby waives any
rights to challenge any action taken by the Servicer that is consistent with the
provisions of this Agreement (including the Standard of Care and the Conflict
Standard) including Schedule 2.02(a), any Approved Budget, any such direction or
certification or the Transaction Approval Requirements or which has been
approved by the Directors of AerCo or a Subsidiary or a duly appointed committee
thereof, the Administrative Agent or the Cash Manager.
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<PAGE> 57
IN WITNESS WHEREOF, this Agreement has been duly executed on the date first
written above.
BABCOCK & BROWN LIMITED
By: Brian Foley
-------------------------------
Name: Brian Foley
Title: Director
AERCO LIMITED
By: Frederick W. Bradley Jr.
-------------------------------
Name: Frederick W. Bradley Jr.
Title: Director
AERCO IRELAND LIMITED
By: Patrick J. Dalton
-------------------------------
Name: Patrick J. Dalton
Title: Director
AERCO IRELAND II LIMITED
By: John Redmond
-------------------------------
Name: John Redmond
Title: Director
AERCOUSA INC.
By: Stephanie Rudolph
-------------------------------
Name: Stephanie Rudolph
Title: President
<PAGE> 58
AERFI BELGIUM N.V.
By: John Redmond
-------------------------------
Name: John Redmond
Title: Director
AIRCRAFT LEASE PORTFOLIO
SECURITIZATION 94-1 LIMITED
By: George Adrian Robinson
-------------------------------
Name: George Adrian Robinson
Title: Director
ALPS 94-1 (BELGIUM) N.V.
By: George Adrian Robinson
-------------------------------
Name: George Adrian Robinson
Title: Director
PERGOLA LIMITED
By: Michael Horgan
-------------------------------
Name: Michael Horgan
Title: Director
<PAGE> 59
APPENDIX A
AerCo Ireland Limited
AerCo Ireland II Limited
AerCoUSA Inc.
AerFi Belgium N.V.
Aircraft Lease Portfolio Securitization 94-1 Limited
ALPS 94-1 (Belgium) N.V.
Pergola Limited
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<PAGE> 60
SCHEDULE 2.02(a)
AIRCRAFT ASSETS SERVICES
The provision of the Services set forth in this Schedule 2.02(a) will be
subject in all cases to such approval as may be required or such limitations as
may be imposed pursuant to Section 7.05 of this Agreement and the provisions of
this Schedule 2.02(a) shall be deemed to be so qualified.
Unless otherwise defined herein, all capitalized terms used in this
Schedule 2.02(a) have the meanings assigned to such terms in the Offering
Memorandum.
ARTICLE 1
LEASE SERVICES
SECTION 1.01. Collections and Disbursements. In connection with each Lease
of an Aircraft Asset under which any Person within AerCo Group is the Lessor,
the Servicer will:
(a) Invoice the Lessee or otherwise arrange, as the Servicer deems
reasonably appropriate on behalf of such Person within AerCo Group, for
all payments due from the Lessee, including Rents, Security Deposits,
Maintenance Reserves, late payment charges and any payments in respect of Taxes
and other payments (including technical, engineering, insurance and other
recharges) due under the relevant lease, use commercially reasonable efforts to
direct the Lessee, subject to the terms of the Lease, to make such payments to
such accounts as are specified in writing by the Cash Manager and use
commercially reasonable efforts to enforce the payment thereof in the event of a
nonpayment by the relevant due date;
(b) Review from time to time, as deemed necessary by the Servicer, the
level of Rents, Security Deposits, Maintenance Reserves and other amounts that
may be adjusted under the Leases and propose to the relevant Lessee or make such
adjustments to the Rents, Security Deposits, Maintenance Reserves and other
amounts as are required under the terms of the relevant Lease or that the
Servicer otherwise deems reasonably appropriate considering, among other things,
practices that the Servicer believes are prevalent in the operating lease
market;
(c) Maintain appropriate records regarding payments under the Leases;
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<PAGE> 61
(d) Subject to the terms of any applicable Aircraft Asset Related Document,
take such actions as are necessary to apply any payments of any type received
from any Lessee on a basis consistent with the directions of such Lessee and, to
the extent that any such payments are made to an account other than the account
to which such payment should have been directed pursuant to such Lessee's
direction, to take such further actions as are necessary to give effect to such
directions; and
(e) Provide for the safekeeping and recording of any letters of credit,
guarantees or other credit support (other than cash and cash equivalents) held
as part of Security Deposits or Maintenance Reserves and the timely renewal or
drawing on or disbursement thereof as provided under the applicable Lease or
other Aircraft Asset Related Document or otherwise in accordance with Section
1.05 of this Schedule 2.02(a).
SECTION 1.02. Technical Services. The Servicer will perform the following
technical services relating to the management of the technical condition of the
Aircraft Assets and using commercially reasonable efforts to apply the Standard
of Care and the Performance Objectives:
(a) Monitor the performance of maintenance obligations by Lessees under all
Leases relating to the Aircraft by including the Aircraft in the Servicer's
technical audit program (which shall include inspection of each Aircraft at
least every 18 months, attendance at major checks or inspections and maintenance
of a record of written reports generated in connection with such inspections)
consistent with practices employed from time to time by the Servicer and its
Affiliates with respect to their own aircraft and other aircraft which they
manage. The Servicer shall advise AerCo as to the content of such technical
audit program and shall advise AerCo as to any material change to such technical
audit program from time to time;
(b) Determine the air authority approval status of a proposed maintenance
program and proposed maintenance performer under any new Lease of any Aircraft
under which any Person within AerCo Group is the Lessor;
(c) Manage aircraft deliveries and re-deliveries in connection with the
commencement or termination or expiration of a Lease under which any Person
within AerCo Group is the Lessor; and
(i) arrange for the appropriate technical inspection of the Aircraft
Assets and records for the purpose of determining if the re-delivery
conditions under the Lease have been satisfied and integrated into the
maintenance program of the new lessee;
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<PAGE> 62
(ii) maintain a record of all material reports and other written
materials (including any relevant reconciliation statements) received or
generated by the Servicer in connection with such inspection and provide
reasonable access to such reports and written materials to the relevant
Person within AerCo Group;
(iii) on the basis of inspection and available records, determine
whether the Lessee has complied with all required airworthiness directives
and mandatory modifications and establish the status of compliance with
airframe and engine manufacturer service bulletins and Lessee-originated
modifications undertaken, in each case with respect to the Aircraft Assets
and as required by the Lease;
(iv) (A) determine whether the Lessee has satisfied the re-delivery
conditions applicable to the Aircraft Assets specified in the Lease and
negotiate any modifications, repairs, refurbishments, inspections or
overhauls to or compromises of such conditions that the Servicer deems
reasonably necessary or appropriate; (B) determine the application of any
available Security Deposits, Maintenance Reserves or other payments under
the Lease; and (C) maintain a record of the satisfaction of such conditions
and recommend whether AerCo should accept redelivery of the Aircraft
Assets; and
(v) determine the need for and procure and monitor the performance of
any maintenance and refurbishment of the Aircraft Assets upon redelivery,
including compliance with applicable airworthiness directives, service
bulletins and other modifications which the Servicer may deem reasonably
necessary or appropriate for the marketing of the Aircraft;
(d) Consider and, to the extent the Servicer deems reasonably necessary
or appropriate, approve any Lessee-originated modifications to any Aircraft
Assets submitted by any Lessee:
(i) to the extent authorized by the terms of the relevant Lease; or
(ii) which the Servicer reasonably determines would not result in a
material diminution in value of the Aircraft Assets or the interests of any
Person within AerCo Group; or
(iii) which are approved by AerCo.
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(e) Determine the amount (if any) that the relevant Person within AerCo
Group is obliged to contribute pursuant to the provisions of a Lease (taking
into account the amount of Maintenance Reserves available with respect to such
Lease and the receivables position of the related Lessee) to maintenance work
performed, the cost of complying with any modification requirements,
airworthiness directives and similar requirements; and
(f) Arrange and supervise appropriate storage and any required on-going
maintenance of any Aircraft Assets, at the expense of the relevant Person within
AerCo Group, following termination of a Lease for any reason and
redelivery of the Aircraft Asset thereunder and prior to delivery of such
Aircraft Assets to a new lessee or purchaser, on the most economic basis
reasonably commercially available and appropriate under the circumstances.
The Servicer shall generally provide the technical management services set
forth in this Section 1.02 through the use of its own staff and the use of
qualified third parties. Technical management services will be provided at the
Servicer's expense except as specified in Section 9.06(b) of the Servicing
Agreement.
SECTION 1.03. Insurance. (a) The Servicer will provide the following
insurance services:
(i) negotiate the insurance provisions of any proposed lease or other
agreement affecting any of the Aircraft Assets, with such provisions to
include such minimum coverage amounts with respect to hull and liability
insurance as are set forth on Annex 1 to this Agreement, as the same may be
amended from time to time at the direction of AerCo;
(ii) monitor the performance of the obligations of Lessees relating to
insurance under Leases of any Aircraft Assets and ensuring that appropriate
evidence of insurance exists with respect to any Aircraft Assets
maintenance providers;
(iii) source and arrange a group aviation insurance program covering
the Aircraft Assets (it being understood that any savings resulting from a
group policy covering both Aircraft Assets and Other Assets shall be shared
equitably based on the amount of insurance obtained and premium paid
thereunder with respect to the covered Aircraft Assets, on the one hand,
and the Other Assets, on the other hand), with such minimum coverage
amounts with respect to hull and liability insurance as are set forth on
Annex 1 to this Agreement, as the same may be amended from time to time at
the direction of AerCo;
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(iv) procure such political risk insurance for Aircraft Assets
habitually based or registered in those countries listed on Annex 1 to
this Agreement (which list has been established by AerCo and may be
modified from time to time by AerCo) and such other insurance related
thereto from the sources and with such minimum coverage amounts with
respect to hull insurance as are set forth on Annex 1 to this
Agreement, as the same may be amended from time to time at the
direction of AerCo;
(v) review the "Agreed Values" set forth on Annex 1 to this
Agreement by reference to market valuations and advise AerCo as to
whether the insurance levels should be modified;
(vi) if at any time any Aircraft Asset ceases to be insured or
any Person within AerCo Group requires insurance coverage relating to
an Aircraft for any reason, including default by the Lessee or an
Aircraft not being leased upon termination of a Lease, the
Servicer will promptly procure, at the expense of the relevant Person
within AerCo Group, alternative insurance coverage, with such minimum
coverage amounts with respect to hull and liability insurance as are
set forth on Annex 1 to this Agreement, as the same may be amended from
time to time at the direction of AerCo; and
(vii) advise AerCo of any settlement offers received by the
Servicer with respect to any claim of damage or loss in excess of
$1,000,000 with respect to an Aircraft Asset, provide AerCo with copies
of all relevant documentation related thereto and such other additional
information and advice as AerCo may reasonably request and, upon
direction from AerCo that any settlement offer related thereto is
acceptable, prepare the appropriate documentation, including releases
and any indemnities required in connection with such releases, to give
effect to such settlement offer and procure the execution of such
documentation by AerCo (it being understood that settlement offers with
respect to any such claims up to and including $1,000,000 may be
settled by the Servicer independently);
provided however, that in each case where insurance is to be obtained by the
Servicer, such insurance is reasonably available in the relevant insurance
market and the Servicer shall have used reasonable sourcing techniques prior to
obtaining such insurance. The foregoing provisions shall apply to any
arrangements in which Persons other than Lessees have possession of, or
insurance responsibility for, an Aircraft Asset (including in the event that an
Aircraft Asset has been sold pursuant to a mortgage, deferred payment agreement
or any similar arrangement).
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(b) The Servicer shall provide to AerCo such periodic reports
regarding insurance matters relating to the Aircraft Assets as AerCo
shall reasonably request.
(c) The Servicer may engage, with the approval of AerCo, and, at
AerCo's expense, one or more insurance advisers to advise on insurance
related issues. The Servicer shall be entitled to rely reasonably on actions
taken by or recommendations of any such advisor, subject to the terms of the
relevant Lease. Any such insurance advisor may also act in the same or similar
capacities for the Servicer or its Affiliates.
SECTION 1.04. Administration. The Servicer shall administer each Lease
in accordance with its terms and as otherwise specifically addressed herein.
SECTION 1.05. Enforcement. The Servicer shall take commercially
reasonable steps to enforce the obligations to the relevant Person within AerCo
Group of the Lessee and any other parties under each Lease and under any
ancillary agreements thereto delivered by AerCo to the Servicer (including any
guarantees of the obligations of the Lessee). Following any default by a Lessee
under the applicable Lease, the Servicer will take all steps as it deems
reasonably necessary or appropriate to preserve and enforce the rights of the
relevant Person within AerCo Group under the applicable Lease, including
entering into negotiations with such Lessee with respect to the restructuring of
such Lease or declaration of an event of default under the applicable Lease,
providing for the drawing on or making disbursement of any Security Deposits,
Maintenance Reserves or any letters of credit, guarantees or other credit
support thereunder, voluntary or involuntary termination of the Lease and
repossession of the Aircraft Asset that is the subject of the Lease, and
pursuing such legal action with respect thereto as the Servicer deems reasonably
necessary or appropriate.
SECTION 1.06. Lease Modifications. (a) The Servicer shall be
authorized to make such amendments and modifications to any Lease as it shall
deem reasonably necessary or appropriate; provided however, that such amendment
or modification shall require the approval of AerCo pursuant to Section 7.05 of
this Agreement if the provisions of such amendment or modification, were they to
be included in a new Lease to be entered into after the date hereof, would, on
their own, cause the entering into of such new Lease to require the approval of
AerCo pursuant to Section 7.05(a)(ii) of this Agreement. Such amendments or
modifications may be made without regard to whether there is a default by the
Lessee or other party under or with respect to any such Lease.
(b) The Servicer may waive, in its absolute discretion, overdue
interest due from any Lessee under any Lease on any default in payment of rent,
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Maintenance Reserves or other amount thereunder if any such default is cured
within seven days of the date on which such payment was due.
SECTION 1.07. Options and Other Rights. The Servicer shall be
authorized to take such action as it shall deem reasonably necessary or
appropriate with respect to:
(a) The exercise by any Lessee or other party of any option or right
affecting the applicable Aircraft Asset or the applicable Lease, consistent with
the terms of any such option or right; and
(b) The exercise on behalf of any Person within AerCo Group of any
right or option that such Person may have with respect to any of the Aircraft
Assets or the Leases.
SECTION 1.08. Lessee Solicitations. Upon AerCo's request, with respect
to the Aircraft Assets, the Servicer shall provide assistance to the relevant
Persons within AerCo Group with respect to:
(a) Obtaining Lessee consents, novations, assignments, amendments and
related documentation (including insurance certificates, title transfer
documents and legal opinions); and
(b) The issue (or reissue) or amendment of letters of credit,
guarantees and related documentation (the documents referred to in clauses (a)
and (b) above are, collectively, the "LESSEE DOCUMENTATION");
SECTION 1.09. Tax Based Financings. The Servicer will cooperate with
AerCo and its advisors to structure any tax based financings, including
assisting with lessee solicitations in accordance with Section 1.08 to this
schedule 2.02(a), if so requested by AerCo.
ARTICLE 2
COMPLIANCE WITH COVENANTS
SECTION 2.01. Compliance Generally. (a) The Servicer shall take such
actions as it shall deem reasonably necessary or appropriate to keep AerCo in
compliance with its obligations and covenants under any indenture or similar
agreements binding it from time to time (the "INDENTURE") solely to the extent
that such obligations and covenants specifically relate to the status,
insurance,
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maintenance or operation of the relevant Aircraft Assets excluding, in any case,
(i) any reporting obligations in respect of any of the foregoing and (ii) any
rental or other payment or monetary obligations under such; provided, however,
that the foregoing shall only apply to (A) any Indenture covenants that are
summarised (or, in certain cases, appear as extracts) in Annex 2 to the
Servicing Agreement, to the extent such summaries (or extracts) include,
following each provision summarised (or extracted) in such Annex, the relevant
section references for each such provision from each Indenture, and which
(together with the definitions for any capitalised terms used therein) are set
forth in full in a copy of the Indenture delivered by AerCo to the Servicer,
certified by AerCo as a true and complete copy thereof (and AerCo shall promptly
provide the Servicer with all amendments, supplements and waivers thereto, so
certified). AerCo shall provide to the Servicer any instructions the Servicer
may require in the interpretation of the Indenture, on which instructions the
Servicer shall be entitled to rely in all respects, and (B) such Indenture
covenants (excluding, in any case, any such covenants relating to the
limitations on Lessee concentrations, which are treated in Section 2.02 of this
Schedule 2.02(a)) first coming into effect (including through amendments or
modifications) after the date of the Servicing Agreement, or which AerCo shall
from time to time notify the Servicer in writing, in reasonably specific detail.
(b) Nothing in this Schedule 2.02(a) or elsewhere in the Servicing
Agreement shall be deemed to constitute or be construed as (i) a delegation or
other transfer to, or an assumption by, the Servicer or any of its Affiliates of
any obligations of any Person within the AerCo Group to make any payment to any
Lessee or other Person, or to comply with any other monetary obligation, under
any Lease or (ii) a transfer to the Servicer or any of its Affiliates of any
right, title and interest in any Lease or related agreement or any Aircraft
Asset covered thereby.
SECTION 2.02. Certain Matters Relating to Concentration Thresholds. (a)
The Servicer shall use commercially reasonable efforts to comply with any
covenants specifically relating to limitations on Lessee concentration set forth
in the Indenture ("CONCENTRATION THRESHOLDS") and shall promptly inform AerCo of
any proposed transaction that it reasonably determines may result in such
Concentration Thresholds being exceeded, and AerCo shall promptly provide to the
Servicer any information that the Servicer may reasonably require in connection
with such Concentration Thresholds in order to comply with the provisions of
this Section 2.02. The Servicer shall not enter into any such transaction other
than pursuant to the terms of Section 2.02(c) below.
(b) AerCo and each Person with the AerCo Group hereby, jointly and
severally, represent and warrant to the Servicer that set forth in Annex 2
to this
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Schedule 2.02(a) are summaries of the Concentration Thresholds (including,
following each provision summarised in such Annex, the relevant section
references for each such provision from the Indenture) presently imposed under
the Indenture, which Concentration Thresholds (together with the definitions for
any capitalised terms used therein) are set forth in a full copy of the
Indenture delivered by AerCo to the Servicer, certified by AerCo as a true and
complete copy thereof (and AerCo shall promptly provide the Servicer with all
amendments, supplements and waivers thereto, so certified) and AerCo shall
provide to the Servicer any instructions the Servicer may require in the
interpretation of such Concentration Thresholds, on which instructions the
Servicer shall be entitled to rely in all respects.
(c) The Servicer shall not enter into any transaction with respect to which
it has provided notice pursuant to Section 2.02(a) until AerCo has provided a
written certification to the Servicer to the effect that such transaction will
not result in any violation of the Concentration Thresholds and the Servicer
shall be entitled to rely upon such certification for all purposes of this
Agreement and this Section 2.02.
ARTICLE 3
LEASE MARKETING
Section 3.01. Lease Marketing Services. The Servicer shall provide and
perform lease marketing services with respect to the Aircraft Assets and in
connection therewith is authorised:
(a) To negotiate and enter into any commitment for a Lease of an Aircraft
Asset on behalf of and (through a power of attorney) in the name of the relevant
Person within AerCo Group; and
(b) To include within any commitment for a Lease of an Aircraft Asset any
intermediate Lease or Leases through any Person within AerCo Group that the
Servicer deems reasonably necessary or appropriate.
SECTION 3.02. Form of Lease. (a) The Servicer shall commence the
negotiation of any commitment for a Lease or Leases of Aircraft Assets in a
manner consistent with the practices employed by the Servicer with respect to
its aircraft operating leasing services business generally and shall commence
the drafting of, and negotiation with respect to, any Leases for Aircraft Assets
on the following basis:
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(i) in the case of any proposed Lessee that is not and has not been a
lessee of an aircraft managed or serviced by the Servicer, the Servicer
shall commence the drafting of, and negotiation with respect to, a Lease
for Aircraft Assets based on the form of lease agreement or agreements then
used by the Servicer in connection with its aircraft operating leasing
services business generally (as such form of lease shall be amended from
time to time by the Servicer, subject to Section 3.02(c) below, the "PRO
FORMA LEASE"); and
(ii) in the case of any proposed Lessee that is or was a lessee of an
aircraft managed or serviced by the Servicer, the Servicer may commence the
drafting of, and negotiation with respect to, a Lease for Aircraft Assets
based on a form of lease substantially similar to the lease previously used
with respect to such Lessee (the "PRECEDENT LEASE").
(b) Provided that the Servicer commences the negotiation of a Lease of any
Aircraft Asset in accordance with clauses (a)(i) and (a)(ii) above, the terms
of any executed Lease may vary from the terms of the Pro Forma Lease or the
Precedent Lease employed by the Servicer in accordance with such clauses.
Subject to compliance with the terms and conditions of this Agreement, the
Servicer is authorized to execute and deliver binding Leases and related
agreements on behalf of the relevant Person within AerCo Group. It is
the intention of the parties that following the execution and delivery of any
Lease with respect to Aircraft Assets the Servicer shall deliver a copy of the
executed Lease, together with a copy thereof marked to reflect changes from the
precedent employed in accordance with the foregoing procedures, to AerCo
within 20 Business Days of such execution and delivery.
(c) Upon ten Business Days' prior written notice from AerCo (x)
requesting a copy of the then current Pro Forma Lease and (y) specifying that
such Pro Forma Lease is to be used for purposes of the annual review of the Pro
Forma Lease (the "ANNUAL REVIEW"), the Servicer shall provide AerCo with
a copy of its then current Pro Forma Lease, together with a copy thereof marked
to reflect changes from the version of the Pro Forma Lease that was produced by
the Servicer following the immediately preceding Annual Review to give effect
to the terms of Section 3.02(d) below.
(d) On or prior to each anniversary of the Closing Date and following the
Annual Review, AerCo shall advise the Servicer in writing whether any provisions
in the then current Pro Forma Lease that correspond to any core lease provisions
or similar provisions are required in accordance with the terms of the Indenture
to be deleted from such Pro Forma Lease and replaced with the provision
corresponding thereto in the most recent Pro Forma Lease in which
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such provision was determined to be in accordance with the terms of the
Indenture. Following any such written advice from AerCo, the Servicer shall
amend the Pro Forma Lease accordingly and shall commence the negotiation of any
Lease thereafter with the Pro Forma Lease as so amended in respect of any such
provision.
SECTION 3.03. Deliveries. The Servicer shall take commercially
reasonable action to deliver any Aircraft Asset pursuant to the terms of the
documentation of the Lease or Leases of such Aircraft Asset, including upon an
extension of such Leases.
SECTION 3.04. Management. The Servicer shall generally manage the
marketing services set forth in this Article 3 through the use of its own
marketing staff.
ARTICLE 4
SALES AND PURCHASES OF AIRCRAFT
SECTION 4.01. Sales Services and Authority. (a) The Servicer shall
provide and perform sales services with respect to the Aircraft Assets at, and
on a basis consistent with, the directions from time to time of AerCo, and, in
connection therewith, is authorized;
(i) to enter into any commitment for a sale of an Aircraft Asset on
behalf and (through a power of attorney) in the name of the relevant Person
within AerCo Group; and
(ii) to include within any sale any intermediate Lease or Leases
through any Person within AerCo Group that the Servicer deems reasonably
necessary or appropriate; provided however, that, except as otherwise
required in accordance with the terms of a Lease, the Servicer shall not
enter into any sale of any Aircraft Asset or agreement to sell any Aircraft
Assets without obtaining the approval of AerCo pursuant to Section 7.05(a)
of this Agreement.
(b) The Servicer shall negotiate documentation of any sale and, subject to
Section 4.01(a) of this Schedule 2.02(a), is authorized to execute and deliver
binding agreements on behalf and (through a power of attorney) in the name of
the relevant Person within AerCo Group.
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(c) The Servicer shall take commercially reasonable efforts to deliver any
Aircraft Asset pursuant to the terms of the documentation of the sale.
(d) In the event that AerCo directs the Servicer to arrange for the sale of
any Aircraft Asset, the Servicer will not be required to take any such action
until AerCo shall provide the Servicer with an Officer's Certificate certifying
that such sale complies with the terms of the Indenture and that the Servicer is
entitled to rely upon such certification for all purposes of this Agreement and
this Schedule 2.02(a).
(e) Notwithstanding any other provision in Section 7.05 of the Servicing
Agreement to the contrary, the Servicer shall be permitted to purchase, sell or
exchange any engine relating to an Aircraft or any part or components thereof or
spare parts or ancillary equipment or devices furnished with an Aircraft at such
times and on such terms and conditions as the Servicer deems reasonably
necessary or appropriate in connection with its performance of the Services;
provided however, the Servicer shall not be permitted to purchase, or enter any
order to purchase, engines or spare parts in a quantity in excess of that
quantity then required to enable the Aircraft Assets to be leased without
obtaining the prior written consent of AerCo.
SECTION 4.02. Tax Based Financings. Subject to satisfaction of the
conditions set forth in clauses (i) and (ii) and (iii) of the provisos in
Sections 9.05(a) and 9.05(b) of the Servicing Agreement, the transfer of title
shall not be deemed to be a sale for the purpose of calculation of Sales Fees
pursuant to Section 9.05 of the Servicing Agreement if such transfer of title is
part of a tax based financing or a refinancing. The transfer of title shall be
deemed to be a sale for the purpose of obtaining approvals pursuant to
Section 7.05 if such transfer of title is part of a tax based financing or a
refinancing.
ARTICLE 5
MARKET AND OTHER RESEARCH
SECTION 5.01. Valuations. From time to time, but in any event at least
annually:
(a) AerCo will request, and the Servicer shall, upon such request, use
commercially reasonable efforts to obtain, current or projected valuations of
the Aircraft; and
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(b) The Servicer shall use commercially reasonable efforts to arrange for
such valuation services with respect to the Aircraft as shall be reasonably
necessary or appropriate in connection with the performance of the Services, in
each case from any internationally recognized independent appraiser chosen by
AerCo.
SECTION 5.02. Regulatory Changes. The Servicer shall:
(a) Advise AerCo on a timely basis in summary form of such information
regarding legal, regulatory and manufacturer material changes and developments
with respect to each Aircraft Asset after the relevant Delivery Date, of which
the Servicer has knowledge, which legal, regulatory and manufacturer
developments are likely to, or will, be applicable to the Aircraft Assets; and
(b) Take such commercially reasonable action as may be necessary or
appropriate to comply therewith.
SECTION 5.03. Market Research. The Servicer shall maintain research
capability and shall provide commercial aviation market industry research
reports to AerCo on a regular basis using internal and external resources where
appropriate to keep AerCo adequately informed regarding developments in the
commercial aviation industry. The reports shall include market information with
respect to commercial aviation demand in terms of traffic growth, new Aircraft
requirements and other information relevant to AerCo Group's long-term planning
with respect to Leases, purchases and sales, market conditions, industry trends
and the Aircraft Assets.
SECTION 5.04. Lessee Information. The Servicer shall provide on a timely
basis in summary form such information regarding default history, audit analysis
or other material Lessee information of which the Servicer has knowledge.
SECTION 5.05. Confidentiality. Nothing in this Article 5 or in Article 8
hereof shall require the Servicer to reveal information which is confidential to
its other clients or its business generally.
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ARTICLE 6
AIRCRAFT ASSET CASH SERVICES
Section 6.01. Accounts and Account Information. (a) EXISTING ACCOUNTS. In
the event that the Cash Manager desires to modify any of the arrangements
relating to any of the bank accounts set forth on Schedule 4.03 to this
Agreement (the "EXISTING ACCOUNTS") in accordance with the Cash Management
Agreement, the Cash Manager shall deliver a certificate to the Servicer
specifying in reasonable detail the modifications to be made with respect to any
such Existing Accounts and certifying that any such modifications are in
accordance with the applicable provisions of the Indenture and the Cash
Management Agreement and the Servicer shall notify the relevant Lessees of such
modifications and shall take such other actions as are incidental thereto in
order to give effect to the foregoing.
(b) NEW ACCOUNTS. The Servicer shall notify the Cash Manager in the event
that any new bank accounts need to be established on behalf of any Person within
AerCo Group in connection with the execution of a new Lease and shall set forth
in reasonable detail the (i) identity of the new Lessee, (ii) Aircraft Assets
subject to such Lease and (iii) the jurisdiction of the Lessee in which such
Aircraft Assets are to be registered, and shall take such other actions as are
incidental thereto in order to give effect to the establishment of the new
accounts (the "NEW ACCOUNTS"); and, together with the Existing Accounts, (the
"BANK ACCOUNTS").
SECTION 6.02. Cash Transfers. In the event that the Cash Manager is
required to transfer funds from any Bank Account to the account of another
Person (other than any Person within AerCo Group) in order to give effect to the
directions of any Lessee in accordance with Section 1.01(d) of this Schedule
2.02(a), the Servicer shall provide the Cash Manager with written notice setting
forth (i)the name of the transferor, (ii) the name of the transferee, (iii) the
accounts from and to which funds are to be transferred, (iv) the amounts to be
transferred, (v) the amount of the initial payment from the Lessee and (vi) the
anticipated date of transfer. No later than the next following Business Day, the
Cash Manager shall notify the Servicer in writing whether the proposed transfer
is approved or disapproved. If approved, the Cash Manager shall cause such
transfer to be made in accordance with the terms of such written notice. If not
approved, the Cash Manager shall advise the Servicer in writing as to the
reasons therefor.
SECTION 6.03. Payments. (a) ANTICIPATED PAYMENTS. For purposes of the
calculation of the required expenses by the Cash Manager pursuant to the Cash
Management Agreement, not less than one Business Day prior to each Calculation
Date, the Servicer shall deliver to the Cash Manager a written
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projection of payment obligations (including projected expenditures, or return
to Lessees, of Security Deposits or Maintenance Reserves in accordance with the
terms of any Lease) reasonably anticipated by the Servicer to be necessary to be
paid in connection with the Servicer's performance of the Services under this
Agreement during the period extending from the Payment Date immediately
following such Calculation Date through to the next succeeding Payment Date (the
"MONTHLY PAYMENT PERIOD"). Not less than five Business Days prior to the first
Business Day of each week, the Servicer shall deliver to the Cash Manager a list
specifying each cash payment projected to be made during such week (whether or
not such cash payment was reflected in the projection referred to in this
Section 6.03(a)), and shall state (i) the anticipated date of such payment, (ii)
the payee, (iii) the amount of such payment, (iv) the obligation in respect of
which such payment is to be made (the "Stated Services Obligation") and (v) the
account from which such payment should be made. Not later than two Business Days
prior to the date of each payment set forth on such list, the Cash Manager shall
deliver to the Servicer a written notice of such proposed payment, restating the
date, payee and amount relating to such payment. Not later than the Business Day
prior to the date of such proposed payment, the Cash Manager shall notify the
Servicer in writing whether the proposed payment is approved or disapproved. If
such payment is approved, the Cash Manager shall pay or cause such payment to be
made to the payee for the Stated Services Obligation from the funds then
available in the relevant account, as the case may be. If such payment is not
approved, the Cash Manager shall advise the Servicer in writing as to reasons
therefor and the Servicer shall not proceed with such transfer.
(b) UNANTICIPATED PAYMENTS. During any Monthly Payment Period the Servicer
may request in writing the Cash Manager's approval to pay or cause to be paid
expenses that had not been reasonably anticipated by the Servicer at the time
the projection required to be provided to the Cash Manager pursuant to Section
6.03(a) with respect to such Monthly Payment Period was delivered to the Cash
Manager (whether or not such expense was reflected in the weekly list of
projected payments referenced in Section 6.03(a)). Any such request shall
specify for each such payment obligation (i) the anticipated date of such
payment, (ii) the payee, (iii) the amount of such payment, (iv) the Stated
Services Obligation and (v) the account from which such payment should be made.
Not later than the Business Day next following such request by the Servicer, the
Cash Manager shall notify the Servicer in writing whether such payment request
is approved or disapproved. If approved, the Cash Manager shall pay or cause
such payment to be made to the payee for the Stated Services Obligation from the
funds then available in the relevant account. In the event that the funds then
available in such account are insufficient to make any such payment, pursuant to
the Cash Management Agreement, the Cash Manager shall take such actions as are
necessary to cause funds sufficient to make any such payments to be transferred
as
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soon as practicable from the Collection Account to such account. Following the
transfer of such funds, the Cash Manager shall pay or cause such payments to be
made in accordance with the foregoing provisions. If such payment is not
approved, the Cash Manager shall advise the Servicer in writing as to reasons
therefor and the Cash Manager shall not proceed with such transfer.
ARTICLE 7
PROFESSIONAL AND OTHER SERVICES
Section 7.01. Legal Services. (a) The Servicer shall provide or procure
legal services, in all relevant jurisdictions, on behalf of the relevant Persons
within AerCo Group with respect to the lease or sale of the Aircraft Assets, any
amendment or modification of any Lease, the enforcement of the rights of any
Person within the Group under any Lease, any disputes that arise with respect to
the Aircraft Assets or for any other purpose that the Servicer reasonably
determines is necessary in connection with the performance of the Services.
(b) The Servicer shall provide such legal services by using its in house
legal staff where it shall deem appropriate and shall authorise outside counsel
to provide such legal services where it shall deem appropriate (it being
understood that while the obligations set forth in this Section 7.01 are, to the
extent possible, generally anticipated to be discharged by the Servicer without
resorting to outside counsel, the Servicer retains the flexibility to engage
outside counsel as it determines in its sole discretion to be necessary). The
cost of any outside counsel shall be borne or reimbursed and apportioned as set
forth in Section 9.06 of the Servicing Agreement. AerCo recognises, and shall
cause each other Person within AerCo Group to recognise, that from time to time
the Servicer will retain legal counsel to provide legal services on behalf of
Persons within AerCo Group and, in the event that a conflict of interest or
potential conflict of interest arises between any Person within AerCo Group and
the Servicer, AerCo agrees, and shall cause each other Person within AerCo Group
to agree, to waive any conflict of interest any such counsel may have with
respect thereto or otherwise to enable the Servicer to retain such counsel on
its own behalf.
SECTION 7.02. Accounting and Tax Services. The Servicer shall arrange
for such accounting and tax services and advice (which may be provided by the
Servicer's internal staff, to the extent available) as shall be reasonably
necessary or appropriate in connection with the structuring of lease or sale
transactions with respect to the Aircraft Assets or for any other purpose that
the Servicer reasonably determines is necessary in connection with the
performance of the Services.
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ARTICLE 8
INFORMATION; REPORTS; CUSTODY
SECTION 8.01. Management Information Systems. (a) The Servicer will, so
long as and to the extent it maintains the following, provide to AerCo, the
Administrative Agent and the Cash Manager access to Servicer's management
information storage and systems, provided that such reasonable access shall only
be granted with respect to information related to the Aircraft Assets.
(b) The Servicer will from time to time, as it reasonably deems necessary,
update the management information systems with (i) data and information on a
basis consistent with the type of data and information available on such systems
as of the first Delivery Date and (ii) such other data and information as the
Servicer shall deem necessary or appropriate in connection with the performance
of the Services.
SECTION 8.02. Weekly Reports. On the last Business Day of each week the
Servicer will provide to AerCo and the Administrative Agent a report in the form
of a weekly report attached hereto as part of Schedule 8 to Schedule 2.02(a).
SECTION 8.03. Monthly Reports. Five Business Days after the first
Business Day of each month, the Servicer shall provide to AerCo and the
Administrative Agent a report in the form of a monthly report attached hereto as
part of Schedule 8 to Schedule 2.02(a).
SECTION 8.04. Quarterly Reports. Thirty Business Days after the end of
each calendar quarter the Servicer shall provide to AerCo and the Administrative
Agent a report in the form of a quarterly report attached hereto as part of
Schedule 8 to Schedule 2.02(a).
SECTION 8.05. Other Information. (a) To the extent the Servicer is in
possession of the relevant information, the Servicer shall prepare and submit to
AerCo the following information with respect to each Person within AerCo Group:
(i) information with respect to transactions relating to Aircraft Assets
necessary for each Person within AerCo Group to prepare value added tax and
other tax returns;
(ii) promptly after the occurrence thereof, notify AerCo of any accident or
incident of which the Servicer has notice involving any Aircraft Asset where (A)
the potential loss in connection therewith
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exceeds the higher of the damage notification threshold under the relevant
Lease, if any, and $1,000,000 or (B) the potential liability in connection
therewith exceeds $1,000,000; and
(iii) information with respect to transactions relating to Aircraft
Assets necessary for any Person within AerCo Group to prepare statutory
returns with respect to contractors engaged by the Servicer on behalf of
such Person, to the extent such information is reasonably available to the
Servicer.
(b) The Servicer will make available to AerCo and its advisers and
designees, at reasonable times and upon reasonable notice, the Servicer
Representatives in order to provide to AerCo and its advisers and designees
information with regard to the Aircraft Assets and Leases (including in response
to inquiries with respect to the reports provided to AerCo by the Servicer
pursuant to Sections 8.02, 8.03 and 8.04 hereof) which may reasonably be
required by AerCo. In furtherance thereof, in order to facilitate each Person
within AerCo Group carrying out its responsibilities upon the request of AerCo,
the Servicer shall make available (through physical attendance or telephonic
conference) such officers and employees as AerCo shall reasonably deem
appropriate for board meetings of AerCo and the Subsidiaries and meetings with
AerCo's representatives to provide to AerCo information, and response to
inquiries, with respect to the reports provided to AerCo by the Servicer
pursuant to Sections 8.02, 8.03 and 8.04 or otherwise.
SECTION 8.06. Ratings Information. Upon request by AerCo, the Servicer
shall provide to AerCo such information and data about the Aircraft Assets and
other commercially reasonable assistance relating to the Aircraft Assets as
AerCo shall deem reasonably necessary or appropriate in connection with
providing information to the rating agencies for AerCo's debt ratings.
SECTION 8.07. Custody of Documents. The Servicer agrees to hold all
original documents of any Person within AerCo Group that relate to the Aircraft
Assets in the possession of the Servicer in safe custody and according to the
commercially reasonable instructions of AerCo.
SECTION 8.08. Public Filing Information. (a) The Servicer shall provide
to AerCo such information and data relating to the Servicer, the Services and
the Aircraft Assets as AerCo shall reasonably request to comply with its public
or statutory reporting and filing obligations.
(b) Notwithstanding anything herein to the contrary, each of AerCo and each
Person within AerCo Group, jointly and severally, acknowledges and agrees
71
<PAGE> 78
that it shall be responsible for, and the Servicer shall not have any
responsibility for: (i) any reporting or compliance obligations to any holders
of outstanding Notes, any liquidity facility providers or any Governmental
Authorities and (ii) the preparation of any forecasts (except for the mechanical
preparation thereof to the extent expressly specified in Section 8.03 of this
Schedule 2.02(a)) and for all instructions, discretion and judgments related to
such reporting or compliance obligations and forecasts, and each of AerCo and
each Person within AerCo Group, jointly and severally, agrees to indemnify the
Servicer and its Affiliates in respect of the foregoing as further provided in
Article 11 of the Servicing Agreement.
72
<PAGE> 79
SCHEDULE 4.01
AIRCRAFT
73
<PAGE> 80
<PAGE> 81
AERCO PORTFOLIO
<TABLE>
<CAPTION>
INITIAL
APPRAISED
VALUE AT MARCH
DATE OF 1,1998
OWNER COMPANY TYPE MSN MANUFACTURE ($000'S)
<S> <C> <C> <C> <C>
1 Alps 94-1 Limited B757-200 26153 Aug-92 42.373
2 Alps 94-1 Limited B737-300 26068 Jun-92 25.683
3 AerCo Ireland 11 Limited A300B4-200 240 May-83 13.317
4 Alps 94-1 Limited B737-300 24465 Aug-89 21.953
5 Alps 94-1 Limited B737-300 24677 Mar-90 21,943
6 Alps 94-1 Limited B737-400 25764 Jul-92 27.353
7 Alps 94-1 Limited B737-400 25765 Jul-92 27.500
8 Alps 94-1 Limited MD83 49952 Dec-91 22.920
9 AerCo Ireland Limited A320-200 85 Feb-90 26.777
10 Alps 94-1 Limited B737-400 24685 May-90 25.710
11 Alps 94-1 Limited F100 11258 Dec-89 14.207
12 Alps 94-1 Limited F100 11342 Aug-91 16.343
13 Alps 94-1 Limited B767-300ER 24999 Feb-91 63.130
14 Alps 94-1 Limited MD83 49627 Apr-89 21.283
15 Alps 94-1 Limited MD83 49790 Oct-89 20.820
16 Alps 94-1 Limited B757-200 26158 Feb-93 43.097
17 Alps 94-1 Limited A320-200 299 Apr-92 31.290
18 Alps 94-1 Limited A320-200 362 Nov-92 31.527
19 AerCo Ireland Limited B737-400 23868 Oct-88 24.214
20 Alps 94-1 Limited A320-200 391 Feb-93 32.883
21 Alps 94-1 Limited B737-300 24909 Apr-91 24.157
22 AerCo Ireland Limited B737-400 23979 Jan-89 24.667
23 Alps 94-1 Limited B737-300 24908 Mar-91 24.367
24 Alps 94-1 Limited B737-400 24904 Feb-91 26.430
25 AerCo Ireland Limited B737-400 26066 Jun-92 28.143
26 AerCo Ireland Limited F100 11341 Aug-91 16.163
27 AerCo Ireland Limited F100 11350 Apr-92 16.710
28 Alps 94-1 Limited F100 11351 Sep-91 16.313
29 Alps 94-1 Limited B767-300ER 24947 Mar-91 62.470
30 Alps 94-1 Limited B757-200 26152 Aug-92 41.680
31 Alps 94-1 Limited A320-200 403 Dec-93 32.083
32 AerCo USA Inc DC8-71F 46064 Mar-92 16.020
33 AerCo USA Inc DC8-71F 46040 Mar-91 15.997
34 AerCo Ireland Limited B747-200B 22496 Oct-81 31.270
35 Alps 94-1 Limited B737-500 26067 Jun-92 21.180
951.973
</TABLE>
<PAGE> 82
<TABLE>
<S> <C>
Account Name: GPA Belgium NV
Bank: Citibank Brussels
Account No.: 570-1192500-40
Currency: Belgian Franc
Account Name: GPA Belgium NV
Bank: Citibank Brussels
Account No.: 570-1192510-50
Currency: US Dollar
</TABLE>
<PAGE> 83
SCHEDULE 7.04(b)(1)
ONE YEAR INITIAL PERIOD
OPERATING BUDGET AND ASSET EXPENSES BUDGET
76
<PAGE> 84
AERCO BUDGET -- ONE YEAR PERIOD
<PAGE> 85
AERCO GROUP-BUDGET [ONE YEAR PERIOD]
- -----------------------------------------------------------------------------
INCOME STATEMENT
<TABLE>
<CAPTION>
Sep-98 Dec-98 Mar-99 Jun-99 FY99
<S> <C> <C> <C> <C> <C>
Gross Revenue 0.0 0.0 0.0 0.0 0.0
Downtime/Bad Debts 0.0 0.0 0.0 0.0 0.0
Depreciation 0.0 0.0 0.0 0.0 0.0
Interest Expense-Cash 0.0 0.0 0.0 0.0 0.0
Interest Expense Accrued 0.0 0.0 0.0 0.0 0.0
Interest Expense-Other 0.0 0.0 0.0 0.0 0.0
Sales Income 0.0 0.0 0.0 0.0 0.0
Other Leasing Costs 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
Babcock & Brown Fees 0.0 0.0 0.0 0.0 0.0
GPA Fees 0.0 0.0 0.0 0.0 0.0
Other Overheads 0.0 0.0 0.0 0.0 0.0
----- ----- ----- ----- -----
Net Loss 0.0 0.0 0.0 0.0 0.0
===== ===== ===== ===== =====
</TABLE>
<PAGE> 86
SCHEDULE 7.04(B)(2)
THREE YEAR INITIAL PERIOD
OPERATING BUDGET AND ASSET EXPENSES BUDGET
77
<PAGE> 87
AERCO BUDGET -- THREE YEAR PERIOD
<PAGE> 88
AERCO GROUP -- BUDGET [THREE YEAR PERIOD]
- -------------------------------------------------------------------------------
INCOME STATEMENT
<TABLE>
<CAPTION>
FY 1999 FY 2000 FY 2001
<S> <C> <C> <C>
Gross Revenue........................... 0.0 0.0 0.0
Downtime/Bad Debts...................... 0.0 0.0 0.0
Depreciation............................ 0.0 0.0 0.0
Interest Expense - Cash................. 0.0 0.0 0.0
Interest Expense Accrued................ 0.0 0.0 0.0
Interest Expense - Other................ 0.0 0.0 0.0
Sales Income............................ 0.0 0.0 0.0
Other Leasing Costs..................... 0.0 0.0 0.0
Interest Income......................... 0.0 0.0 0.0
Babcock & Brown Fees.................... 0.0 0.0 0.0
GPA Fees................................ 0.0 0.0 0.0
Other Overheads......................... 0.0 0.0 0.0
------- ------- -------
Net Loss................................ 0.0 0.0 0.0
======= ======= =======
</TABLE>
<PAGE> 89
AERCO GROUP -- BUDGET [THREE YEAR PERIOD]
- -----------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
Jun-99 Jun-00 Jun-01
<S> <C> <C> <C>
Aircraft GBV.......................... 0.0 0.0 0.0
Depreciation.......................... 0.0 0.0 0.0
Aircraft NBV.......................... 0.0 0.0 0.0
------ ------ ------
0.0 0.0 0.0
Deferred Financing Costs.............. 0.0 0.0 0.0
Receivables........................... 0.0 0.0 0.0
Cash.................................. 0.0 0.0 0.0
------ ------ ------
0.0 0.0 0.0
====== ====== ======
Retained Earnings..................... 0.0 0.0 0.0
Subclass E1 Principal................. 0.0 0.0 0.0
Subclass D1 Principal................. 0.0 0.0 0.0
Total Bonds Outstanding............... 0.0 0.0 0.0
Creditors/Accruals.................... 0.0 0.0 0.0
Maintenance........................... 0.0 0.0 0.0
Lessee Deposits....................... 0.0 0.0 0.0
------ ------ ------
Other Liabilities 0.0 0.0 0.0
------ ------ ------
0.0 0.0 0.0
====== ====== ======
</TABLE>
<PAGE> 90
AERCO GROUP -- BUDGET [THREE YEAR PERIOD]
- -------------------------------------------------------------------------------
CASH FLOW
<TABLE>
<CAPTION>
Jun-99 Jun-00 Jun-01
<S> <C> <C> <C>
CASH INFLOWS
Net Revenue............................. 0.0 0.0 0.0
Lessee Deposit Receipts................. 0.0 0.0 0.0
Interest Received....................... 0.0 0.0 0.0
------ ------ ------
Total Inflows........................... 0.0 0.0 0.0
CASH OUTFLOWS
Net Swap/Swaption Payments.............. 0.0 0.0 0.0
Lessee Deposit Returns.................. 0.0 0.0 0.0
Babcock & Brown Fees.................... 0.0 0.0 0.0
GPA Fees................................ 0.0 0.0 0.0
Overhead Payments....................... 0.0 0.0 0.0
Other Leasing Costs..................... 0.0 0.0 0.0
------ ------ ------
Total Outflows.......................... 0.0 0.0 0.0
Bond Interest Payments.................. 0.0 0.0 0.0
Bond Principal Payments................. 0.0 0.0 0.0
------ ------ ------
Distributions to Bond Holders........... 0.0 0.0 0.0
Opening Cash............................ 0.0 0.0 0.0
Total Inflows........................... 0.0 0.0 0.0
Total Outflows.......................... 0.0 0.0 0.0
Distributions to Bond Holders........... 0.0 0.0 0.0
------ ------ ------
Closing Cash............................ 0.0 0.0 0.0
====== ====== ======
</TABLE>
<PAGE> 91
AERCO GROUP -- BUDGET [ONE YEAR PERIOD]
- --------------------------------------------------------------------------------
CASH FLOW
<TABLE>
<CAPTION>
Jun-98 Sep-98 Dec-98 Mar-99 FY99
<S> <C> <C> <C> <C> <C>
CASH INFLOWS
Net Revenue.................... 0.0 0.0 0.0 0.0 0.0
Lessee Deposit Receipts........ 0.0 0.0 0.0 0.0 0.0
Interest Received.............. 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Total Inflows.................. 0.0 0.0 0.0 0.0 0.0
CASH OUTFLOWS
Net Swap/Swaption Payments..... 0.0 0.0 0.0 0.0 0.0
Lessee Deposit Returns......... 0.0 0.0 0.0 0.0 0.0
Babcock & Brown Fees........... 0.0 0.0 0.0 0.0 0.0
GPA Fees....................... 0.0 0.0 0.0 0.0 0.0
Overhead Payments.............. 0.0 0.0 0.0 0.0 0.0
Other Leasing Costs............ 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Total Outflows................. 0.0 0.0 0.0 0.0 0.0
Bond Interest Payments......... 0.0 0.0 0.0 0.0 0.0
Bond Principal Payments........ 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Distributions to Bond Holders.. 0.0 0.0 0.0 0.0 0.0
Opening Cash................... 0.0 0.0 0.0 0.0 0.0
Total Inflows.................. 0.0 0.0 0.0 0.0 0.0
Total Outflows................. 0.0 0.0 0.0 0.0 0.0
Distributions to Bond Holders.. 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Closing Cash................... 0.0 0.0 0.0 0.0 0.0
====== ====== ====== ====== ======
</TABLE>
<PAGE> 92
AERCO GROUP -- BUDGET [THREE YEAR PERIOD]
- --------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
Jul-98 Sep-98 Dec-98 Mar-99 Jun-99
<S> <C> <C> <C> <C> <C>
Aircraft GBV................... 0.0 0.0 0.0 0.0 0.0
Depreciation................... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Aircraft NBV................... 0.0 0.0 0.0 0.0 0.0
Deferred Financing Costs....... 0.0 0.0 0.0 0.0 0.0
Receivables.................... 0.0 0.0 0.0 0.0 0.0
Cash........................... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
0.0 0.0 0.0 0.0 0.0
====== ====== ====== ====== ======
Retained Earnings.............. 0.0 0.0 0.0 0.0 0.0
Subclass E1 Principal.......... 0.0 0.0 0.0 0.0 0.0
Subclass D1 Principal.......... 0.0 0.0 0.0 0.0 0.0
Total Bonds Outstanding........ 0.0 0.0 0.0 0.0 0.0
Creditors/Accruals............. 0.0 0.0 0.0 0.0 0.0
Maintenance.................... 0.0 0.0 0.0 0.0 0.0
Lessee Deposits................ 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Other Liabilities.............. 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
0.0 0.0 0.0 0.0 0.0
====== ====== ====== ====== ======
</TABLE>
<PAGE> 93
SCHEDULE 10.01
RENTAL FEE PERCENTAGE
In the event that AerCo exercises its right to extend the term of the
Servicing Agreement pursuant to the provisions of Section 10.01, then the
Rental Fee Percentage, to be calculated on July 15, 2008 and applicable to each
month during the remaining term of the Servicing Agreement, shall be the
greater of:
(a) 1.5% and
(b) 1.0% plus the Inflation Adjustment (calculated as set forth below)
provided that in no event shall the Rental Fee Percentage exceed 2.0%.
The Inflation Adjustment shall be calculated as follows:
[(CP12/CP11) - 1] x Year 1 Fees / Year 1 Rentals
where:
CP11 is the level of the US Consumer Price Index expressed as an index
number as of June 1998
CP12 is the level of the US Consumer Price Index expressed as an index
number as of June 2008
Year 1 Fees is the actual amount of the Retainer Fee and the Rental Fee
paid by AerCo to the Servicer from July 15, 1998 to July 15, 1999
Year 1 Rentals is the actual aggregate amount of Rent paid by the Lessees
from July 15, 1998 to July 15, 1999
78
<PAGE> 94
ANNEX 1
INSURANCE
1. MINIMUM COVERAGE AMOUNTS:
(a) HULL INSURANCE: With respect to any Aircraft, hull insurance and
political risk insurance, if necessary, shall be maintained in an amount equal
to the greatest of:
(i) the Note Target Price for such Aircraft (as such Note Target Price is
defined in any Indenture and as set forth on Schedule 1 hereto, as the same
shall be amended in writing from time to time by AerCo);
(ii) the appraised value for such Aircraft (as such appraised value is set
forth in Schedule 1 hereto, as the same shall be amended in writing from time to
time by AerCo;
(iii) 110% of the net book value of such Aircraft (as such net book value
is set forth in Schedule 1 attached hereto, as the same shall be amended in
writing from time to time by AerCo); and
(iv) such greater amounts as may be directed in writing by AerCo from time
to time; provided however, that in the event that an agreement with respect to
hull insurance or political risk insurance, if necessary, cannot be reached with
any particular Lessee pursuant to which such Lessee will pay the premiums to
procure such insurance in amounts consistent with the foregoing, hull insurance
shall be maintained in an amount equal to the greater of the amounts described
in clause (i) above and this clause (iv). Spare engines and parts, if any, shall
be insured on the basis of their "replacement costs".
(b) LIABILITY INSURANCE: Liability insurance shall be maintained for each
Aircraft Asset and occurrence in an amount equal to that set forth below, as the
same shall be amended in writing from time to time by AerCo.
<TABLE>
<CAPTION>
MODEL MINIMUM LIMIT
<S> <C>
F100 US $300 million
B737 US $400 million
MD83 US $400 million
A320 US $400 million
A300 US $550 million
B767 US $550 million
</TABLE>
79
<PAGE> 95
<TABLE>
<S> <C>
B757 US $450 million
B747 US $750 million
DC8 US $450 million
</TABLE>
2. INSURANCE DEDUCTIBLES:
(a) Deductibles and self-insurance for Aircraft Assets subject to a Lease
may be maintained in an amount pursuant to deductible and self-insurance
arrangements (taking into account, inter alia, the creditworthiness and
experience of the Lessee, the type of aircraft and market practices in the
aircraft insurance industry generally) consistent with the Servicer's
commercially reasonable practices for its own aircraft.
(b) Deductibles for Aircraft Assets off-lease shall be maintained in
respect of any one occurrence in respect of such Aircraft Assets in an amount
consistent with the Servicer's commercially reasonable practice for its own
aircraft with any difference between such amount and $200,000 (or such other
amount as AerCo may direct in writing from time to time), taking into account
any deductible insurance procured, to be notified to AerCo by the Servicer.
3. OTHER INSURANCE MATTERS:
Apart from the matters set forth above, the coverage and terms of any
insurance with respect to any Aircraft Assets not subject to a Lease shall be
substantially consistent with the reasonable commercial practices of the
Servicer with respect to its own aircraft.
4. ADDITIONAL INSUREDS:
Any insurance arrangements entered into with respect to any Aircraft Assets
shall include as named insureds such persons as are reasonably requested by
AerCo.
5. CURRENCIES:
Any insurance requirement stated in U.S. dollar terms shall be interpreted
to include the foreign currency equivalent thereto from time to time if any such
insurance related thereto is denominated in a currency other than U.S. dollars.
80
<PAGE> 96
6. AVAILABILITY:
The insurance guidelines set forth herein are subject to such insurance
being generally available in the relevant insurance market at commercially
reasonable rates from time to time.
81
<PAGE> 97
PAGE
SCHEDULE 4.02
DOCUMENTS
97
<PAGE> 98
Schedule 1 to Annex A
AERCO GROUP PORTFOLIO
<TABLE>
<CAPTION>
July 15, 1998 01-Mar-98 July 15, 1998
Aircraft Serial Net Book Value Net Book Value Initial Appraised Note Target Greatest of
No. Type Number @ July 15, 1998 @110% Value Price 1/2/3
1 2 3
880,000 --
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 B757-200 26153 42,373 46,610 42,373 40,345 46,610
2 B737-300 26068 25,683 28,251 25,683 24,453 28,251
3 A300-84-200 240 13,317 14,649 13,317 12,679 14,649
4 B737-300 24465 21,953 24,148 21,953 20,902 24,148
5 B737-300 24677 21,943 24,137 21,943 20,893 24,137
6 B737-400 25764 27,353 30,088 27,353 25,044 30,088
7 B737-400 25765 27,500 30,250 27,500 26,184 30,250
8 MD83 49952 22,920 25,212 22,920 21,825 25,212
9 A320-200 85 26,777 29,455 26,777 25,495 29,455
10 B737-400 24685 25,710 28,281 25,710 24,479 28,281
11 F100 11258 14,207 15,628 14,207 13,527 15,628
12 F100 11342 16,343 17,977 16,343 15,561 17,977
13 5767-300ER 24999 63,130 69,443 63,130 60,108 69,443
14 MD83 49627 21,283 23,411 21,283 20,264 23,411
15 MD83 49790 20,820 22,902 20,820 19,823 22,902
16 B757-200 26158 43,097 47,407 43,097 41,034 47,407
17 A320-200 299 31,290 34,419 31,290 29,792 34,419
18 A320-200 362 31,527 34,680 31,527 30,018 34,680
19 B737-400 23858 24,214 26,635 24,214 23,055 26,635
20 A320-200 991 32,883 36,171 32,883 31,309 36,171
21 B737-300 24909 24,157 26,573 24,157 23,001 26,573
22 B737-400 23979 24,667 27,134 24,667 23,486 27,134
23 B737-300 24906 24,367 26,804 24,367 23,200 26,804
24 B737-400 24904 26,430 29,073 26,430 25,165 29,073
25 B737-400 26066 28,143 30,957 29,143 26,796 30,957
26 F100 11341 16,163 17,779 16,163 15,389 17,779
27 F100 11350 16,710 18,381 16,710 15,910 18,381
28 F100 11351 16,313 17,944 16,313 15,532 17,944
29 B767-300ER 24947 62,470 68,717 62,470 59,479 68,717
30 B757-200 26152 41,680 45,848 41,680 39,685 45,848
31 A320-200 403 32,083 35,291 32,083 30,547 35,291
32 DC8-71F 46064 16,020 17,622 18,020 15,253 17,622
33 B747-200B 22496 31,270 34,397 31,270 29,773 34,397
34 B737-500 26067 21,180 23,298 21,180 20,166 23,298
35 DC8-71F 46040 15,997 17,597 15,997 15,231 17,597
951,973 1,047,170 951,973 906,400 1,047,170
</TABLE>
** Sum of Subclass A-1, A-2, B-1, C-1 and D-1 Notes on July 15, 1999.
<PAGE> 99
ANNEX 2
INDENTURE COVENANTS
SECTION 5.02(a) OF INDENTURE
No Release of Obligations. The company will not take, or knowingly permit
any subsidiary to take, any action which would amend, terminate (other than any
termination in connection with the replacement of such agreement with an
agreement on terms substantially no less favorable to the Company and its
subsidiaries than the agreement being terminated) or discharge or prejudice the
validity or effectiveness of the Indenture (other than as permitted therein),
the Security Trust Agreement, the Cash Management Agreement, the Administrative
Agency Agreement or any Servicing Agreement or permit any party to any such
document to be released from such obligations, except, in each case, as
permitted or contemplated by the terms of such document and provided that such
actions may be taken or permitted, and such releases may be permitted, if the
Company shall have first obtained an authorizing resolution of the Directors of
the Company determining that such action, permitted action or release does not
materially adversely affect the interests of the Noteholders, and provided
further, that in any case (i) the Company will not take any action which would
result in any amendment or modification to the conflicts standard or duty of
care in such agreements and (ii) there must be at all times an administrative
agent, a cash manager and, unless a Servicer resigns prior to the appointment of
a replacement servicer as a result of any failure to pay amounts due and owing
to it, one or more Servicers with respect to all Aircraft in the Portfolio.
<PAGE> 100
SECTION 5.02(b) OF INDENTURE
Limitation on Encumbrances. Under the terms of the Indenture, the Company
will not, and will not permit any subsidiary to, create, incur, assume or suffer
to exist any mortgage, pledge, lien, encumbrance, charge or security interest
(in each case, an "ENCUMBRANCE"), including,without limitation, any conditional
sale, any sale with recourse against the seller or any affiliate of the seller,
or any agreement to give any security interest over or with respect to any of
the Company's or subsidiary's assets (excluding Segregated Funds) including,
without limitation, all ordinary shares and preferred shares, any options,
warrants and other rights to acquire such shares of capital stock ("STOCK") and
any indebtedness of any subsidiary held by the Company or a subsidiary thereof.
Notwithstanding the foregoing, the Company may create, incur, assume or
suffer to exist (i) any Permitted Encumbrance, (ii) any security interest
created or required to be created under the Security Trust Agreement, (iii)
Encumbrances over rights in or derived from leases, upon confirmation from the
Rating Agencies in advance that such action or event will not result in the
lowering or withdrawal of any rating assigned by any Rating Agency to any of the
AerCo Notes then Outstanding, provided that any transaction or series of
transactions resulting in such Encumbrance, taken as a whole, does not
materially adversely affect the amount of Collections that would have been
received by the Company from such Lease had such Encumbrance not been created,
(iv) Encumbrances over any Aircraft, Leases or funds on deposit in the Tax
Defeasance Account or investments in respect thereof created in connection with
any Permitted Tax-Related Disposition or (v) any other Encumbrance the validity
or applicability of which is being contested in good faith in appropriate
proceedings by the Company or any of its subsidiaries.
As used in this Offering Memorandum, "AFFILIATE" means, with respect to any
person, any other person that, directly or indirectly, controls, is controlled
by or is under common control with, such person or is a director or officer of
such person; "CONTROL" of a person means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting Stock, by contract or
otherwise, and "PERMITTED ENCUMBRANCE" means (i) any lien for taxes, assessments
and governmental charges or levies not yet due and payable or which are being
contested in good faith by appropriate proceedings; (ii) in respect of any
Aircraft, any liens of a repairer, carrier or hanger keeper arising in the
ordinary course of business by operation of law or any engine or parts-pooling
arrangements or other similar lien; (iii) any permitted lien or encumbrance on
any Aircraft, Engines or parts as defined under any Lease thereof (other than
liens or encumbrances created by the relevant lessor); (iv) any liens created by
or through or arising from debt or liabilities or any act or omission of any
Lessee in each case either in contravention of the relevant Lease (whether or
not such Lease has been terminated) or without the consent of the relevant
Lessor (provided that if such Lessor becomes aware of any such lien, such Lessor
shall use commercially reasonable efforts to have any such liens lifted); (v)
any head lease, lease, conditional sale agreement or Purchase Option existing on
the Closing Date, with respect to the Initial Aircraft, or, with respect to any
Additional Aircraft, on the date such Aircraft is acquired, or Aircraft
Agreement meeting the requirements of clauses (iii), (v) or (vi) of the second
paragraph under the "Limitation on Aircraft Sales" covenant; (vi) any lien for
air navigation authority, airport tending, gate or handling (or similar) charges
or levies; (vii) any lien created in favor of the Company, or any of its
subsidiaries or the Security Trustee and (viii) any lien not referred to in (i)
through (vii) above which would not adversely affect the owner's rights and does
not exceed the greater of 1% of the aggregate Initial Appraised Value of the
Portfolio and $250,000 per Aircraft.
<PAGE> 101
SECTION 5.02(c) OF INDENTURE
Limitation on Restricted Payments. Under the terms of the Indenture, the
Company will not, and will not permit any of its subsidiaries, to (i) declare
or pay any dividend or make any distribution on its Stock held by persons other
than the Company or any of its subsidiaries; (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Stock of the Company or any of its
subsidiaries held by and on behalf of persons other than the Company, any of
its subsidiaries or other Persons permitted under the requirements of (ii)(B)
under the "Limitation on the Issuance. Delivery and Sale of Capital
Stock" covenant; (iii) make any interest, principal or premium payment on the
AerCo Notes or make any voluntary or optional repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of the Company or any of
its subsidiaries that is not owed to the Company or any of its subsidiaries
other than in accordance with, "-- Payment of Principal and Interest" or (iv)
make any investments (other than Permitted Account Investments, investments
permitted under the "Limitation on Engaging in Business Activities" covenant,
Allowed Restructurings and investments in any subsidiaries that own or lease
Aircraft).
The term "INVESTMENT" for purposes of the above restriction shall mean any
loan or advance to a person or entity, any purchase or other acquisition for any
capital stock, warrants, rights, options, obligations or other securities of
such person or entity, any capital contribution to such person or entity or any
other investment in such person or entity. For the avoidance of doubt,
"investment" shall not include any obligation of a purchaser of an Aircraft to
make deferred or installment payments pursuant to any Aircraft Agreement
specified in clauses (iii), (v) or (vi) of the second paragraph under
"Limitations on Aircraft Sales" below so long as AerCo Group retains a security
interest in the relevant Aircraft until all such obligations are discharged.
<PAGE> 102
SECTION 5.02(d) OF INDENTURE
Limitation on Dividends and Other Payment Restrictions. Under the terms of
the Indenture, the Company will not, and will not permit any of its
subsidiaries to, create or otherwise suffer to exist any consensual encumbrance
or restriction of any kind on the ability of any subsidiary to (i) declare or
pay dividends or make any other distributions permitted by applicable law, or
purchase, redeem or otherwise acquire for value, the Stock of the Company or
such subsidiary, as the case may be, (ii) pay any Indebtedness owed to the
Company or such subsidiary, (iii) make loans or advances to the Company or such
subsidiary or (iv) transfer any of its property or assets to the Company or any
other subsidiary thereof.
The foregoing provisions shall not restrict any consensual encumbrances or
other restrictions: (i) existing on the Closing Date, with respect to the
Initial Aircraft, or, with respect to any Additional Aircraft, on the date such
Aircraft is acquired, under any Related Document, and any amendments,
extensions, refinancings, renewals or replacements of such documents; provided
that such consensual encumbrances and restrictions in any such amendments,
extensions, refinancings, renewals or replacements are no less favorable in any
material respect to the holders of the AerCo Notes than those previously in
effect and being amended, extended, refinanced, renewed or replaced; or (ii) in
the case of clause (iv) in the preceding paragraph, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property or
asset or (B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or consensual encumbrance on, any property or
assets of the Company or any subsidiary not otherwise prohibited by the
Indenture. Nothing contained in this covenant shall prevent the Company or
any subsidiary from creating, incurring, assuming or suffering to exist any
Encumbrances not otherwise prohibited under the Indenture.
<PAGE> 103
SECTION 5.02(e) OF INDENTURE
Limitation on Engaging in Business Activities. Under the terms of the
Indenture, the Company will not, and will not permit any subsidiary to engage
in any business or activity other than:
(i) (A) purchasing or otherwise acquiring aircraft assets both directly
and indirectly through the acquisition of aircraft-owning entities (subject to
the limitations set forth in the "Limitation on Aircraft Acquisitions"
covenant) and (B) owning (including, subject to the limitations set forth in
the "Limitation on Aircraft Acquisitions" covenant, acquiring Additional
Aircraft), holding, converting, maintaining, modifying, managing, operating,
leasing, re-leasing and, subject to the limitations set forth in the
"Limitations on Aircraft Sales" covenant, selling or otherwise disposing of the
Aircraft (including Permitted Tax-Related Dispositions) and entering into all
contracts and engaging in all related activities incidental thereto, including
from time to time accepting, exchanging, holding or permitting any of its
subsidiaries to accept, exchange or hold (an "ALLOWED RESTRUCTURING")
promissory notes, contingent payment obligations or equity interests, of
Lessees or their affiliates issued in connection with the bankruptcy,
reorganization or other similar process, or in settlement of delinquent
obligations or obligations anticipated to be delinquent, of such Lessees or
their respective affiliates in the ordinary course of business;
(ii) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of, any AerCo Group Member or any Future AerCo
Entity, in each case on such terms and in such manner as the Directors see fit
and (whether or not the Company, any member of the AerCo Group or any future
AerCo entity derives a benefit therefrom) so long as such loans, guarantees or
other supports are provided in connection with the purposes set forth in clause
(i) of this covenant;
(iii) financing or refinancing the business activities described in
clause (i) of this covenant through the offer, sale and issuance of any
securities of the Company, upon such terms and conditions as the Directors see
fit, for cash or in payment or in partial payment for any property purchased or
otherwise acquired by AerCo Group or any Future AerCo Entity;
(iv) engaging in currency and interest rate exchange transactions for the
purposes of avoiding, reducing, minimizing, hedging against or otherwise
managing the risk of any loss, cost, expense or liability arising, or which may
arise, directly or indirectly, from any change or changes in the interest rate
or currency exchange rate or in the price or value of any of the property or
assets of the Company or any of its subsidiaries within limits determined by the
Directors from time to time and submitted to the Rating Agencies, including but
not limited to dealings, whether involving purchases, sales or otherwise, in
foreign currency, spot and forward interest rate exchange contracts, forward
interest rate agreements, caps, floors and collars, futures, options, swaps, and
any other currency, interest rate and other similar hedging arrangements and
such other instruments as are similar to, or derivatives of, any of the
foregoing.
(v) (A) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, syndicates or partnerships of all kinds in
any part of the world for the purposes set forth in clause (i) above, (B)
acquiring, holding and disposing of shares, securities and other interests in
any such company, syndicate or partnership and (C) disposing of shares,
securities and other interests in, or causing the dissolution of, any existing
subsidiary provided that any such disposition which results in the disposition
of an Aircraft meets the requirements set forth under the "Limitation on
Aircraft Sales" covenant; and
(vi) taking out, acquiring, surrendering and assigning policies of
insurance and assurances with any insurance company or companies which the
Company or any of its subsidiaries may think fit and paying the premiums
thereon.
<PAGE> 104
SECTION 5.02(f) OF INDENTURE
Limitation on Indebtedness. Under the terms of the Indenture, the Company
will not, and will not permit any of its subsidiaries to, incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, whether present or
future (in any such case, to "INCUR"), Indebtedness.
For the purposes of the Indenture, "INDEBTEDNESS" means, with respect to
any person at any date of determination (without duplication), (i) all
indebtedness of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto), (iv) all
obligations of such person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of purchasing such property or service or taking delivery and title thereto
or the completion of such services, and payment deferrals arranged primarily as
a method of raising finance or financing the acquisition of such property or
service, (v) all obligations of such person under a lease of (or other agreement
conveying the right to use) any property, whether real, personal or mixed, that
is required to be classified and accounted for as a capital lease obligation
under U.S. GAAP, (vi) all Indebtedness (as defined in clauses (i) through (v) of
this paragraph) of other persons secured by a lien on any asset of such person,
whether or not such Indebtedness is assumed by such person, and (vii) all
Indebtedness (as defined in clauses (i) through (v) of this paragraph) of other
persons guaranteed by such person.
Notwithstanding the foregoing, the Company and any subsidiary may incur
each and all of the following: (i) Indebtedness in respect of any AerCo Note
issued on the Closing Date and any Subclass D-1 Notes and Subclass E-1 Notes
issued in respect of any Remaining Aircraft or Substitute Aircraft; (ii)
Indebtedness in respect of any Refinancing Notes or other Indebtedness issued in
connection with the repurchase, acquisition, defeasance or retirement for value
of AerCo Notes; provided that (A) such Refinancing Notes or other Indebtedness
receive ratings from the Rating Agencies at the close of such Refinancing or
issuance equal to or higher than those of the subclass being refinanced or
repurchased, acquired, defeased or retired (determined at the date of
incurrence), (B) taking into account such Refinancing or repurchase,
acquisition, defeasance or retirement for value, the Company receives
confirmation prior to such transaction from the Rating Agencies that such
transaction will not result in the lowering or withdrawal of any rating assigned
by any Rating Agency to any AeroCo Notes Outstanding at such time, and (C) the
net proceeds of any such Refinancing or issuance shall be used only to repay the
Outstanding Principal Balance of the subclass of the AeroCo Notes being so
refinanced or repurchased, acquired, defeased or retired (plus any Redemption
Premium and transaction expenses relating thereto); (iii) Indebtedness in
respect of guarantees by AerCo or any subsidiary of any other member of AerCo
Group (other than guarantees described in clause (v)); provided that no such
Indebtedness in respect of any member of AerCo Group other than AerCo or any
subsidiary of AerCo shall be incurred if it would materially adversely affect
the AerCo Noteholders; (iv) Indebtedness in respect of any Additional Notes
incurred in connection with a Permitted Additional Aircraft Acquisition;
provided that (A) taking into account the incurrence of such Indebtedness, AerCo
receives confirmation prior thereto that the incurrence of such Indebtedness
will not result in the lowering or withdrawal of any rating assigned by any
Rating Agency to any subclass of the AerCo Notes Outstanding at such time and
(B) the net proceeds of such Indebtedness shall be used only to finance such
Permitted Additional Aircraft Acquisition; (v) Indebtedness in respect of
guarantees by AerCo or any subsidiary of Indebtedness incurred by any Future
AerCo Entity (other than a subsidiary of AerCo) in connection with a Permitted
Additional Aircraft Acquisition; provided that (A) such Future AerCo Entity
shall have guaranteed the AerCo Notes, (B) the Indebtedness being guaranteed
would be permitted pursuant to clause (ii) or (iv) above if such Indebtedness
were incurred directly by AerCo or any subsidiary in connection with such
Permitted Additional Aircraft Acquisition and (C) the Indebtedness being
guaranteed was issued by such Future AerCo Entity under an indenture, the terms
of which (including the covenants and other obligations of such Future AerCo
Entity thereunder) are substantially similar to those of the Indenture; (vi)
Indebtedness to aircraft sellers pursuant to aircraft acquisition or similar
agreements;
<PAGE> 105
(vii) Indebtedness under intercompany loans or any agreement between AerCo or
any of its subsidiaries and any other members of AerCo Group (each an
"INTERCOMPANY LOAN"); provided that any Indebtedness owed by any member of
AerCo Group to AerCo shall be evidenced by promissory notes that are pledged to
the Security Trustee, (viii) Indebtedness of AerCo Group under any credit or
liquidity enhancement facility provided in favor of AerCo Group and (ix)
obligations to each investor or other person in respect of the cash proceeds in
the Tax Defeasance Account and any Subordinated Tax-Related Payments pursuant
to the related Permitted Tax-Related Disposition and any related assignment and
assumption agreements and documents related thereto.
As used in this Offering Memorandum, "GUARANTEE" means any obligation,
contingent or otherwise, of any person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
person or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "GUARANTEE" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "GUARANTEE"
when used as a verb has a corresponding meaning.
<PAGE> 106
SECTION 5.02(g) OF INDENTURE
Limitation on Aircraft Sales. Under the terms of the Indenture, the Company
will not, and will not permit any of its subsidiaries to, sell, transfer or
otherwise dispose of any Aircraft or any interest therein.
Notwithstanding the foregoing, the Company and any of its subsidiaries will
be permitted to sell, transfer or otherwise dispose of, directly or indirectly,
(a) any engines owned on the Closing Date, with respect to the Initial Aircraft,
or, with respect to any Remaining Aircraft, Substitute Aircraft or Additional
Aircraft, on the date such Aircraft is acquired, or any replacements thereof
("ENGINES") or parts installed in or attached to any Aircraft other than Engines
("PARTS"), or (b) one or more Aircraft or an interest therein (i) pursuant to a
Purchase Option or other agreements of a similar character existing on the
Closing Date, with respect to the Initial Aircraft, or with respect to any
Remaining Aircraft, Substitute Aircraft or Additional Aircraft, on the date such
Aircraft is acquired, (ii) within or among the Company and its subsidiaries
without limitation, and among the Company or any of its subsidiaries and any
other member of AerCo Group if such sale, transfer or disposition, as the case
may be, would not materially adversely affect the AerCo Noteholders, (iii)
pursuant to any Aircraft Agreement as long as such sale does not result in a
Concentration Default, and the net present value of the cash Net Sale Proceeds
is not less than the Note Target Price, (iv) pursuant to receipt of insurance
proceeds in connection with an event of loss, (v) pursuant to an Aircraft
Agreement that is designed to allow a person unrelated to the Company or any
other member of the AerCo Group to realize tax benefits associated with the
Aircraft or other assets being sold (any such sale, transfer or other
disposition, a "PERMITTED TAX-RELATED DISPOSITION"), provided that the Company
receives confirmation prior to entering into such Aircraft Agreement that the
performance of such agreement will not result in the lowering or withdrawal of
any rating assigned by any Rating Agency to each subclass of AerCo Notes
Outstanding at such time and all obligations of the Company or any other member
of AerCo Group (other than the obligation to pay the Tax Defeasance Amount)
under such Aircraft Agreement or to any person provided credit support for such
obligations are payable only under Subordinated Tax-Related Disposition Payments
as set forth under "--Priority of Payments", or (vi) pursuant to an Aircraft
Agreement and, in any one calendar year, not exceeding 10% of the Adjusted
Portfolio Value as determined by the most recent Appraisal obtained for such
calendar year; provided that (x) the Directors unanimously confirm that each
such sale does not materially adversely affect AerCo and the AerCo Noteholders
and (y) such sale does not result in a Concentration Default.
For the purpose of this covenant, the net present value of the cash Net
Sale Proceeds of any sale, transfer or other disposition of any Aircraft shall
mean the present value of all payments received or to be received by AerCo Group
in respect of such Aircraft from the date of execution or option granting date,
as the case may be, of the relevant Aircraft Agreement through and including the
date of transfer of title to such Aircraft, discounted back to the date of
execution or option granting date, as the case may be, of such Aircraft
Agreement at the weighted average cost of funds of AerCo Group (based on the
cost of funds on the Payment Date immediately preceding such date (excluding for
such purpose any interest paid or accrued on the Class E Notes other than the
Class E Notes Interest Amount, but taking into account any Swap Agreements)).
The "NOTE TARGET PRICE" means, in respect of any Aircraft, an amount equal
to 103% of the aggregate Outstanding Principal Balance of Class A, Class B,
Class C and Class D Notes, together with any accrued but unpaid interest thereon
and any related Swap Breakage Costs, allocable to such Aircraft on the date of
the sale agreement or purchase option date, as the case may be. On any date, the
Outstanding Principal Balance of Class A, Class B, Class C and Class D Notes
allocable to an Aircraft will equal the product of (i) (A) the Adjusted Base
Value of such Aircraft divided by (B) the Adjusted Portfolio Value and (ii) the
aggregate Outstanding Principal Balance of the Class A, Class B, Class C and
Class D Notes, in each case on the most recent Payment Date.
<PAGE> 107
"AIRCRAFT AGREEMENT" means any lease, sub-lease, conditional sale
agreement, finance lease, hire purchase agreement or other agreement (other than
an agreement relating to maintenance, modification or repairs) or any purchase
option granted to a person other than the Company or its subsidiaries or any
other member of AerCo Group to purchase an Aircraft pursuant to a purchase
option agreement, in each case pursuant to which any person acquires or is
entitled to acquire legal title, or the economic benefits of ownership of, such
Aircraft.
"NET SALE PROCEEDS" means, with respect to any sale or other disposition of
any assets, the aggregate amount of cash received or to be received from time to
time (whether as initial or deferred consideration) by or on behalf of the
seller in connection with such transaction after deducting therefrom (without
duplication) (a) reasonable and customary brokers' commissions and other similar
fees and commissions (including fees received by the Servicer under the
Servicing Agreement) and (b) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid to a person that is not an affiliate of the seller and are
properly attributable to such transaction or to the asset that is the subject
thereof.
"CONCENTRATION DEFAULT" means an Event of Default under "Operating
Covenants -- Concentration Limits", as such covenant may be adjusted from time
to time upon approval of the Rating Agencies, which would arise if effect were
given to any sale, transfer or other disposition or any purchase or other
acquisition as of the date of the binding sale or purchase agreement regardless
of whether such sale, transfer or other disposition or purchase or other
acquisition is scheduled or expected to occur after the date of such binding
agreement.
<PAGE> 108
SECTION 5.02(h) OF INDENTURE
Limitation on Aircraft Acquisitions. Under the terms of the Indenture, the
Company will not, and will not permit any of its subsidiaries, to purchase or
otherwise acquire any Aircraft other than the Initial Aircraft or any interest
therein.
Notwithstanding for foregoing, the Company and any of its subsidiaries
will be permitted to: (A) purchase or otherwise acquire, directly or
indirectly. Additional Aircraft; provided that (i) no Event of Default shall
have occurred and be continuing, (ii) all Scheduled Principal Payment Amounts
on the AerCo Notes have been paid, (iii) the acquisition does not result in a
Concentration Default, and (iv) after giving effect to such acquisition, no
more than 90% by appraised Base Value of the Portfolio consists of Stage 3
narrowbody aircraft and regional jets, no more than 50% consists of Stage 3
widebody aircraft and no more than 15% consists of Stage 2 aircraft and
turboprop aircraft without the Directors of the Company having obtained
confirmation in advance that such action will not result in the lowering or
withdrawal of any rating assigned by any Rating Agency to any of the AerCo
Notes Outstanding at such time; (B) act as sponsor of a Future AerCo Entity
other than a subsidiary of AerCo that would fund an acquisition of aircraft
assets with indebtedness guaranteed by AerCo pursuant to the "Limitation on
Indebtedness" covenant as described above; provided that, if such acquisition
of aircraft assets had been consummated directly by AerCo, such acquisition
would have been permitted pursuant to the preceding clause (A) (each of the
transactions described in clauses (A) and (B), a "PERMITTED ADDITIONAL AIRCRAFT
ACQUISITION"); and (C) purchase or otherwise acquire, directly or indirectly,
Remaining Aircraft or Substitute Aircraft.
<PAGE> 109
SECTION 5.02(i) OF INDENTURE
Limitation on Modification Payments and Capital Expenditures. Under the
terms of the Indenture, the Company will not, and will not permit any of its
subsidiaries to, make any capital expenditures for the purpose of effecting any
optional improvement or modification of any Aircraft, or for the optional
conversion of any Aircraft from a passenger aircraft to a freighter or mixed-use
aircraft, for the purpose of purchasing or otherwise acquiring any Engines or
Parts outside of the ordinary course of business (each such expenditure, a
"MODIFICATION PAYMENT"). Notwithstanding the foregoing, the Company may, and may
permit any of its subsidiaries to, make Modification Payments; provided that (i)
each Modification Payment, together with all other Modification Payments made
after the Closing Date pursuant to the covenant with respect to any single
Aircraft, do not exceed the aggregate amount of funds that would be necessary to
perform heavy maintenance (as described in the applicable servicing agreement)
on such Aircraft, including the airframe and the related Engines thereof; (ii)
such Modification Payment is included in the annual operating budget of AerCo
Group and approved by the Directors; (iii) the amount of funds necessary to make
such Modification Payment shall have been accrued in advance as a Permitted
Accrual in the Expense Account through transfers into the Expense Account
pursuant to the Indenture or otherwise allowed to be paid under Permitted
Indebtedness; and (iv) the aggregate amount of all Modification Payments made by
members of AerCo Group, taken as a whole, pursuant to this covenant after the
Closing Date, including such Modification Payment, shall not exceed 5% of the
aggregate Initial Appraised Value of all Aircraft acquired by AerCo Group.
<PAGE> 110
SECTION 5.02(j) OF INDENTURE
Limitation on Consolidation, Merger and Transfer of Assets. Under the terms
of the Indenture, the Company will not, and will not permit any subsidiary to,
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of its property and assets (as an entirety or substantially an
entirety in one transaction or in a series of related transactions) to, any
other person, or merit any other person to merge with or into the Company or any
subsidiary, unless (i) the resulting entity is a special purpose corporation,
the charter of which is substantially similar to the Memorandum and Articles of
Association of the Company or the equivalent charter document of such
subsidiary, as the case may be, and, after such consolidation, merger, sale,
conveyance, transfer, lease or other disposition, payments from such resulting
entity to the holders of the AerCo Notes do not give rise to any withholding tax
payments less favorable to the holders of AerCo Notes than the amount of any
withholding tax payments which would have been required had such event not
occurred, (ii) in the case of consolidation, merger or transfer by the Company,
the surviving successor or transferee entity shall expressly assume all of the
obligations of the Company in the Indenture, the AerCo Notes and each other
Related Document to which the Company is then a party, (iii) the Directors shall
have obtained confirmation in advance that such action or event will not result
in the lowering or withdrawal of any rating assigned by any Rating Agency to any
of the AerCo Notes, (iv) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing, and (v) the Company
delivers to the Trustee an officers' certificate and an opinion of counsel, in
each case stating that such consolidation, merger or transfer and such
supplemental indenture comply with the above criteria and, if applicable, the
"Limitation on Aircraft Sales" covenant and that all conditions precedent
provided for in the Indenture relating to such transaction have been complied
with; provided that this covenant shall not apply to any such consolidation,
merger, sale, conveyance, transfer, lease or disposition (a) within and among
the Company and any of its subsidiaries and among AerCo Group is such
consolidation merger, sale, conveyance, transfer, lease or disposition, as the
case may be, would not materially adversely affect the holders of the AerCo
Notes, (b) complying with the terms of the "Limitation on Aircraft Sales"
covenant or (c) effected as part of a single transaction providing for the
redemption or defeasance of the AerCo Notes in accordance with the terms thereof
as described under "-- Redemption" or "-- Defeasance", respectively.
<PAGE> 111
SECTION 5.02(k) OF INDENTURE
Limitation on Transactions with Affiliates. Under the terms of the
Indenture, the Company will not, and will not permit any subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with GPA or any affiliate of the
Company or any subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such subsidiary than could be obtained, at the time
of such transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a person that is not
such an affiliate.
The foregoing limitation does not limit, and shall not apply to: (i) any
transaction pursuant to the terms of the Related Documents; (ii) any
transaction within and among the Company or any of its subsidiaries and any
other member of the AerCo Group, provided, that no such transaction, other than
between the Company and any of its subsidiaries, shall be consummated if it
would materially adversely affect the holders of the AerCo Notes; (iii) the
payment of reasonable and customary regular fees to, and the provision of
reasonable and customary liability insurance in respect of, Directors; (iv) any
Permitted Additional Aircraft Acquisition or any transaction complying with the
"Limitation on Aircraft Sales" covenant; (v) any payments of the types referred
to in clauses (i) or (ii) of the "Limitation on Restricted Payments" covenant
and not prohibited thereunder, and (vi) entering into any transaction effected
as part of a single transaction providing for the redemption or defeasance of
the AerCo Notes in accordance with the terms thereof as described under
"-- Redemption" or "-- Defeasance", respectively.
<PAGE> 112
SECTION 5.02(l) OF INDENTURE
Limitation on the Issuance, Delivery and Sale of Stock. Under the terms of
the Indenture, the Company will not (i) issue, deliver or sell any shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting, other than such shares, interests, participations or other
equivalents existing on the Closing Date) in equity, including without
limitation, all ordinary shares of the Company, or (ii) sell, or permit any
subsidiary, directly or indirectly, to issue, deliver or sell, any shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting, other than such shares, interests, participations or other
equivalents existing on the Closing Date) in equity except (A) to the Charitable
Trust Trustee, (B) issuances or sales of shares of Stock of foreign subsidiaries
of the Company to nationals in the jurisdiction of incorporation or organization
of such subsidiary, as the case may be, to the extent required by applicable law
or necessary in the determination of the Directors to avoid an adverse tax
consequence in any such jurisdiction, (C) the pledge of shares in AerCo's
subsidiaries pursuant to the Security Trust Agreement. (D) the sale, delivery or
transfer of any Stock of any member of AerCo Group in connection with the
redemption or defeasance of the AerCo Notes, in accordance with the terms set
forth under "-- Redemption" or "-- Defeasance", respectively. (E) the sale of
any Stock in connection with any sale of Aircraft in compliance with the terms
of the "Limitation on Aircraft Sales" covenant and (F) the sale, delivery,
transfer or pledge of any Stock of any AerCo Group member to or for the benefit
of any other AerCo Group member.
In addition, under the terms of the Shareholders Undertaking, the
Charitable Trust Trustee and GPA Group will agree that while the AerCo Notes are
outstanding they will not, without prior written approval of the Trustee and all
of the Directors, take any action in their capacity as shareholders of the
Company to alter the share capital or issue any additional shares of the
Company.
<PAGE> 113
SECTION 5.03(a) OF INDENTURE
CONCENTRATION THRESHOLDS
Concentration Limits. Unless the Directors obtain prior written
confirmation from each of the Rating Agencies that no lowering or withdrawal of
the then current rating of any subclass of AerCo Notes will result, AerCo will
not permit any of its subsidiaries to lease or re-lease any Aircraft if entering
into such proposed lease would cause the Portfolio (excluding any Aircraft then
subject to an Aircraft Agreement and to be disposed of within one year from the
date of effectiveness of such lease (other than any Aircraft with respect to
which AerCo Group has entered into a binding agreement to acquire and which the
Directors reasonably expect to acquire within 180 days from the date of
effectiveness of such agreement) but including any Aircraft with respect to
which a member of AerCo Group retains an interest including a right to lease
rentals or other payments, finance lease payments, installment purchase payments
or any other payments with respect to such Aircraft) to exceed any of the
concentration limits set forth below (the "CONCENTRATION LIMITS"; provided that
the Indenture will permit breaches of such Concentration Limits upon any
renewal, extension or restructuring of any Lease.
<TABLE>
<CAPTION>
PERCENTAGE OF
LESSEE CONCENTRATION LIMITS MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
---------------------
<S> <C>
Single Lessees rated BBB/Baa2 (or the equivalent) or better ....... 15%
Other Single Lessees .............................................. 10%
Five largest Lessees .............................................. 35%
PERCENTAGE OF
COUNTRY CONCENTRATION LIMITS MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
---------------------
United States ..................................................... 25%
Countries rated BBB/Baa2 (or the equivalent) or better(1).......... 20%
Other ............................................................. 15%
PERCENTAGE OF
REGION CONCENTRATION LIMITS MOST RECENT APPRAISED
VALUE OF PORTFOLIO(2)
----------------------
Developed Market Region(3) ........................................ 50%
Emerging Market Region(3) ......................................... 25%
Other(3) .......................................................... 20%(4)
Asia/Pacific(3) ................................................... 55%
</TABLE>
_______________
(1) Based on the sovereign foreign currency debt rating assigned by the
Rating Agencies to the country in which a Lessee is habitually based
at the time the relevant Lease is executed.
(2) Percentage to be obtained by dividing the aggregate most recent
Appraised Values of all Aircraft operating or to be operated by
Lessees habitually based in the applicable country or region by the
aggregate most recent Appraised Values of all Aircraft then owned by
AerCo Group.
(3) The designations of Emerging Markets and Developed Markets are as
determined and published by Capital International Perspective S.A.
("MSCI") from time to time based on, among other things, gross
domestic product levels, regulation of foreign ownership of assets,
applicable regulatory environment, exchange controls and perceived
investment risk. The current designations are as set out below:
<PAGE> 114
<TABLE>
<CAPTION>
REGION COUNTRY
- ------ -------
<S> <C>
Developed Markets
Europe.............. EU (except Greece and Luxembourg), Norway and Switzerland
North America....... Canada and United States
Pacific............. Australia, Hong Kong, Japan, New Zealand and Singapore
Emerging Markets
Asia................ China, India, Indonesia, South Korea, Malaysia, Pakistan, Philippines,
Sri Lanka, Taiwan and Thailand
Europe and
Middle East....... Czech Republic, Greece, Hungary, Israel, Jordan, Poland, Russia and
Turkey
Latin America....... Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela
Other................. All other countries (generally those that have small or undeveloped
capital markets, including Fiji)
</TABLE>
(4) In addition, within the "Other" designation, no more than 10% of the
most recent Appraised Value of the Portfolio shall be leased to
Lessees habitually based in "Other" countries rated below BBB/Baa2 (or
the equivalent) and no more than 5% of the most recent Appraised Value
of the Portfolio shall be leased to Lessees habitually based in
"Other" countries in Africa.
In addition, the Indenture will not permit the Company or any subsidiary to
lease Aircraft operated or to be operated by Lessees domiciled in (i) certain
countries and (ii) certain other countries without procuring political risk
insurance. The list of prohibited countries and countries with respect to which
political risk insurance must be procured may be modified from time to time upon
the approval of the Rating Agencies.
The Indenture contains no limitations with respect to the country or region
where any sublessees of Aircraft operated or to be operated are domiciled if
(i) such sublease is permitted under the relevant Lease (including by reason of
consent or waiver, if applicable) or renewed Lease (including by reason of
consent or waiver, if applicable) and (ii) the relevant Lessee is either a
signatory to a Lease or a renewed Lease.
<PAGE> 115
SECTION 5.03(b) OF INDENTURE
Compliance with Law. Maintenance of Permits. Under the terms of the
Indenture, the Company will (i) comply, and cause each of its subsidiaries to
comply, in all material respects with all applicable laws, (ii) obtain, and
cause each of its subsidiaries to obtain, all material governmental (including
regulatory) registrations, certificates, licenses, permits and authorizations
required for such person's use and operation of the Aircraft, including, without
limitation, a current certificate of airworthiness for each Aircraft (issued by
the applicable aviation authority and in the appropriate category for the nature
of operations of such Aircraft), except that (A) no certificate of airworthiness
shall be required for any Aircraft (x) during any period when such Aircraft is
undergoing maintenance, modification or repair, (y) following the withdrawal or
suspension by such applicable aviation authority of certificates of
airworthiness in respect of all aircraft of the same model or period of
manufacture as such Aircraft (in which case the Company shall comply, and cause
each of its subsidiaries to comply, with all directions of such applicable
aviation authority in connection with such withdrawal or suspension), (B) no
registration, certificates, licenses, permits or authorizations required for the
use or operation of any Aircraft need be obtained with respect to any period
when such Aircraft is not being operated and (C) no such registrations,
certificates, licenses, permits or authorizations shall be required to be
maintained for any Aircraft that is not the subject of a Lease, except to the
extent required under applicable laws, (iii) not cause or knowingly permit,
directly or indirectly, through any of its subsidiaries, any Lessee to operate
any Aircraft under any Lease in any material respect contrary to any applicable
law and (iv) not knowingly permit, directly or indirectly, through any of its
subsidiaries, any Lessee not to obtain all material governmental (including
regulatory) registrations, certificates, licenses, permits and authorizations
required for such Lessee's use and operation of any Aircraft under any operating
Lease except as provided, mutatis mutandis, in clauses (ii)(A) and (ii)(B)
above.
The foregoing covenant shall not be deemed to have been breached by virtue
of any act or omission of a Lessee or sub-lessee, or of any person which has
possession of the Aircraft or any Engine for the purpose of repairs,
maintenance, notification or storage, or by virtue of any requisition, seizure,
or confiscation of the Aircraft (other than seizure or confiscation arising from
a breach by the Company or a subsidiary of such covenant) (each, a "THIRD PARTY
EVENT"); provided that (i) no member of AerCo Group consents or has consented to
such Third Party Event; and (ii) the member of AerCo Group which is the lessor
or owner of such Aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor or owner
would reasonably take in respect of such Third Party Event, including, as deemed
appropriate (taking into account, amount other things, the laws of the
jurisdictions in which the Aircraft are located), seeking to compel such Lessee
or other relevant person to remedy such Third Party Event or seeking to
repossess the relevant Aircraft or Engine.
<PAGE> 116
SECTION 5.03(c) OF INDENTURE
Appraisal of Portfolio. Under the terms of the Indenture, the Company will, no
earlier than 90 nor later than 30 days prior to March 31 of each year, deliver
to the Trustee appraisals of the Base Value of each of the Aircraft, from at
least three independent appraisers that are members of the International
Society of Transport Aircraft Trading or any similar organization, each such
appraisal to be dated within 30 days prior to its delivery to the Trustee.
<PAGE> 117
SECTION 5.03(d) OF INDENTURE
Maintenance of Assets. Under the terms of the Indenture, the Company will
(i) with respect to each Aircraft and Engine that is subject to a Lease, cause
directly or indirectly, through any of its subsidiaries, such Aircraft and
Engine to be maintained in a state of repair and condition consistent with the
requirements of reasonable commercial practice of leading international aircraft
operating lessors with respect to similar aircraft under lease, taking into
consideration, among other things, the identity of the relevant Lessee
(including the credit standing and operating experience thereof), the age and
condition of the Aircraft and the jurisdiction in which such Aircraft will be
operated or registered under such Lease, and (ii) with respect to each Aircraft
that is not subject to a Lease, maintain, and cause each of its subsidiaries to
maintain, such Aircraft in a state of repair and condition consistent with the
reasonable commercial practice of leading international aircraft operating
lessors with respect to aircraft not under lease. No breach of this covenant,
however, shall be deemed to have occurred by virtue of any Third Party Event;
provided that (i) no member of AerCo Group consents or has consented to such
Third Party Event; and (ii) the member of AerCo Group which is the lessor or
owner of such Aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor would
reasonably take in respect of such Third Party Event, including as deemed
appropriate, seeking to compel such Lessee or other relevant person to remedy
such Third Party Event or seeking to repossess the relevant Aircraft or Engine.
<PAGE> 118
SECTION 5.03(e) OF INDENTURE
Notification of Trustee, Cash Manager and Administrative Agent. Under the
terms of the Indenture, the Company will notify the Trustee, Cash Manager and
Administrative Agent as soon as the Company or any of its subsidiaries becomes
aware of any loss, theft, damage or destruction to any Aircraft or Engine if the
potential cost of repair or replacement of such asset (without regard to any
insurance claim related thereto) may exceed $2,000,000.
<PAGE> 119
SECTION 5.03(f) OF INDENTURE
Leases. Under the terms of the Indenture, the Company shall adopt and will
agree to cause the Servicer to use, and will adopt and will agree to cause any
additional Servicer (including any servicer appointed in respect of any
Additional Aircraft or to replace the Servicer in respect of the Initial
Aircraft, an "ADDITIONAL SERVICER") to use, the pro forma lease agreement or
agreements then used by the Servicer or such Additional Servicer, as the case
may be, in connection with its aircraft operating leasing services business
generally, as such pro forma lease agreement or agreements may be revised from
time to time by the Servicer or such Additional Servicer (the "SERVICER'S PRO
FORMA LEASE"), on behalf of each member of AerCo Group as a starting point in
the negotiation of Future Leases with persons who are not members of AerCo
Group; provided, that with respect to any Future Lease entered into in
connection with (x) the renewal or extension of a Lease, (y) the leasing of an
Aircraft to a person that is or was a Lessee under a pre-existing Lease or (z)
the leasing of an Aircraft to a person that is or was a lessee under an
operating lease of an aircraft that is being managed or serviced by the Servicer
or such Additional Servicer, as the case may be (such Future Lease, a "RENEWAL
LEASE"), a form of lease substantially similar to such pre-existing Lease or
operating lease (a "PRECEDENT LEASE"), as the case may be, may, in lieu of the
Servicer's Pro Forma Lease, be used by the Servicer or such Additional Servicer,
as the case may be, on behalf of any member of AerCo Group as a starting point
in the negotiation of such future lease with persons who are not members of
AerCo Group or a Future AerCo Entity.
<PAGE> 120
SECTION 5.03(g) OF INDENTURE
Opinions. Under the terms of the Indenture, the Company will not enter into
and will not permit any of its subsidiaries to enter into, any Future Lease with
any person that is not a member of AerCo Group or change the jurisdiction of
registration of any Aircraft that is subject to a Lease, unless, upon entering
into such Future Lease or changing the jurisdiction of registration of such
Aircraft (or within a commercially reasonable period thereafter), the Servicer
or Additional Servicer, as the case may be, obtains such legal opinions, if any,
with regard to compliance with the registration requirements of the relevant
jurisdiction, enforceability of the Future Lease and such other matters
customary for such transactions to the extent that receiving such legal opinions
is consistent with the reasonable commercial practice of leading international
aircraft operating lessors.
<PAGE> 121
SECTION 5.03(h) OF INDENTURE
Insurance. Under the terms of the Indenture, the Company will maintain or
cause, directly or indirectly through its subsidiaries, to be maintained with
reputable and responsible insurers or with insurers that maintain relevant
reinsurance with reputable and responsible reinsurers (i) airline hull insurance
for each Aircraft in an amount at least equal to the Note Target Price for such
Aircraft (or the equivalent thereof from time to time if such insurance is
denominated in a currency other than U.S. dollars), (ii) airline liability
insurance for each Aircraft and occurrence on an amount at least equal to the
relevant amounts set forth in the Indenture for each model of aircraft and (iii)
airline political risk insurance ("PRI") for each Aircraft subject to a Lease
and habitually based in a jurisdiction determined in accordance with the PRI
guidelines, as set forth in the Indenture and as amended from time to time by
the Directors in an amount at least equal to the Note Target Price (or the
equivalent thereof from time to time if such insurance is denominated in a
currency other than U.S. dollars) for such Aircraft; provided, however, that,
with respect to any such insurance for any Aircraft, such insurance may be
subject to commercially reasonable deductibles and self-insurance arrangements
(taking into account, inter alia, the creditworthiness and experience of the
Lessee, if any, the type of aircraft and market practices in the aircraft
insurance industry generally). The coverage and terms (including endorsements)
of any insurance maintained with respect to any Aircraft not subject to a Lease
shall be substantially consistent with the commercial practices of leading
international aircraft operating lessors regarding similar aircraft.
In determining the amount of insurance required to be maintained, the
Company may take into account any indemnification from, or insurance provided
by, any governmental, supranational or inter-governmental authority or agency
(other than, with respect to PRI, any governmental authority or agency of any
jurisdiction for which PRI must be obtained), the sovereign foreign currency
debt rating of which is rated AA, or the equivalent, by at least one of the
Rating Agencies, against any risk with respect to an Aircraft at least in an
amount which, when added to the amount of insurance against such risk maintained
by the Company (or which the Company has caused to be maintained), shall be at
least equal to the amount of insurance against such risk otherwise required by
the covenant (taking into account self-insurance permitted by the covenant). Any
such indemnification or insurance provided by such government shall provide
substantially similar protection as the insurance required by the covenant. The
Company will not be required to maintain (or to cause to be maintained) any
insurance otherwise required hereunder to the extent that such insurance is not
generally available in the relevant insurance market from time to time.
<PAGE> 122
SECTION 5.03(i) OF INDENTURE
Indemnity. Under the terms of the Indenture, the Company will, and will
cause each of its subsidiaries to include in each Lease between a member of the
AerCo Group and a person who is not a member of the AerCo Group an indemnity in
respect of the Lease in respect of any losses or liabilities arising from the
use or operation of the Aircraft during the term of such Lease, subject to such
exceptions, limitations and qualifications as are consistent with the reasonable
commercial practices of leading international aircraft operating lessors.
<PAGE> 123
Schedule 8 to
Schedule 2.02(a)
WEEKLY, MONTHLY AND QUARTERLY REPORTS
82
<PAGE> 124
AerCo - Servicer Reports
<PAGE> 125
AERCO - SERVICER REPORTS
1 WEEKLY
(a) Commercial Report
- Narrative report giving a detailed update on AerCo activities for
the previous week. Relevant documentation to be attached (e.g.
LOls, New Leases, Sales, amendments). Commentary on background to
each new transaction
- Headings to be covered each week (giving details of any new
transactions: Leasing Activity; Sales Activity; Aircraft Purchases;
Report on Lessee and/or Lessor options; Default Notices Issued;
Update on AOG remarketing efforts & costs.
- Summary of financial terms of all transactions of previous week
(incl comparison with budget, new lease structures, intercompany
margins etc)
- Report on any Lessee Default (other than payment default) and
lessee claims against AerCo of which the Servicer is aware.
(b) Receivables/Financial Report
- Report giving details of all cash receivable, (showing rentals,
maintenance, interest and other) received and allocations during
the previous pre-agreed period split between current, arrears and
advance
- Receivables summary (split between deferred & non deferred)
detailing receivable outstanding by lessee, age, amounts from non
current lessees, weekly comparison of movement and commentary on
lessees current payment record.
- Report on unallocated cash, cash promised by Lessees and any other
relevant items and progress on resolving same.
- Schedule of any other cash transactions & notifications (e.g.
payment of Lessee maintenance reserve claims; receipt of new Lessee
deposits; repayment of Lessee Deposits; Lessee redelivery
payments/receipts; Drawdown of any LOCs).
- Schedule of any cash transactions offset against receivables (incl
maintenance reserve claims and other credits offset against
receivables)
<PAGE> 126
AERCO - SERVICER REPORTS
2 MONTHLY
(a) Receivables/Financial Report
- Summary schedule giving details of all cash receivable (showing
rentals, maintenance, interest and other) and received and
allocations during the previous calendar month and giving an updated
arrears position and showing a profile of Lease Security (LOCs,
Guarantees, Cash deposits held).
- Debtors listing at month end by lessee and age split by due on rent,
maintenance, deposits, interest & other
- Debtors reconciliation for month (i.e. Opening Balance, Total
Invoiced, Total Received, Total Credits, Closing Balance) showing a
breakdown of amounts Invoiced & Received by Rental, Maintenance,
Interest & Other.
- Detailed debtors statements in respect of each AerCo Lessee (incl
historic & current details as required).
- Schedule of Monthly AOG costs
- Copies of Rental Adjustment Calculation Schedules issued during the
previous calendar month.
- Copies of invoices (including intercompany invoices) as required.
(b) Maintenance Reserve Report
- Maintenance Reserves movement report for previous calendar month
showing up to date balances including analysis by current & previous
lessees and by component.
- Access to aircraft/engine utilisation by hours & cycles for each
month, billing rate for each month, cumulative hours & cycles to
date, hours & cycles since last major aircraft/engine check.
- List of maintenance reserves covered by Letters of Credit
- Maintenance redelivery adjustment calculations & supporting
documentation settled during previous month
- List of Maintenance Reserves Abatement
- List of outstanding maintenance reserve claims (already included in
weekly report)
(c) Technical Report
- Detailed Statement of technical expenditure for the previous
calendar month and year to date analysed by relevant category of
expense/aircraft/project etc.
- Detailed schedule of actual expenditure versus expected expenditure
for each month and year (FY) to date and also actual expenditure
versus annual budget expenditure.
- Schedule of expected Servicer originating cash disbursements
including pre-lease expenditure and redelivery adjustments for the
next 4 weeks and monthly for the coming 12 month period analysed by
relevant category of expense/aircraft/project etc. (to be included
in last weekly report prior to each payment date)
(d) Portfolio Report
- Detailed portfolio report showing:
Summary of fleet by Aircraft Type, Lessee, Aircraft Availability,
Leases Committed, Lease Commencement and Expiry dates, Lease
Structures, Aircraft owning company.
<PAGE> 127
AERCO - SERVICER REPORTS
3 QUARTERLY
(a) MAINTENANCE RESERVE REPORT
- Maintenance reserve deficit review
- Next projected date for each aircraft & engine maintenance check and
expected cost.
- Confirmation of lessee agreement with maintenance reserve balances
(by component) per Servicer.
- Review of all upsy/downsy maintenance contracts of AerCo fleet.
(b) TECHNICAL REPORT
- Detailed report on technical condition of each AerCo aircraft
showing last inspection date.
- Variance report on actual technical expenditures versus annual
budget cost with commentary on all variances from budget for the
preceding quarter and year to date.
(c) PORTFOLIO REPORT
- AerCo fleet portfolio summary detailing concentration of aircraft:
By country of habitual base;
By Lessee;
By Aircraft Type;
By age;
Number of aircraft;
Leases expiring in next 6 qtrs and annually for 4 years thereafter
Appraised value (as of most recent appraisal);
Analysis of termination, extension and any other material options;
Commentary on quality of AerCo fleet based on Servicers' knowledge
of the aircraft industry.
(d) LEASE REVIEW REPORT
- Summary analysis of the financial condition of each AerCo Lessee on
a rolling basis (or as requested by Administrative Agent) so that at
least seven Lessee reviews reports are provided each quarter so that
all lessees are reviewed annually.
(e) INDUSTRY REVIEW
- Report on issues of commercial concern & latest developments
pertaining to the leasing market in general.
<PAGE> 128
AIRCRAFT LEASE AGREEMENT
dated
--------------------
between
[NAME OF LESSOR]
and
[NAME OF LESSEE]
-----------------------------------------------------
AIRCRAFT MAKE AND MODEL: BOEING 737-_____
SERIAL NO.:__________
REGISTRATION NO.:__________
-----------------------------------------------------
<PAGE> 129
THIS AGREEMENT is made on ____________,_____
BETWEEN:
[Name, jurisdiction of organization and address]("Lessor"), and
[Name, jurisdiction of organization and address]("Lessee").
WHEREAS, Lessor wishes to lease to Lessee and Lessee wishes to lease from
Lessor the Aircraft (as hereinafter defined) on the terms and subject to the
conditions set forth in this Agreement:
NOW, THEREFORE, in consideration of and subject to the mutual agreements
contained herein, Lessor and Lessee hereby agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS: In this Agreement capitalized words and expressions have the
respective meanings set forth in Schedule I hereto.
1.2 CONSTRUCTION:
(a) In this Agreement, unless the contrary intention is stated, a reference to:
(i) each of "Lessor" or "Lessee" or any other Person includes, without
prejudice to the provisions of this Agreement restricting transfer or
assignment, any successor and any assignee;
(ii) words importing the plural shall include the singular and vice versa,
and the terms "include" or "including" are not limiting;
(iii) any document shall include that document as amended, novated,
assigned or supplemented;
(iv) a Clause or a Schedule is a reference to a clause of or a schedule to
this Agreement;
(b) any Law, or to any specified provision of any Law, is a reference to such
Law or provision as amended, substituted or re-enacted; and
(c) headings are to be ignored in construing this Agreement.
<PAGE> 130
2. REPRESENTATIONS AND WARRANTIES
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES: The representations and
warranties set forth in Clauses 1.1 and 1.2 of Schedule 2 are hereby made by
Lessee to Lessor.
2.2 REPETITION: The representations and warranties in Clauses 1.1 and 1.2 of
Schedule 2 will survive the execution of this Agreement and will be deemed to
be repeated by Lessee on the Delivery Date with reference to the facts and
circumstances then existing (and for this purpose the representation and
warranty contained in Clause 1.1(g) of Schedule 2 shall be constructed by
reference to the accounts most recently provided to Lessor prior to such Rent
Date). The representations and warranties contained in Clause 1.1 of Schedule 2
will be deemed to be repeated by Lessee on each Rent Date as if made with
reference to the facts and circumstances then existing.
2.3 LESSOR'S REPRESENTATIONS AND WARRANTIES: The representations and warranties
set forth in Clause 1.3 of Schedule 2 are hereby made by Lessor to Lessee.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT: Lessor's obligation to deliver and lease the Aircraft
under this Agreement is subject to satisfaction of each of the Conditions
Precedent specified in Schedule 3.
3.2 WAIVER: The Conditions Precedent are for the sole benefit of Lessor and
may be waived or deferred in whole or in part and with or without conditions by
Lessor. If any Conditions Precedent are not satisfied on the Delivery Date and
Lessor (in its absolute discretion) nonetheless agrees to deliver the Aircraft
to Lessee. Lessee will ensure that such Conditions Precedent are fulfilled
within 15 days after the Delivery Date, and Lessor may treat as in Event of
Default the failure of Lessee to do so.
4. COMMENCEMENT
4.1 LEASING:
(a) Lessor will lease the Aircraft to Lessee and Lessee will take delivery of
the Aircraft on lease in accordance with this Agreement for the duration of
the Term. Subject to Clause 4.3, Lessor will deliver and Lessee will accept
the Aircraft on the Scheduled Delivery Date or such other day as may be
agreed in writing by the parties.
(b) If Lessee is unwilling or unable to accept delivery of the Aircraft on the
Rent Commencement Date, or Lessee fails to fulfill any Condition Precedent
on or before such date, then Lessee's obligation to pay Rent hereunder
shall commence on the Rent Commencement Date notwithstanding that Lessee
has not accepted possession of the Aircraft.
<PAGE> 131
(c) After Delivery the Aircraft, the Engines and every part will be in every
respect at the sole risk of Lessee, who will bear all risk of loss, theft,
damage or destruction to the Aircraft, any Engine or any Part from any
cause whatsoever.
4.2 DELIVERY: The Aircraft will be delivered to and accepted by Lessee at the
Delivery Location, as may be agreed in an "AS IS, WHERE AS" condition. Without
prejudice to Clauses 3.1 and 4.1, Lessee will effect acceptance of the Aircraft
by execution and delivery to Lessor of the Certificate of Acceptance.
4.3 DELAYED DELIVERY: If owing to:
(a) any seller, manufacturer or existing lessee of the Aircraft delaying in the
delivery of, or failing to deliver, the Aircraft to Lessor for any reason
(other than because of any default of Lessor in the performance of its
obligations under an agreement with that seller, manufacturer or lessee
unless the default arises from an act or omission of Lessee) whether or not
in circumstances entitling that seller, manufacturer or lessee to terminate
that agreement: or
(b) any Excusable Delay;
Lessor delays in the delivery of, or fails to deliver, the Aircraft under this
Agreement, then in any such case:
(i) Lessor will not be responsible for any losses, including loss of
profit, costs or expenses arising from or in connection with the delay
or failure suffered or incurred by Lessee; and
(ii) Lessee will not be entitled to terminate this Agreement or to reject
the Aircraft when tendered for delivery by Lessor, on the grounds of
any such delay, unless due to such a delay (which is not attributable
in any way to a default by Lessee hereunder or a failure by Lessee to
fulfill a condition precedent hereunder or otherwise attributable to
Lessee or within its control) delivery of the Aircraft does not occur
within______[months] [days] of the Scheduled Delivery Date
("DEADLINE"), in which case either party hereto shall have the right
to terminate the leasing of the Aircraft hereunder if such party gives
notice to the other party of such party's election to terminate
within_____Business Days of the Deadline. In the event of such
termination, neither party will have any further liability to the
other hereunder [except-include Lessor's return of security
deposit/guaranty/letter of credit]. If neither party gives such a
notice of termination within such [____] Business Day period, neither
party shall have any further termination right for such delay and this
Agreement shall remain in full force and effect.
-4-
<PAGE> 132
4.4 LICENSES: Lessee will at its expense obtain all licenses, permits and
approvals which may be necessary to export and/or transport the Aircraft from
the Delivery Location. Lessor will furnish such data and information as may be
reasonably requested by Lessee in connection with obtaining any such license,
permit or approval.
5. PAYMENTS
5.1 RENTAL PERIODS: The first Rental Period will commence on the Rent
Commencement Date and each subsequent Rental Period will commence on the date
succeeding the last day of the previous Rental Period. Each Rental Period will
end on the date immediately preceding the numerically corresponding day in the
next month, except that:
(a) if there is no such numerically corresponding day in that month, it will
end on the last day of that month; and
(b) if a Rental Period would otherwise overrun the Expiry Date, it will end on
the Expiry Date.
5.2 RENT: Lessee will pay to Lessor or its order on each Rent Date Rent in
advance in the amount of $_______. Payment must be initiated adequately in
advance of the Rent Date to ensure that Lessor receives credit for the payment
on the Rent Date. If a Rental Period begins on a day which is not a Business
Day, the Rent payable in respect of that Rental Period shall be paid on the
Business Day immediately preceding such day.
5.3 {MAINTENANCE RESERVES:
(a) Amount: Lessee will further pay to Lessor Maintenance Reserves in relation
to each calendar month (or part thereof) (including the last calendar
month, or part thereof, of the Term) on the fifteenth day following the
end of such calendar month, in the amounts specified in Clause 1.1 of
Schedule 6.
(b) Adjustment: Lessor may adjust the amount of Maintenance Reserves after the
Delivery Date by notice to Lessee not more frequently than annually based
on each of the following:
(i) with respect to Engine LLP Maintenance Reserves by __ per cent per
annum by way of agreed inflation adjustment; and
(ii) with respect to Airframe and Engine Maintenance Reserves, by
reference to the Engine manufacturer's recommendations, industry
overhaul cost experience, any change in the operational environment
of the Aircraft and any change in the hour-to-cycle ratio of the
operation of the Aircraft (it being understood that the Maintenance
reserves are based on the assumption that the operation of the
Aircraft during the
-5-
<PAGE> 133
relevant period will, on average, be not less than two Flight Hours
for each Cycle and may be adjusted upwards if the Flight Hour to
Cycle ratio falls below 2:1).
(c) Release of Maintenance Reserves: Provided no Default has occurred and is
continuing, Lessor will release funds to Lessee from the Maintenance
Reserves on the terms and subject to the conditions specified in Clauses
1.2 and 1.3 of Schedule 6.]1
5.4 PAYMENTS: All payments by Lessee to Lessor under this Agreement will be
made for value on the due date in Dollars and in immediately available funds
settled through the New York Clearing House System or such other funds as may
for the time being be customary for the settlement in New York City of payments
in Dollars by wire transfer to Bankers Trust Company, New York, U.S.A., ABA No.
021-001-033, _________________, Collection Account No.__________, Attention:
Corporate Trust-Structured Finance Team, _______________________ or to such
other account as Lessor may advise Lessee in writing.
5.5 WITHHOLDING:
(a) All payments by Lessee pursuant to the Operative Documents shall be free of
all withholdings of any nature whatsoever except to the extent otherwise
required by Law, and if any such withholding is so required. Lessee shall
pay an additional amount such that after the deduction of all amounts
required to be withheld, the net amount actually received by Lessor will
equal the amount that Lessor would have received if such withholding had
not been required; provided, however, that if Lessee pays any such
additional amount to compensate for the withholding of any Lessor Tax,
Lessor shall repay to Lessee within 30 days after receipt of Lessee's
written request therefor (which request shall include a description in
reasonable detail of the Lessor Tax involved and the calculation of the
additional amount to be repaid) the amount of such additional amount to the
extent attributable to any Lessor Tax.
(b) If any payment is made by Lessee under Clause 5.6(a) and Lessor in good
faith determines that it has actually received a credit against, or relief
or remission for, or repayment of, any Tax paid or payable by Lessor in
respect of or calculated with reference to the deduction or withholding
giving rise to such payment. Lessor shall, to the extent that it can do so
without prejudice to the retention of the amount of such credit, relief,
remission or repayment and without leaving Lessor in any worse position
than that in which it would have been had such deduction or withholding not
been required to be made, pay to Lessee such amount as Lessor shall in good
faith have determined to be attributable to the relevant deduction or
withholding.
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Nothing in this Clause 5.5(b) shall:
(i) interfere with the right of Lessor to arrange its tax affairs in
whatever manner it thinks fit and, in particular, but without
limitation, Lessor shall not be under any obligation to claim credit,
relief, remission or repayment from or against its corporate profits
or similar Tax liability in respect of the amount of any such
deduction or withholding in priority to any other claims, reliefs,
credits or deductions available to Lessor; or
(ii) oblige Lessor to disclose any information relating to its Tax affairs
or any computations in respect thereof.
5.6 TAXES AND OTHER OUTGOINGS: Lessee will promptly pay:
(a) all license and registration fees, Taxes (other than Lessor Taxes) and
other amounts of any nature imposed by any Government Entity with respect
to the Aircraft, or this Agreement, including without limitation the
ownership, delivery, leasing, possession, use, operation, return, sale or
other disposition of the Aircraft; and
(b) all rent, fees, charges, Taxes (other than Lessor Taxes) and other amounts
in respect of any premises where the Aircraft, any Engine or any Part is
located from time to time;
except to the extent that, in the reasonable opinion of Lessor, such payment is
being contested in good faith by appropriate proceedings, in respect of which
adequate reserves have been provided by Lessee and non-payment of which does
not give rise to any material likelihood of the Aircraft or any interest
therein being sold, forfeited or otherwise lost or of criminal liability on the
part of Lessor, Security Trustee, Trustee or any Financing Party.
5.7 TAX INDEMNITY:
(a) Lessee will on demand pay and indemnify each Indemnitee against all Taxes
(other than Lessor Taxes) levied or imposed against or upon Lessor or
Lessee or any Indemnitee and relating to or attributable to Lessee, this
Agreement, the Operative Documents or the Aircraft directly or indirectly
in connection with the importation, exportation, registration, ownership,
leasing, sub-leasing, purchase, delivery, possession, use, operation,
repair, maintenance, overhaul, transportation, landing, storage, presence
or redelivery of the Aircraft or any part thereof or any rent, receipts,
insurance proceeds, income or other amounts arising therefrom, or the
making of any Equipment Change.
(b) If Lessee is required by any applicable Law, or by any third party, to
deliver any report or return in connection with any Taxes for which Lessee
is obliged to indemnify Lessor or any
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Indemnitee under the Operative Documents, Lessee will complete the same
and, on request, supply a copy of the report or return to Lessor.
(c) If any report, return or statement is required to be made by Lessor or any
Indemnitee with respect to any Tax for which there is an indemnity
obligation of Lessee under this Agreement, Lessee will promptly notify
Lessor of the requirement; and
(i) if permitted by applicable Law, make and file in a timely manner such
report, return or statement (except for any report, return or
statement that Lessor has notified Lessee that Lessor or any
Indemnitee intends to prepare and file), prepare such return in such
manner as will indicate the interests of Lessor as owner and lessor of
the Aircraft under this Agreement and Security Trustee, in its
capacity as such, if required or appropriate, and provide Lessor upon
request a copy of each such report, return or statement filed by
Lessee, or
(ii) if Lessee is not permitted by applicable Law to file any such report,
return or statement, Lessee will prepare and deliver to Lessor a
proposed form of such report, return or statement within a reasonable
time prior to the time such report, return or statement is to be
filed.
5.8 VALUE ADDED TAX:
(a) For the purposes of this Clause 5.8:
(i) "VAT" means value added tax and any goods and services, sales or
turnover tax, imposition or levy of a like nature;
(ii) "supply" includes anything on or in respect of which VAT is
chargeable.
(b) Lessee will pay to Lessor or the relevant taxing authority, as the case may
be, the amount of any VAT chargeable in respect of any supply for VAT
purposes under this Agreement.
(c) Each amount stated as payable by Lessee under this Agreement is exclusive
of VAT (if any). If VAT is payable in respect of any amount as aforesaid,
Lessee shall pay all such VAT and indemnify Lessor against any claims for
the same (and where appropriate, Lessee shall increase the payments which
would otherwise be required to be made hereunder so that Lessor is left in
the same position as Lessor would have been in had no VAT been payable) and
Lessee shall provide evidence to Lessor, if available, in respect of
payment of any such VAT.
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5.9 TAX CONTEST: If Lessee disputes the payment of any Taxes payable by Lessor
or any Indemnitee for which Lessee is responsible under this Agreement, Lessor
will consider with Lessee the taking of such action as Lessee may reasonably
request at Lessee's expense to contest that payment, but no Indemnitee will be
obliged to take any such action:
(a) which such Indemnitee considers in its sole discretion may prejudice it; or
(b) which such Indemnitee considers does not have a reasonable prospect of
success; or
(c) for which Lessee has not made adequate provision to the satisfaction of
such Indemnitee in respect of the expense concerned.
5.10 INDEMNITY PAYMENTS -- AFTER-TAX BASIS: Lessee agrees that, with respect to
any indemnity payment (the "REQUIRED AMOUNT") pursuant to Clause 5.8 (Tax
Indemnity) or Clause 10 (Indemnity) to or for the benefit of any Indemnitee,
Lessee's obligations shall include such amount as may be necessary to hold such
Indemnitee harmless on an after-Tax basis from all Taxes required to be paid by
such Indemnitee with respect to such payment (including any payments pursuant to
this Clause 5.10), so that the total amount required to be paid by Lessee to
such Indemnitee is an amount which will equal the Required Amount after
deduction of all Taxes required to be paid by such Indemnitee with respect to
the receipt or accrual of such amount.
Such total amount shall be determined based on the assumptions that at the time
when each such payment is accrued by such Indemnitee, such payment will be
subject to (i) United States federal income tax at the highest marginal
statutory rate applicable to corporations for the relevant period, (ii) United
States state and local income taxes at the composite of the highest marginal
statutory rates applicable to such Indemnitee, as such composite rates shall be
certified by an officer of such Indemnitee, and (iii) income taxes (if any)
imposed by countries outside the United States at the actual rates imposed on
such Indemnitee.
5.11 LESSOR OBLIGATIONS FOLLOWING EXPIRY DATE: WITHIN FIVE BUSINESS DAYS AFTER:
(a) redelivery of the Aircraft to Lessor in accordance with and in the
condition required by this Agreement; or
(b) payment to Lessor of the Agreed Value following an Event of Loss after the
Delivery Date;
or in each case such later time as Lessor is satisfied that Lessee has
irrevocably paid to Lessor all amounts which may then be outstanding or become
payable under this Agreement and the Other Agreements, Lessor will pay to Lessee
the amount of any Rent received in respect of any period falling after the date
of redelivery of the Aircraft or payment of the Agreed Value, as the case may
be. [Include return of security deposit/guaranty/letter of credit if
applicable.]
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5.12 NET LEASE: This Agreement is a net lease. Lessee's obligations under this
Agreement are absolute and unconditional irrespective of any circumstance or
contingency whatsoever and shall not be reduced by any circumstance or
contingency whatsoever, including:
(a) any right of set-off, counterclaim, recoupment, defence or other right
which either party to this Agreement may have against the other (including
any right of reimbursement) or which Lessee may have against the
Manufacturer, any manufacturer or seller of or any Person providing
services with respect to the Aircraft, any Engine or any Part or any other
Person, for any reason whatsoever;
(b) any unavailability of the Aircraft for any reason, including, but not
limited to a requisition of the Aircraft or any prohibition or interruption
of or interference with or other restriction against Lessee's use,
operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose, condition, design,
or operation of any kind or nature of the Aircraft for any particular use
or trade, or for registration or documentation under the Laws of any
relevant jurisdiction, or, except as expressly provided herein, any Event
of Loss in respect of or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganisation, arrangement, readjustment of
debt, dissolution, liquidation or similar proceedings by or against Lessor,
Lessee or any other Person;
(e) any illegality, invalidity or unenforceability or lack of due authorisation
of, or other defect in this Agreement; and/or
(f) any other cause or circumstance which (but for this provision) would or
might otherwise have the effect of terminating or in any way affecting any
obligation of Lessee under this Agreement.
5.13 [FURTHER PROVISIONS REGARDING MAINTENANCE RESERVES:
(a) Lessee agrees that Lessor shall be entitled to commingle the Maintenance
Reserves with Lessor's general or other funds, and Lessor will not hold any
such funds as agent or on trust for Lessee or in any similar fiduciary
capacity.
(b) If Lessee fails to comply with an provision of this Agreement or the Other
Agreements, or any Default shall have occurred and be continuing, in
addition to all rights and remedies accorded to Lessor elsewhere in this
Agreement or under Law in respect of the Maintenance Reserves, Lessor may
immediately or at any time thereafter, without prior notice to Lessee,
apply all or part of and/or the Maintenance Reserves in or towards the
payment or discharge of any matured obligation owed by Lessee or any Lessee
Affiliate under this Agreement or
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the Other Agreements, in such order as Lessor sees fit, and/or exercise any
of the rights of set-off described in Clause 5.19 against all or part of
the Maintenance Reserves.
(c) If Lessor exercised the rights described in sub-clause (b) above. Lessee
shall, following a demand in writing from Lessor, immediately restore the
Maintenance Reserves to the level at which they stood immediately prior to
such exercise. Any remaining balances of the Maintenance Reserves on the
Expiry Date shall be retained by Lessor as its sole property.]
5.14 [Include fees/security deposit/guaranty/letter of credit provisions if
applicable.]
5.15 DEFAULT INTEREST: If Lessee fails to pay any amount payable under this
Agreement on the due date, Lessee will pay on demand from time to time to Lessor
interest (both before and after judgment) on that amount, from the due date to
the date of payment in full by Lessee to Lessor, at the rate per annum
calculated by Lessor to be LIBOR plus two per cent (or, if less, at the maximum
interest rate permitted by applicable Law). All such interest will be compounded
monthly and calculated on the basis of the actual number of days elapsed in the
month, assuming a 30 day month and a 360 day year.
5.16 CURRENCY:
(a) Lessee acknowledges that the specification of Dollars in this Agreement
is of the essence and that Dollars shall be the currency of account in any
and all events. Lessee waives any right it may have in any jurisdiction to
pay any amount under this Agreement in a currency other than Dollars.
(b) If Lessor receives an amount in respect of Lessee's liability under this
Agreement or if such liability is converted into a claim, proof, judgment
or order in a currency other than the currency (the "contractual
currency") in which the amount is expressed to be payable under this
Agreement;
(i) Lessee will indemnify Lessor as an independent obligation against any
loss arising out of or as a result of such conversion;
(ii) if the amount received by Lessor, when converted into the contractual
currency (at the market rate at which Lessor is able on the date of
receipt by Lessor (or on the next date thereafter on which under
normal banking practice Lessor is able to convert the amount received
into the contractual currency) to purchase the contractual currency
in New York or at its option London with that other currency) is less
than the amount owed in the contractual currency, Lessee will,
forthwith on demand, pay to Lessor an amount in the contractual
currency equal to the deficit; and
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(iii) Lessee will pay to Lessor on demand any exchange costs and Taxes
payable in connection with the conversion.
5.17 CERTIFICATES: Save where expressly provided in this Agreement, any
certificate or determination by Lessor as to any rate of interest or as to any
other amount payable under this Agreement will, in the absence of manifest
error, be presumed prima facie to be correct.
5.18 APPROPRIATION: If any sum paid or recovered by Lessor in respect of the
liabilities of Lessee under this Agreement is less than the amount then due,
Lessor may apply that sum to amounts due under this Agreement in such
proportions and order and generally in such manner as Lessor may determine at
its sole discretion; provided, that no appropriation pursuant hereto shall
prejudice the contesting in good faith by Lessee, or the ultimate allocation or
appropriation, of any amounts claimed due under this Agreement.
5.19 SET-OFF: Lessor may set off any matured obligation owed by Lessee or any
Lessee Affiliate under this Agreement or the Other Agreements against any
obligation owed by Lessor to Lessee (whether or not matured), regardless of the
place of payment or currency. If the obligations are in different currencies,
Lessor may convert either obligation at the market rate of exchange available
in New York or at its option London for the purpose of the set-off. If an
obligation is unascertained or unliquidated, Lessor may in good faith estimate
that obligation and set off in respect of the estimated amount, in which case
when the obligation is ascertained or liquidated Lessor or Lessee shall make a
payment to the other (as appropriate) in respect of any amount by which the
ascertained or liquidated amount differs from the estimated amount. Lessor will
not be obliged to pay any amounts to Lessee under this Agreement so long as any
sums which are then due from Lessee or any Lessee Affiliate under this
Agreement or the Other Agreements remain unpaid, and any such amounts which
would otherwise be due will fall due only if and when Lessee has paid all such
sums, except to the extent that Lessor otherwise agrees or sets off such
amounts against such payment pursuant to the foregoing provisions.
5.20 EXPENSES: Whether or not the Aircraft is delivered to Lessee pursuant to
this Agreement, Lessee will pay to Lessor on demand:
(a) all fees, costs and expenses (including reasonable legal, professional and
out-of-pocket expenses) payable or incurred by Lessor in connection with
any amendment to or extension of or other documentation in connection with,
or the granting of any waiver or consent under, this Agreement or the
monitoring of compliance by Lessee with this Agreement (provided that such
monitoring reveals a Default) but excluding any fees, costs and expenses
incurred by Lessor in connection with any change in the ownership or
financing of the Aircraft or otherwise reimbursable pursuant to Clause
14.5);
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(b) all fees, costs and expenses (including reasonable legal, professional and
out-of-pocket expenses) associated with perfecting this Agreement in the
State of Registration, the State of Incorporation and the Habitual Base
(and any other state or country as appropriate having regard to the
operation of the Aircraft), including (but not limited to) legal opinions,
tax advice, the provision of translations, registrations and the payment of
documentary Taxes and any other Taxes and fees, whether required by Lessor
or Lessee provided that the foregoing shall not apply to Lessor Taxes; and
(c) all fees, costs and expenses (including reasonable legal, survey,
out-of-pocket expenses and other costs) payable or incurred by Lessor in
contemplation of, or otherwise in connection with the enforcement of or
preservation of any of Lessor's or Security Trustee's rights under this
Agreement, or in respect of the repossession of the Aircraft.
All amounts payable pursuant to this Clause 5.20 will be paid in the currency
in which they are incurred by Lessor.
6. MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENTS:
(a) With effect from Delivery, Lessor assigns to Lessee, and authorises Lessee
to exercise such rights as Lessor may have under any warranty with respect
to the Aircraft, any Engine or any part made by any manufacturer, vendor,
sub-contractor or supplier, to the extent that the same may be assigned or
otherwise made available to Lessee and without warranty by Lessor as to
enforceability of any of the rights so assigned.
(b) To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its commercially reasonable
efforts at Lessee's request and expense (and subject to Lessee making
adequate provision to the satisfaction of Lessor in respect of any such
expense) to enforce such rights as Lessor may have with respect thereto
for the benefit of Lessee.
(c) Upon occurrence of an Event of Default (unless the same is immediately
rectified to the reasonable satisfaction of Lessor) or termination or
expiry of the leasing of the Aircraft under this Agreement (each, a
"TERMINATION EVENT"), whichever occurs earlier, all rights under such
warranties will immediately revert to Lessor, including all claims
thereunder (whether or not perfected); and Lessee will immediately take
all steps and execute all documents required by Lessor to perfect such
reversion.
6.2 PROCEEDS: Lessor agrees to apply any proceeds of any claims assigned to
Lessee by Lessor under Clause 6.1 to remedy the defect, if any, in the
Aircraft, any Engine or any Part giving rise to such claim. So long as no
Termination Event has occurred and is continuing, Lessor agrees to co-
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operate with Lessee to cause any proceeds from any rights assigned by Lessor to
Lessee under Clause 6.1 to be paid directly to Lessee, and, if any such
proceeds are nonetheless paid to Lessor, unless a Termination Event has
occurred, Lessor agrees to remit promptly such proceeds to Lessee.
7. QUIET ENJOYMENT
7.1 LESSOR'S COVENANT: Provided no Default has occurred and is continuing.
Lessor will not interfere with the quiet use, possession and enjoyment of the
Aircraft by Lessee in accordance with this Agreement during the Term; but the
exercise by Lessor of its rights under or in connection with this Agreement
will not constitute such an interference.
8. LESSEE'S COVENANTS
8.1 DURATION:
(a) Lessee shall perform and comply with its undertakings and covenants in this
Agreement at all times during the Term. All such undertakings and covenants
shall, except where expressly otherwise stated, be performed at the expense
of Lessee.
(b) Lessee will use its best endeavours to procure that no Person (other than
Lessor) will act in any manner inconsistent with Lessee's obligations under
this Agreement.
8.2 INFORMATION: Lessee will:
(a) notify Lessor forthwith of the occurrence of any Default or any other event
which might in the reasonable opinion of Lessor adversely affect Lessee's
ability to perform any of its obligations under this Agreement;
(b) furnish to Lessor:
(i) as soon as available but not in any event later than 180 days after
the last day of each financial year of Lessee, its audited
consolidated balance sheet in English as of such day and its audited
consolidated profit and loss statement for the year ending on such
day; and
(ii) such other information regarding Lessee and its business and affairs
as Lessor may reasonably request from time to time.
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(C) promptly furnish to Lessor all information Lessor from time to time
reasonably requests regarding the Aircraft, each Engine, any engine
installed on the Airframe, and any Part, and the use, location and
condition of the Aircraft, including the hours remaining on the Aircraft
and any Engine until the next scheduled check, inspection, overhaul or shop
visit, as the case may be;
(d) on request, furnish to Lessor evidence satisfactory to Lessor that all
charges and other outgoings incurred by Lessee with respect to the
Aircraft, including all payments due to the relevant air traffic control
authorities, have been, or are being, paid and discharged in a normal
commercial manner which would not give rise to a Security Interest on, or a
right of detention in relation to, the Aircraft;
(e) provide to Lessor within seven days after the end of each calendar month a
monthly report on the Aircraft and each Engine in the form required by
Lessor;
(f) give Lessor not less than 60 days' written notice as to the time and
location of all Major Checks; and
(g) promptly notify Lessor of:
(i) any loss, theft, damage or destruction to the Aircraft, any Engine or
any Part, or any modification to the Aircraft if the potential cost
may exceed the Damage Notification Threshold (without regard to any
insurance claim related thereto); and
(ii) any claim or other occurrence likely to give rise to (x) a claim under
the hull Insurances in excess of the Damage Notification Threshold, or
(y) any other claim in excess of $[2,000,000] (without regard to any
insurance claim related thereto) and details of any negotiations with
the insurance brokers over any such claim.
8.3 LAWFUL AND SAFE OPERATION: Lessee will:
(a) comply at all times with the Laws in force in any country or jurisdiction
which may then be applicable to the Aircraft (including Laws mandating
insurance coverage) or, so far as concerns the use and operation of the
Aircraft or an owner or operator thereof, and take all reasonable steps to
ensure that the Aircraft is not used for any illegal purpose;
(b) not operate or otherwise use the Aircraft in any manner contrary to any Law
of the Air Authority or for any purpose for which the Aircraft is not
designed or reasonably suitable;
(c) ensure that the crew and engineers employed by it in connection with the
operation and maintenance of the Aircraft have the qualifications and hold
the licenses required by the Air Authority and applicable Law;
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(d) use the Aircraft solely in commercial or other operations for which Lessee
is duly authorised by the Air Authority and under applicable Law;
(e) not use the Aircraft for the carriage of any items or substances which
could reasonably be expected to cause damage to the Aircraft or which would
not be adequately covered by the Insurances, or any item or substance whose
possession or carriage is illegal under any applicable Law; and comply with
the any carriage regulations or restrictions from time to time issued by
IATA;
(f) not utilise the Aircraft for purposes of training, qualifying or
re-confirming the status of cockpit personnel except for the benefit of
Lessee's cockpit personnel, and then only if the use of the Aircraft for
such purpose is not disproportionate to the use for such purpose of other
aircraft of the same type operated by Lessee;
(g) not cause or permit the Aircraft to proceed to, or remain at, any location
which is then the subject of a prohibition order (or any similar order or
directive) or sanctions or restrictions by or under:
(i) any law or government regulation applicable to the Aircraft or to
Lessee, including the relevant provisions of the US Commerce
Department's Export Administration Regulations (15 C.F.R. Parts
760-774); or
(ii) any Government Entity of the State of Registration or the Habitual
Base; or
(iii) any Government Entity of the country in which such location is
situated; or
(iv) any Government Entity having jurisdiction over Lessor, Babcock &
Brown, Security Trustee, Trustee or the Aircraft;
(h) obtain and maintain in full force all certificates, licenses, permits and
authorisations from time to time required for the use and operation of the
Aircraft, and for the making of payments required by, and the compliance by
Lessee with its other obligations under, this Agreement; and
(i) not use, operate, or locate the Aircraft or suffer or permit the Aircraft
to be used, operated or located during the Term in any manner not covered
by the Insurances or in any area excluded from coverage by the Insurances
or in any manner not covered by the Insurances or in any manner which would
prejudice the interests of the Indemnitees in the Insurances, the Aircraft,
any Engine or any Part.
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8.4 SUBLEASING: Lessee will not sub-lease, or part with possession of the
Aircraft, the Engines or any Part without the prior written consent of Lessor,
such consent not to be unreasonably withheld or delayed, and any permitted
subleasing shall be in accordance with such terms and conditions as Lessor may
impose if it grants its consent thereto; provided, that:
(a) Lessee may part with possession (i) with respect to the Aircraft, the
Engines or any Part of the relevant manufacturers for testing or similar
purposes or to the Agreed Maintenance Performer for service, repair,
maintenance or overhaul work, or alterations, modifications or additions to
the extent required or permitted by this Agreement, and (ii) with respect
to an Engine or Part, as expressly permitted by this Agreement; and
(b) Lessee may wet lease the Aircraft (without parting with possession and
control thereof) and shall notify Lessor of its intention to do so and,
provided, further, that:
(i) no Event of Default has occurred and is continuing; and
(ii) any charter, agreement or other document containing the terms of
such wet-lease;
(A) shall be subordinate in all respects to this Agreement;
(B) will not in any event be capable of extending beyond the
Expiry Date; and
(C) shall not result in any change in the State of Registration
or the Habitual Base (except as provided for in clause
8.7(b)), provided that it is agreed that the consent of
Lessor shall not be required to any such wet-lease which
involves a change in the Habitual Base to a Habitual Base
situated within the European Union, the United States of
America or Canada; and
(c) no such wet lease or parting with possession or permitted sublease shall
release or relieve Lessee from, or reduce, any of Lessee's obligations
under this Agreement, all of which shall remain Lessee's responsibility and
shall be directly enforceable against Lessee as if such wet lease or
parting with possession or permitted sublease had not occurred.
8.5 INSPECTION:
(a) Lessor and any person designated by Lessor may at Lessor's cost, at any
time visit, inspect and survey the Aircraft, any Engine, any Part or the
Aircraft Documents, and for such purpose may, subject to any applicable Air
Authority regulation, travel on the flight deck as observer.
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(b) Lessee will pay to Lessor on demand all reasonable out-of-pocket expenses
incurred by Lessor in connection with any such visit, inspection or survey
conducted after the occurrence of a Default.
(c) Lessor will:
(i) have no duty to make, and no liability arising out of making or
failing to make, any such visit, inspection or survey; and
(ii) so long as no Default has occurred and is continuing, not exercise
such right other than on reasonable notice and so as not to disrupt
unreasonably the commercial operations of Lessee; PROVIDED, HOWEVER,
Lessee will take such action as may be reasonably required to
facilitate Lessor's inspection.
8.6 OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS: Lessee will:
(a) not do or knowingly permit to be done or omit or knowingly permit to be
omitted to be done any act or thing which might reasonably be expected to
jeopardise the rights of Lessor as owner of the Aircraft and as lessor
thereof under this Agreement or the rights of Security Trustee in its
applicable capacity or the rights of Lessor and Security Trustee as
additional insureds, contract parties or loss payees under the Insurances
or the validity, enforceability or priority of any applicable Security
Documents;
(b) on all occasions when the ownership of the Aircraft, any Engine or any part
is relevant, make clear to third parties that title is held by Lessor;
(c) not at any time (i) represent or hold out Lessor, Security Trustee, Trustee
or any of the Financing Parties as carrying goods or passengers on the
Aircraft or as being in any way connection or associated with any,
operation or carriage (whether for hire or reward or gratuitously) which
may be undertaken by Lessee; or (ii) pledge the credit of Lessor, Security
Trustee, Trustee or any of the Financing Parties;
(d) ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 10 cm. x
7 cm.) in a reasonably prominent position in the cockpit of the Aircraft
adjacent to the certificate of airworthiness and on each Engine stating:
"this Aircraft/Engine is owned by [________], is leased to _______________
and may not be or remain in the possession of, or be operated by, any other
person with the prior written consent of _______________";
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(e) not crease or permit to exist any Security Interest (other than Permitted
Liens) upon the Aircraft, any Engine or any Part;
(f) not do or permit to be done anything which may reasonably be expected to
expose the Aircraft, any Engine or any Part to penalty, forfeiture,
impounding, detention, appropriation, damage or destruction and without
prejudice to the foregoing, if any such penalty, forfeiture, impounding,
detention or appropriation, damage or destruction occurs, give Lessor
immediate notice thereof and procure the immediate release of the Aircraft,
any Engine or the Part, as the case may be;
(g) not abandon the Aircraft, any Engine or any Part;
(h) pay and discharge, or cause to be paid and discharged, when due and payable
or make adequate provision by way of security or otherwise for all debts,
damages, claims and liabilities which have given or might give rise to a
Security Interest (other than Permitted Liens) over or affecting the
Aircraft, any Engine or any Part; and
(i) not attempt, or hold itself out as having only power, to sell, lease or
otherwise dispose of the Aircraft, any Engine or any Part.
8.7 GENERAL: Lessor will:
(a) not make any substantial change in the nature of the business in which it
is engaged, will preserve its corporate existence (other than in connection
with a voluntary liquidation in the context of a solvent reconstruction or
reorganization on terms which shall have been previously approved in
writing by Lessor and provided that upon such voluntary liquidation, an
affiliate of Lessee enters into a lease agreement with Lessor in
substantially identical terms to this Agreement), and will conduct its
business in an orderly and efficient manner and will maintain all rights,
privileges, licenses and franchises material thereto or material to
performing its obligations under this Agreement;
(b) ensure that the Habitual Base remains the habitual base of the Aircraft
unless Lessor gives its prior written consent to a change therein, such
consent not to be unreasonably withheld or delayed; and
(c) not operate, maintain, insure or deal with the Aircraft or any Engine or
Part in a manner which discriminates against the Aircraft or such Engine or
Part, when compared with the manner in which Lessee operates, maintains,
insures or deals with similar aircraft, engines or parts in Lessee's fleet.
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8.8 RECORDS: Lessee will:
(a) cause accurate, complete and current records to be kept of all flights made
by, and all maintenance carried out on, the Aircraft (including in relation
to each Engine and Part subsequently installed, before the installation);
keep the records in such manner as the Air Authority may from time to time
require, and ensure that they comply with the recommendations of any
manufacturers of the Aircraft, any Engine or any Part. The records will
form part of the Aircraft Documents; and
(b) maintain in English with appropriate revision service, all Aircraft
Documents, records, logs and other materials required by applicable Laws
and the practice of major international air transport operators in respect
of the Aircraft.
8.9 PROTECTION: Lessee will:
(a) maintain or procure the maintenance of the registration of the Aircraft
with the Air Authority in the name of Lessor (or, if such registration
cannot be maintained in the name of Lessor, on a basis which reflects the
interests of Lessor, as owner of the Aircraft and as lessor of the Aircraft
under this Agreement and the interest, if any, of the Security Trustee, to
the greatest extent permitted by applicable Law) and not do or suffer to be
done anything which might adversely affect that registration; and
(b) do all acts and things (including making any filing or registration with
the Air Authority or any other Governmental Entity or as required to comply
with the Geneva Convention where applicable) and execute and deliver,
notarise, file, register and record all documents (including any amendment
of this Agreement provided, without prejudice to the rights of Lessor under
Clause 14, such amendment shall not materially affect the rights and
obligations of the Lessee) as may be required by Lessor:
(i) upon or following any change or proposed change in the ownership or
financing of the Aircraft (and Lessor shall reimburse Lessee for the
reasonable out-of-pocket expenses, including reasonable legal fees,
incurred by Lessee at the time of such change in complying with
Lessor's requirements under this paragraph (i)); or
(ii) following any modification of the Aircraft, and Engine or any Part or
the permanent replacement of any Engine, or Part in accordance with
this Agreement so as to ensure that the rights of Lessor as owner and
lessor under this Agreement and the rights of Security Trustee as
applicable apply with the same effect as before; or
(iii) to establish, maintain, preserve, perfect and protect the rights of
Lessor as owner of the Aircraft and lessor under this Agreement or
the interest of Security Trustee as applicable.
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8.10 MAINTENANCE AND REPAIR: Lessee will:
(a) keep the Aircraft airworthy in all respects and in good repair and
condition;
(b) not change the schedule and work content of (i) the C Checks or (ii) the
"D" Check or (iii) the structural inspection items of the Agreed
Maintenance Programme without the prior written consent of Lessor, such
consent not to be unreasonably withheld;
(c) maintain the Aircraft in accordance with the Agreed Maintenance Programme
through the Agreed Maintenance Performer;
(d) maintain the Aircraft in accordance with the standard of maintenance
required by the Air Authority and in at least the same manner and with at
least the same care, including maintenance scheduling, service bulletin
status, modification status and technical condition, as is the case with
respect to similar aircraft owned or otherwise operated by Lessee and as if
Lessee were to retain and continue operating the Aircraft in its fleet
after the Expiry Date, including all maintenance to the Airframe, and
Engine or any Part required to maintain all warranties, performance
guarantees or service life policies in full force and effect;
(e) comply with all Air Authority mandatory inspection and mandatory
modification requirements and Airworthiness Directives and alert service
bulletins of the manufacturer applicable to the Aircraft, any Engine or
Part having a compliance date during the Term; and
if such Airworthiness Directive is issued by the FAA (other than Excluded
Requirements) and/or, to the extent that the same have legal effect, the
Joint Airworthiness Authority (Joint Airworthiness Authority), and if the
costs to Lessee or performing or causing to be performed such Airworthiness
Directive exceeds $______, and (save in the case of those Airworthiness
Directives that shall only reasonably be accomplished during a "D" Check)
if Lessee accomplishes such Airworthiness Directive no later than 12 months
after the effective date stipulated in such Airworthiness Directive, Lessor
shall, following receipt of an invoice in respect of such amount, and
provided no Default has occurred and in continuing, reimburse to Lessee an
amount calculated in accordance with the following formula:
C x (N - R)/N
Where:
"N"=_______
"R"= the remainder of the Term in months after completion of the
performance work:
"C"= the cost of the performance work in excess of $_____
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"Excluded Requirements" means any mandatory FAA operational requirement
which relates solely to operation of the Aircraft within the airspace of
the United States of America, unless, it is required by the Air Authority
or the Joint Airworthiness Authority (Joint Airworthiness Authority) for
operation in the Habitual Base.
(f) comply with all applicable Laws and the regulations of the Air Authority
and other aviation authorities with jurisdiction over Lessee or the
Aircraft, any Engine or Part (regardless of upon whom such requirements are
imposed) and which relate to the maintenance, condition, use or operation
of the Aircraft or require any modification or alteration to the Aircraft,
any Engine or Part;
(g) maintain in good standing a current certificate of airworthiness (in the
appropriate category for the nature of the operations of the Aircraft) for
the Aircraft issued by the Air Authority except where the Aircraft is
undergoing maintenance, modification or repair required or permitted by
this Agreement, and Lessee will provide on request from time to time to
Lessor a copy of such certificates; and
(h) if required by the Air Authority, maintain a current certification as to
maintenance issued by or on behalf of the Air Authority in respect of the
Aircraft and will from time to time provide to Lessor a copy on request.
8.11 REMOVAL/INTERCHANGE OF ENGINES: Lessee will:
(a) ensure that no Engine is removed from the Airframe unless it is promptly
replaced by an engine of the same model as, or an improved or advanced
version of, such Engine and Lessee has full details as to the source and
maintenance records of the replacement engine;
(b) ensure that any Engine which is not installed on the Aircraft (or an
aircraft permitted by paragraph (d) below) is, except as expressly
permitted by this Agreement, properly and safely stored and insured, and
kept free form Security Interests (other than Permitted Liens);
(c) from time to time, on request by Lessor, procure that any person to whom
possession of an Engine is given acknowledges in writing to Lessor, in form
and substance satisfactory to Lessor, that it will respect the interests of
Lessor as owner of such Engine and Lessor thereof and of the Security
Trustee as applicable and will not seek to exercise any rights whatsoever
in relation to such Engine;
(d) be permitted, if no Default has occurred and is continuing, to install any
Engine on an aircraft operated by Lessee, provided that neither (i) the
provisions of any applicable Law nor (ii) the terms of any lease or other
agreement or Security Interest to which such aircraft or engine is subject,
prohibit such installation or will have the effect at any time of divesting
or impairing
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the title and interests of Lessor as owner of such Engine and lessor
thereof under this Agreement, or the interest, if any, of the Security
Trustee as applicable over such Engine; and
(e) promptly procure the replacement of any Engine ("ORIGINAL ENGINE") which
has become time-, cycle- or calendar-expired, or has suffered an Engine
Event of Loss, with the following:
(i) a replacement engine of the same manufacturer and model, or at
Lessee's option an engine of an improved model, that has equivalent
value, utility, modification status, time elapsed since performance
restoration shop visit and equivalent remaining warranty status as
the Original Engine, and is otherwise of an equivalent value and
utility and suitable for installation and use on the Airframe without
impairing the value or utility of the Airframe and compatible with
the remaining installed Engine;
(ii) that has become and remains the property of Lessor, as owner, free
from Security Interests (except Permitted Liens) and on installation
on the Aircraft will without further act be subject to this
Agreement; and Lessee shall at any time when requested by Lessor,
provide evidence to Lessor's satisfaction (including the provision,
if required, to Lessor of bills of sale and one or more legal
opinions) that title to the replacement engine has passed to lessor
subject to this Agreement free and clear of all Security Interests
and shall at its own expense take all such steps and execute and
procure the execution of all such documents as may be required or
desirable to effect such passing of title; and
(iii) Lessee has full details of such engine's source and maintenance
records.
8.12 REMOVAL/INTERCHANGE OF PARTS: Lessee will:
(a) ensure that no Part is at any time removed from the Airframe unless it is
promptly replaced by a part complying with the following:
(i) it is in as good operating condition, has substantially similar hours
available until the next scheduled check, inspection, overhaul and
shop visit, is of the same or a more advanced make and model and is
of the same interchangeable modification status, and of equivalent
value and utility to, as the replacement Part;
(ii) it has become and remains the property of Lessor, as owner, free from
Security Interests (other than Permitted Liens) and on installation
of the Aircraft will without further act be subject to this
Agreement; and
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(iii) Lessee has full details as to such part's source and maintenance
records:
(b) ensure than any Part which is not installed on the Aircraft (or any other
aircraft as expressly permitted by this Agreement) is properly and safely
stored and insured, and kept free from Security Interests (other than
Permitted Liens);
(c) be permitted, if no Default has occurred and is continuing, to install any
Part on an aircraft operated by Lessee, provided that Clause 8.11(d) would
be complied with in respect of such part if it were an Engine; and
(d) promptly procure the replacement of any Part which has become time-, cycle-
or calendar-expired, loss, stolen, seized, confiscated, destroyed, damaged
beyond repair, unserviceable or permanently rendered unfit for use, with a
part complying with paragraph (a) above.
8.13 POOLING OF ENGINES AND PARTS: Lessee will not enter into nor permit any
pooling agreement or arrangement in respect of any Engine or Part without the
prior written consent of Lessor which shall not be unreasonably withheld or
delayed.
8.14 EQUIPMENT CHANGES:
(a) Lessee will not make any modification or addition to the Aircraft (each an
"EQUIPMENT CHANGE"), except for an Equipment Change which
(i) is expressly permitted by this Agreement; or
(ii) has the prior written approval of Lessor and does not diminish or
impair the value, utility, condition, or airworthiness of the
Aircraft below the value, utility, condition or airworthiness thereof
subsisting at the time of the Equipment Change assuming the Aircraft
is in the condition required by the provisions hereof.
(b) So long as no Default has occurred and is continuing, Lessee may remove any
Equipment Change if it can be removed from the Aircraft without diminishing
or impairing the value, utility, condition or airworthiness of the
Aircraft.
8.15 TITLE TO AN EQUIPMENT CHANGE:
(a) Title to all Parts installed on the Aircraft (whether by way of
replacement, as the result of an Equipment Change or otherwise) will on
installation, without further act, vest in Lessor subject to the terms of
this Agreement, free and clear of all Security Interests (other than
Permitted Liens). Lessee will at its own expense take all such steps and
execute, and procure the execution of, all such instruments as Lessor may
require and which are necessary to ensure that title so passes to Lessor
according to all applicable Laws. At any time when
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requested by Lessor, Lessee will provide evidence to Lessor's satisfaction
(including the provision, if required, to Lessor of bills of sale and one
or more legal opinions) that title has so passed to Lessor.
(b) Lessor may require Lessee to remove any Equipment Change on the Expiry Date
and to restore the Aircraft to its condition prior to that Equipment
Change.
(c) Any Engine or Part at any time removed from the Aircraft will remain the
property of Lessor until a replacement has been effected in accordance with
this Agreement and until title in that replacement has passed, according to
applicable Laws, to Lessor subject to the terms of this Agreement, free of
all Security Interests (other than Permitted Liens), whereupon title to the
replaced Engine or Part, will, provided no Default has occurred and is
continuing, pass to Lessee.
9. INSURANCE
9.1 INSURANCES: Lessee will maintain the Insurances in full force during the
Term and thereafter as expressly required in this Agreement, through such
brokers and with such insurers and having such deductibles and subject to such
exclusions as may be approved by Lessor from time to time. The Insurances shall
in any event meet the requirements set forth in Schedule 8, which may be amended
from time to time by Lessor at Lessee's expense so that the scope and level of
insurance cover is maintained in line with such insurance coverage as may then
be customary in the airline industry for aircraft of a type similar to the
Aircraft being used on routes similar to the Aircraft and commonly required by
leading international aircraft operating lessors.
9.2 CHANGE: If at any time Lessor wishes to revoke its approval of any
insurer, reinsurer, insurance or reinsurance, Lessor and/or its brokers will
consult with Lessee and Lessee's brokers (as for the time being approved by
Lessor) regarding whether that approval should be revoked to protect the
interests of the parties insured. If, following such consultation, Lessor
considers that any change should be made, Lessee will then arrange or procure
the arrangement of alternative cover satisfactory to Lessor.
9.3 INSURANCE UNDERTAKINGS AND INFORMATION: Lessee will:
(a) comply with the terms and conditions of each policy of the Insurances, and
not do, consent or agree to any act or omission which:
(i) invalidates or may invalidate the Insurances; or
(ii) renders or may render void or voidable the whole or any part of
any of the Insurances; or
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(iii) brings any particular liability within the scope of an
exclusion or exception to the Insurances;
(b) not take out without the prior written approval of Lessor any insurance or
reinsurance in respect to the Aircraft other than those required under this
Agreement unless relating solely to hull total loss, business interruption,
profit commission and deductible risk;
(c) commence renewal procedures at least ____ days prior to expiry of any of
the Insurances and provide to Lessor:
(i) if requested by Lessor, a written status report of renewal
negotiation ____ days prior to each expiry date;
(ii) telecopy confirmation of completion of renewal prior to each
expiry date:
(iii) certificates of insurance (and where appropriate certificates of
reinsurance) and broker's (and any reinsurance brokers') letter
of undertaking in a form acceptable to Lessor in English,
detailing the coverage and confirming the insurers' (and any
reinsurers') agreement to the specified insurance requirements
of this Agreement within seven days after each renewal date;
(d) on request, provide to Lessor copies of documents or other information
evidencing the Insurances; and
(e) provide any other insurance and reinsurance related information, or
assistance, in respect of the Insurances as Lessor may reasonable require.
9.4 FAILURE TO INSURE: If Lessee fails to maintain the Insurances in compliance
with this Agreement, each of the Indemnitees will be entitled but not bound
(without prejudice to any other rights of Lessor under this Agreement):
(a) to pay the premiums due or to effect and maintain insurances satisfactory
to it or otherwise remedy Lessee's failure in such manner (including,
without limitation to effect and maintain an "owner's interest" policy) as
it considers appropriate. Any sums so expended by it will become
immediately due and payable by Lessee to Lessor together with interest
thereon at the Default Rate, from the date of the expenditure by it up to
the date of reimbursement by Lessee; and
(b) at any time while such failure is continuing to require the Aircraft to
remain at any airport or to proceed to and remain at any airport designated
by it until the failure is remedied to its satisfaction.
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9.5 CONTINUING INDEMNITY: Lessee shall effect and maintain insurance after the
Expiry Date with respect to its liability under the indemnity in Clause 10 for
two years or until the next scheduled Major Check, whichever is the earlier, and
such insurance shall name each Indemnitee as an additional insured.
10. INDEMNITY
10.1 GENERAL: Lessee agrees to defend, indemnify and hold harmless the
Indemnitees on demand from and against any and all Losses (regardless of when
the same are made or incurred):
(a) which may at any time be suffered or incurred directly or indirectly as a
result of or connected with the possession, delivery, performance,
management, ownership, registration, control, maintenance, condition,
service, repair, overhaul, leasing, use, operation or redelivery of the
Aircraft, any Engine or Part (either in the air or on the ground), or the
occurrence of any Default, whether or not the Loss may be attributable to
any defect in the Aircraft, any Engine or any Part or to its design,
testing or use or otherwise, and regardless of when the same arises or
whether it arises out of or is attributable to any act or omission,
negligent or otherwise, of any Indemnitee; or
(b) which arise out of any act or omission which invalidates or which renders
violable any of the Insurances; or
(c) which may at any time be suffered or incurred as a consequence of any
design, article or material in the Aircraft, any Engine or Part or its
operation or use constituting an infringement of patent, copyright,
trademark, design or other proprietary right, or a breach of any
obligation of confidentiality owed to any person in respect of any of the
matters referred to in this paragraph (c);
but excluding any Loss in relation to a particular Indemnitee to the extent that
such Loss (i) is covered pursuant to another indemnity provision of this
Agreement or (ii) arises solely as a result of the gross negligence or wilful
misconduct of that Indemnitee or (iii) arises solely as a result of Lessor Taxes
or a Lessor Lien attributable to that Indemnitee.
10.2 DURATION: The indemnities contained in this Agreement will continue in
full force following the Event of Default notwithstanding any breach or
repudiation by Lessor or Lessee of this Agreement or any termination of the
leasing of the Aircraft hereunder.
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11. EVENTS OF LOSS
11.1 EVENTS OF LOSS:
(a) If an Event of Loss occurs prior to Delivery, this Agreement will
immediately terminate and except as expressly stated in this Agreement
neither party will have any further obligations or liability under this
Agreement other than pursuant to Clause 5.11.
(b) If an Event of Loss occurs after Delivery, Lessee will pay the Agreed Value
to Lessor on or prior to the earlier of (i)__ days after the Event of Loss
and (ii) the date of receipt of insurance proceeds in respect of that Event
of Loss.
(c) Subject to the rights of any insurers and reinsurers or other third party,
upon irrevocable payment in full to Lessor of the Agreed Value and all
other amounts which may be or become payable to Lessor under this
Agreement, Lessor will without recourse or warranty (except as to the
absence of Lessor's Liens) transfer to Lessee all of Lessor's rights to the
Aircraft, on an as-is where-is basis, and will at Lessee's expense, execute
and delivery such bills of sale and other documents and instruments as
Lessee may reasonably request to evidence such transfer, free and clear of
all rights of Lessor and Lessor Liens. Lessee shall indemnify Lessor for
all fees, expenses and Taxes incurred by Lessor in connection with any such
transfer.
11.2 REQUISITION: During any requisition for use or hire of the Aircraft, any
Engine or Part which does not constitute an Event of Loss:
(a) the Rent and other charges payable under this Agreement will not be
suspended or abated either in whole or in part, and Lessee will not be
released from any of its other obligations under the Agreement (other than
operational obligations with which Lessee is unable to comply solely by
virtue of the requisition); and
(b) so long as no Default has occurred and is continuing, Lessee will be
entitled to any hire paid by the requisitioning authority in respect of the
Term or any part thereof. Lessee will, as soon as practicable after the end
of any such requisition, cause the Aircraft to be put into the condition
required by this Agreement. Lessor will be entitled to all compensation
payable by the requisitioning authority in respect of any change in the
structure, state or condition of the Aircraft arising during the period of
requisition, and Lessor will apply such compensation in reimbursing Lessee
for the cost of complying with its obligations under this Agreement in
respect of any such change, but, if any Default has occurred and is
continuing, Lessor may apply the compensation or hire in or towards
settlement of any amounts owing by Lessee under this Agreement.
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12. RETURN OF AIRCRAFT
12.1 RETURN: On the Expiry Date or redelivery of the Aircraft pursuant to
Clause 13.2 or termination of the leasing of the Aircraft under this Agreement,
Lessee will,unless an Event of Loss has occurred, redeliver the Aircraft and
Aircraft Documents at Lessee's expense to Lessor at the Redelivery Location, in
accordance with the procedures and in compliance with the conditions set forth
in Schedule 7, free and clear of all Security Interests (other than Lessor
Liens) and in a condition qualifying for immediate certification of
airworthiness by the Air Authority or as otherwise agreed by Lessor and Lessee.
If requested by Lessor, Lessee shall thereupon cause the Aircraft to be
deregistered by the Air Authority.
12.2 NON-COMPLIANCE: To the extent that, at the time of Final Inspection,
Lessee has not fully complied with any of its obligations under this Agreement,
Lessee will at Lessor's option:
(a) immediately rectify such non-compliance, and all Lessee's obligations under
this Agreement will remain in force until such non-compliance has been
rectified, and in particular (without limitation) Lessee shall pay Rent to
Lessor from the date of Final Inspection up to the date when such
non-compliance shall have been fully rectified, at a rate per month equal
to the monthly Rent specified in Clause 5.2, calculated on a per diem
basis; or
(b) redelivery the Aircraft to Lessor and indemnify and hold Lessor harmless
against the cost putting the aircraft into the condition required by this
Agreement.
12.3 REDELIVERY: Upon redelivery Lessee will provide to Lessor, upon Lessor's
request, all documents necessary to export the Aircraft from the Habitual Base
(including, without limitation, a valid and subsisting export license for the
Aircraft) and required in relation to the deregistration of the Aircraft with
the Air Authority.
12.4 ACKNOWLEDGMENT: Provided Lessee has complied with its obligations under
this Agreement, following redelivery of the Aircraft by Lessee to Lessor at the
Redelivery Location, Lessor will deliver to Lessee an acknowledgment
confirming that Lessee has redelivered the Aircraft to Lessor in accordance
with this Agreement.
12.5 INDEMNITY: Lessor will indemnify and hold Lessee harmless from and against
all Losses arising from death or injury to any observer or any employee of
Lessor in connection with any demonstration flight or inspection of the
Aircraft by Lessor referred to in Schedule 7.
13. DEFAULT
13.1 EVENTS: The occurrence of any of the Event of Default will constitute a
repudiation (but not a termination) of this Agreement by Lessee (whether the
occurrence of any such Event of Default
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is voluntary or involuntary or occurs by operation of Law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any Governmental Entity).
13.2 RIGHTS AND REMEDIES: If an Event of Default occurs, Lessor may at its
option (and without prejudice to any of its other rights under this
Agreement), at any time thereafter (without notice to Lessee except as
required under applicable Law):
(a) accept such repudiation and by notice to Lessee and with immediate effect
terminate the leasing of the Aircraft (but without prejudice to the
continuing obligations of Lessee under this Agreement), whereupon all
rights of Lessee under this Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to enforce performance of
this Agreement or to recover damages for the breach of this Agreement;
and/or
(c) either:
(i) take possession of the Aircraft, for which purpose Lessor may enter
any premises belonging to or in the occupation of or under the control
of Lessee where the Aircraft may be located, or cause the Aircraft to
be redelivered to Lessor at the Redelivery Location (or such other
location as Lessor may require), and Lessee hereby irrevocably by way
of security for Lessee's obligations under this Agreement appoints
(which appointment is coupled with an interest) Lessor as Lessee's
attorney in causing the redelivery or in directing the pilots of
Lessee or other pilots to fly the Aircraft to that airport and Lessor
will have all the powers and authorisations necessary for taking that
action; or
(ii) by serving notice require Lessee to redeliver the Aircraft to Lessor
at the Redelivery Location (or such other location as Lessor may
require).
13.3 DEFAULT INDEMNITY: If an Event of Default occurs, or the Aircraft is not
delivered on the proposed Delivery Date by reason of failure of Lessee to
satisfy any conditions to that delivery, Lessee will indemnify Lessor on
demand against any Loss which Lessor may sustain or incur directly or
indirectly as a result of such Event of Default or non-delivery, including
(but not limited to):
(a) any loss of profit suffered by Lessor because of Lessor's inability to
place the Aircraft on lease with another lessee on terms as favourable to
Lessor as this Agreement, or because whatever use, if any, to which Lessor
is able to put the Aircraft upon its return to Lessor, or the funds arising
upon a sale or other disposal of the Aircraft, is not as profitable to
Lessor as this Agreement;
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(b) any amount of principal, interest, fees or other sums whatsoever paid or
payable on account of funds borrowed in order to carry any unpaid amount;
(c) any Loss which may be incurred in repaying funds raised to finance the
Aircraft or in unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole or in part to Lessor's financing of
the Aircraft; and
(d) any Loss sustained or incurred by Lessor in or as a result of exercising
any of its rights or remedies pursuant to Clause 13.2 or as a result of
Lessee's failure to redeliver the Aircraft on the date, at the place and in
the condition required by this Agreement.
13.4 SALE OR RE-LEASE OF AIRCRAFT: If an Event of Default occurs, Lessor may
sell or re-lease or otherwise deal with the Aircraft at such time and in such
manner and on such terms as Lessor considers appropriate in its absolute
discretion, free and clear of any interest of Lessee, as if this Agreement had
never been entered into.
13.5 DEREGISTRATION: If an Event of Default occurs, Lessee will at the request
of Lessor immediately take all steps necessary to effect (if applicable)
deregistration of the Aircraft and its export from the country where the
Aircraft is for the time being situated, and any other steps necessary to
enable the Aircraft to be redelivered to Lessor in accordance with this
Agreement, and Lessee hereby irrevocably and by way of security for its
obligations under this Agreement appoints (which appointment is coupled with an
interest) Lessor as Lessee's attorney to execute and deliver any documentation
and to do any act or thing required in connection with the foregoing.
14. ASSIGNMENT
14.1 LESSEE: Lessee will not assign, transfer (whether voluntarily or
involuntarily, by operation of law or otherwise) or delegate, or create or
permit to exist any Security Interest over, any of its rights or obligations
under this Agreement.
14.2 ASSIGNMENT BY LESSOR: Lessee agrees that Lessor may at any time during the
Term assign its rights under this Agreement. Notwithstanding any such
assignment, Lessor will remain entitled to the benefit of each indemnity and
the liability insurances effected under this Agreement. Lessee will promptly
execute all documents reasonably requested by Lessor to effect, perfect, record
or implement any such assignment, and will promptly comply with any other
reasonable requests of Lessor, its successors and assigns in respect of any
such novation.
14.3 TRANSFER OF LESSOR: Lessee agrees that Lessor may at any time during the
Term transfer by way of novation its rights and obligations under this
Agreement, and upon completion of any such novation (including the assumption
by the transferee of all of Lessor's remaining obligations under this
Agreement) Lessor will be released from and will have no further obligation
under this Agreement (but, for the avoidance of doubt, Lessor will continue to
be entitled to the benefit of each
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indemnity and the liability insurances effected under this Agreement). Lessee
will promptly execute all documents reasonably requested by Lessor to effect,
perfect, record or implement any such novation, and will promptly comply with
any other reasonable requests of Lessor, its successors and assigns in respect
of any such novation.
14.4 NO ADDITIONAL COST: If at the time of any such assignment or transfer by
Lessor there arises an obligation to make a payment to the assignee or
transferee which exceeds the amount which Lessee would have been obligated to
pay under this Agreement to Lessor if no such assignment or transfer had taken
place, then Lessee shall not be obliged to pay the amount of such excess:
14.5 COSTS: Lessor shall reimburse to Lessee its reasonable out-of-pocket
expenses (including reasonable legal expenses) actually incurred in connection
with co-operating with Lessor in relation to any such assignment or transfer
referred to in this Clause 14, provided that such expenses are substantiated to
Lessor's reasonable satisfaction.
14.6 NO GREATER OBLIGATIONS: The Lessor agrees that any such assignment or
transfer shall not materially affect the Lessee's rights and obligations under
this Agreement.
15. MISCELLANEOUS
15.1 WAIVER, REMEDIES CUMULATIVE: The rights of Lessor under this Agreement may
be exercised as often as necessary, are cumulative and not exclusive of its
rights under any Law; and may be waived only in writing and specifically. Delay
by Lessor in exercising, or non-exercise of, any such right will not constitute
a waiver of that right.
15.2 DELEGATION: Lessor may delegate to any Person all or any of the rights,
powers or discretions vested in it by this Agreement, and any such delegation
may be made upon such terms and conditions and subject to such regulations
(including power to sub-delegate) as Lessor in its absolute discretion thinks
fit.
15.3 SEVERABILITY: Without prejudice to paragraph (s) of Schedule 10, if a
provision of this Agreement is or becomes illegal, invalid or unenforceable in
any jurisdiction, that will not affect:
(a) the legality, validity or enforceability in that jurisdiction of any other
provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction of that
or any other provision of this Agreement.
15.4 REMEDY: If Lessee fails to comply with any provision of this Agreement,
Lessor may, without being in any way obliged to do so or responsible for so
doing and without prejudice to the ability of Lessor to treat such
non-compliance as a Default, effect compliance on behalf of Lessee:
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whereupon Lessee shall become liable to pay immediately any sums expended by
Lessor together with all costs and expenses (including legal costs) in
connection therewith.
15.5 TIME OF ESSENCE: The time stipulated in this Agreement for all payments
payable by Lessee to Lessor and the prompt, punctual performance of Lessee's
other obligations under this Agreement are of the essence of this Agreement.
15.6 NOTICES: All notices under, or in connection with, this Agreement will,
unless otherwise stated, be given in writing by letter or facsimile. Any such
notice is deemed effectively to be given as follows:
(i) if by letter, on the earlier of the date when delivered and the
seventh day after dispatch; and
(ii) if by facsimile, when transmitted and full transmission has been
separately notified by telephone by the transmitting party.
The addresses and facsimile and telephone numbers of Lessee and Lessor are as
follows:
LESSEE:
Address:
Attention:
Facsimile:
Telephone:
LESSOR:
Address:
Attention:
Facsimile:
Telephone:
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WITH A COPY TO: Babcock & Brown Limited
Oracle House
Herbert Street
Dublin 2
Ireland
Attention:
Facsimile: 353-1-661-6506
Telephone: 353-1-661-6505
15.7 GOVERNING LAW AND JURISDICTION:
(a) This Agreement in all respects shall be governed by, and construed in
accordance with, the Governing Law.
(b) For the benefit of Lessor, Lessee agrees that the courts of ___________ are
to have non-exclusive jurisdiction to settle any disputes arising out of or
relating to this Agreement and submits itself and its property to the
non-exclusive jurisdiction of the foregoing courts with respect to such
disputes.
(c) Without prejudice to any other mode of service, Lessor and Lessee consent
to the service of process relating to any writ, judgment or other legal
proceedings by prepaid mailing by air mail, certified or registered mail of
a copy of the process to Lessor or Lessee as the case may be at the address
set forth in Clause 15.6.
(d) Lessor and Lessee:
(i) waive to the fullest extent permitted by law any objection with either
party may now or hereafter have to the courts referred to in Clause
15.7(b) above on grounds of inconvenient forum or otherwise as regards
proceedings in connection with this Agreement;
(ii) waive to the fullest extent permitted by law any objection which
either party may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this
Agreement brought in the courts referred to in Clause 15.7(b); and
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(iii) agrees that a judgment or order of any court referred to in
Clause 15.7(b) in connection with this Agreement is conclusive
and binding on it and may be enforced against it in the courts
of any other jurisdiction.
(e) Nothing in this Clause 15.7 limits the right of Lessor or Lessee to bring
proceedings in connection with this Agreement:
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction.
(f) Lessee irrevocably and unconditionally:
(i) agrees that if Lessor brings legal proceedings against it or
its assets in relation to this Agreement no immunity from such
legal proceedings (which will be deemed to include without
limitation, suit, attachment prior to judgment, other
attachment, the obtaining of judgment, execution or other
enforcement) will be claimed by or on behalf of itself or with
respect to its assets;
(ii) waives any such right of immunity which it or its assets now
has or may in the future acquire; and
(iii) consents generally in respect of any such proceedings to the
giving of any relief or the issue of any process in connection
with such proceedings including, without limitation, the
making, enforcement or execution against any property
whatsoever (irrespective of its use or intended use) of any
order of judgment which may be made or given in such
proceedings.
15.8 SALE AND ENTIRE AGREEMENT: This Agreement is the sole and entire agreement
between Lessor and Lessee in relation to the leasing of the Aircraft, and
supersedes all previous agreements in relation to that leasing. Any amendments
to this Agreement must be made in writing and signed on behalf of Lessor and
Lessee.
15.9 INDEMNITEES: All rights expressed to be granted to each INDEMNITEE (other
than Lessor) under this Agreement are given to Lessor on behalf of that
Indemnitee.
15.10 LANGUAGE: All notices to be given under this Agreement will be in
English. All documents delivered to Lessor pursuant to this Agreement
(including any documents to be delivered pursuant to the Conditions Precedent)
will be in English, or if not in English, will be accompanied by a certified
English translation. If there is any inconsistency between the English version
of this Agreement and any version in any other language, the English version
will prevail.
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16. DISCLAIMERS AND WAIVERS
LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND CONFIRMATIONS SET
FORTH IN CLAUSES 16.1 TO 16.3 BELOW SHALL APPLY AT ALL TIMES DURING THE TERM
WITH EFFECT FROM LESSEE'S ACCEPTANCE OF THE AIRCRAFT BY EXECUTION OF THE
CERTIFICATE OF ACCEPTANCE, WHICH SHALL BE CONCLUSIVE EVIDENCE THAT LESSEE HAS
FULLY INSPECTED THE AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT, THE
ENGINES, THE PARTS AND THE AIRCRAFT DOCUMENTS ARE TECHNICALLY ACCEPTABLE TO
LESSEE AND ARE IN SUITABLE CONDITION FOR DELIVERY TO AND ACCEPTANCE BY LESSEE:
16.1 EXCLUSION: THE AIRCRAFT IS TO BE LEASED AND DELIVERED HEREUNDER "AS IS,
WHERE IS", AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN
THIS AGREEMENT:
(A) LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL
NOT BE DEEMED TO HAVE MADE OR GIVEN (WHETHER BY VIRTUE OF HAVING DONE OR
FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS
UNDER OR IN RELATION TO THIS AGREEMENT OR OTHERWISE), ANY WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE AIRCRAFT OR ANY
ENGINE OR PART, INCLUDING (BUT NOT LIMITED TO) THE DESCRIPTION,
AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS, OPERATION, MERCHANTABILITY,
FREEDOM FORM INFRINGEMENT OF PATENT OR OTHER PROPRIETARY RIGHTS, FITNESS
FOR ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY, CONDITION, OR DESIGN
OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP, TITLE, THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER
MATTER WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY
ARISING FROM A COURT OF PERFORMANCE OR DEALING OR USAGE OF TRADE) WITH
RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY PART; AND
(B) LESSOR SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER TO LESSEE
(WHETHER ARISING IN CONTRACT OR IN TORT, AND WHETHER ARISING BY REFERENCE
TO NEGLIGENCE OR STRICT LIABILITY OF LESSOR OTHERWISE) FOR:
(i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR
INFRINGEMENT THEREOF OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION
THEREWITH;
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(ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS
RELATING THERETO;
(iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED
PROFITS OR ANY OTHER DIRECT, INDIRECT OR CONSEQUENTIAL LOSS OR
DAMAGE; OR
(iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT, ANY ENGINE OR ANY
PART.
16.2 WAIVER: LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS
RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED. ON THE
PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER ARISING AT
ANY TIME IN RESPECT OF OR OUT OF ANY OF THE MATTERS REFERRED TO IN CLAUSE 16.1.
16.3 CONFIRMATION: LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF
THIS CLAUSE 16 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE BEEN
CALCULATED BASED ON ITS PROVISIONS.
17. BROKERS AND OTHER THIRD PARTIES
17.1 NO BROKERS: Each of the parties hereby represents and warrants to the
other that it has not paid, agreed to pay or caused to be paid directly or
indirectly in any form, any commission, percentage, contingent fee, brokerage
or other similar payment of any kind, in connection with the establishment or
operation of this Agreement, to any Person (other than fees payable to Lessee's
legal advisers).
17.2 INDEMNITY: Each party agrees to indemnify and hold the other harmless from
and against any and all claims, suits, damages, costs and expenses (including,
but not limited to reasonable attorneys' fees) asserted by any agent, broker or
other third party for any commission or compensation of any nature whatsoever
based upon this Agreement or the Operative Documents or the Aircraft, if such
claim, suit, damage, cost or expense arises out of any breach by the
indemnifying party, its employees or agents of Clause 17.1.
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IN WITNESS whereof the parties hereto have executed this Agreement on the date
shown at the beginning of this Agreement.
LESSOR:
SIGNED on behalf of ______________
By: ___________________________
Name: ___________________________
Title: ___________________________
LESSEE:
SIGNED on behalf of ______________
By: ___________________________
Name: ___________________________
Title: ___________________________
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SCHEDULE 1
The following words and expressions have the respective meanings set forth
below:
AGREED MAINTENANCE PERFORMER means _______________ or any other FAA or JAA
authorised person agreed to from time to time in writing by Lessor, which
agreement shall not be unreasonably withheld.
AGREED MAINTENANCE PROGRAMME means a maintenance programme for the Aircraft
approved from time to time in writing by Lessor, encompassing scheduled
maintenance (including block maintenance), condition-monitored maintenance,
and/or on-condition maintenance of Airframe, Engines and Parts, including but
not limited to, servicing, testing, preventive maintenance, repairs, structural
inspections, system checks, overhauls, approved modifications, service
bulletins, engineering orders, airworthiness directives, corrosion control,
inspections and treatments.
AGREED VALUE means $ _________________________.
AGREEMENT means this Agreement and any and all amendments, revisions,
supplements and modifications thereto.
AIR AUTHORITY means the civil aviation authority of the State of Registration.
AIRCRAFT means the aircraft described in Part 1 of Schedule 4 (which term
includes, where the context admits, a separate reference to all Engines, Parts
and Aircraft Documents).
AIRCRAFT DOCUMENTS means the documents, data and records identified in the list
attached to the Certificate of Acceptance, and any other documents and records
referred to in Clause 8.8, and all additions, renewals, revisions and
replacements from time to time made to any of the foregoing in accordance with
this Agreement.
AIRFRAME means the Aircraft, excluding the Engines and Aircraft Documents.
AIRWORTHINESS DIRECTIVE means an airworthiness directive issued by the FAA or
the State of Registration.
APU means the auxiliary power unit installed on the Aircraft on the Delivery
Date and any replacement auxiliary power unit installed on the Aircraft and
title to which is transferred to Lessor in accordance with this Agreement.
BABCOCK & BROWN means Babcock & Brown Limited and any Subsidiary for the time
being of Babcock & Brown Limited and any Person that directly or indirectly is
controlled by, or controls, or is under common control with, Babcock & Brown
Limited.
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BLOCK HOUR means each hour or part thereof elapsing during the period from the
moment the chocks are removed from the wheels of the Aircraft until the chocks
are next again returned to the wheels.
BOEING means The Boeing Company, a Delaware corporation with its principal
office in Seattle, State of Washington, U.S.A.
BUSINESS DAY means any day other than a Saturday, Sunday or other day on which
banking institutions in Ireland or New York are authorised or required by Law
to be closed.
"C" CHECK means a "C" check in accordance with the Agreed Maintenance Programme
in effect on the relevant date.
CERTIFICATE OF ACCEPTANCE means a certificate of acceptance in the form of
Schedule 5.
CONDITIONS PRECEDENT means the conditions specified in Schedule 3.
CYCLE means one take-off and landing of the Aircraft.
DAMAGE NOTIFICATION THRESHOLD means [$2,000,000].
"D" CHECK means a "D" check in accordance with the following Manufacturer's
Maintenance Planning Document items:
(a) 1C, 2C, 3C, 4C, and 7C Checks;
(b) 15 month, 45 month, 10,000 Flight Hour and 22,400 Flight Hour structural
inspections;
(c) all CPCP tasks with an initial interval of 12 years or less;
(d) overhaul/function check of components normally scheduled for
accomplishment during "D" Check in accordance with the Agreed
Maintenance Programme; and
(e) the overhaul of the landing gear.
DEFAULT means any Event of Default or any event or circumstance which, with the
giving of notice and/or lapse of time and/or determination of materiality
and/or fulfilment of any other condition, would constitute an Event of Default.
DEFAULT RATE means the rate of interest specified in Clause 5.15.
DELIVERY means the date on which Delivery occurs.
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DELIVERY LOCATION means __________________.
DOLLARS AND $ mean the lawful currency of the United States of America.
ENGINE means, whether or not installed on the Aircraft:
(a) each engine of the manufacture and model specified in Part 1 of Schedule 4
which Lessor elects to tender to Lessee with the Airframe on the Delivery
Date, such engines being described as to serial numbers on the Certificate
of Acceptance; and
(b) any Replacement Engine, with effect from the time when title thereto has
passed to Lessor in accordance with this Agreement;
and in each case includes all modules and Parts from time to time belonging to
or installed in that engine but excludes any properly replaced engine title to
which should have passed to Lessee pursuant to this Agreement.
ENGINE CYCLE means operation of an engine on an aircraft from and including a
take-off to and including the landing of that aircraft.
ENGINE EVENT OF LOSS means the occurrence with respect to an Engine only,
whether or not installed on the Airframe, of any of those events described in
the definition of Event of Loss.
ENGINE FLIGHT HOUR means each hour or part thereof an Engine is operated,
elapsing from the moment the wheels of an aircraft on which such Engine is
installed leave the ground until the wheels of such aircraft next touch the
ground.
ENGINE REFURBISHMENT means all scheduled and unscheduled off-the-wing engine
maintenance and repair accomplished for each module in accordance with the
performance restoration or full overhaul sections of the manufacturer's
workscope planning guide, which for purposes of clarification shall exclude
replacement of Engine Life Limited Parts.
EQUIPMENT CHANGE has the meaning given in Clause 8.14(a).
EUROCONTROL means the European Organisation for the Safety of Air Navigation.
EVENT OF DEFAULT means any event or condition specified in Schedule 10.
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EVENT OF LOSS means with respect to the Aircraft (including for the purposes of
this definition the Airframe):
(a) the actual or constructive total loss of the Aircraft (including any damage
to the Aircraft which results in an insurance settlement on the basis of a
total loss, or requisition for use or hire which results in an insurance
settlement on the basis of a total loss); or
(b) the Aircraft being destroyed, damaged beyond economic repair or permanently
rendered unfit for normal use for any reason whatsoever; or
(c) the requisition of title or other compulsory acquisition of title for any
reason of the Aircraft by the government of the State of Registration or
any other authority (whether de jure or de facto); or
(d) the hijacking, theft, disappearance, condemnation, confiscation, seizure,
detention or requisition for use or hire of the Aircraft which deprives any
Person permitted by this Agreement to have possession and/or use of the
Aircraft of its possession and/or use for (i) more than ___ days (or
______, in the case of requisition for use or hire by the government of the
State of Registration) or (ii) if earlier, a period ending on the Expiry
Date.
EXCUSABLE DELAY means, with respect to delivery of the Aircraft, delay or
non-performance due to or arising out of acts of God or public enemy, civil war,
insurrection or riot, fire, flood, explosion, earthquake, accident, epidemic,
quarantine restriction, any act of government, governmental priority,
allocation, regulation or order affecting directly or indirectly, the aircraft,
any manufacturer, Lessor or any materials or facilities, strike or labour
dispute causing cessation, slowdown or interruption of work, inability after due
and timely diligence to procure equipment, data or materials from manufacturers,
suppliers, any existing owner, seller or lessee in a time manner, damage,
destruction or loss, or any other cause to the extent that such cause is beyond
the control of Lessor, whether above mentioned or not and whether or not similar
to the foregoing.
EXPIRY DATE means the date failing _____ months after the Rent Commencement
Date, or, if earlier, (i) when Lessor, acting in accordance with the provisions
of this Agreement, terminates the leasing of the Aircraft to Lessee under this
Agreement, or (ii) subject to the provisions of Clauses 11.1(a) and 11.2 the
date when Lessor receives the Agreed Value together with any other amounts then
due and unpaid under this Agreement and the Other Agreements following an Event
of Loss; provided, that if Clause 12.2(a) becomes applicable, the Expiry Date
shall be extended to the date when any non-compliance referred to therein has
been fully rectified and Lessor shall have accepted redelivery of the Aircraft.
FAA means the Federal Aviation Administration of the United States of America
and any successor thereof.
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FAR means the Federal Aviation Regulations set forth in Title 14 of the United
States Code of Federal Regulations, as amended and modified from time to time.
FINAL INSPECTION has the meaning given in Clause 1.1 of Schedule 7.
FINAL INSPECTION has the meaning given in Clause 1.1 of Schedule 7.
FINANCIAL INDEBTEDNESS means any indebtedness in excess of $ _____________ in
respect of:
(a) moneys borrowed or raised;
(b) any liability under any debenture, bond, note, loan stock, acceptance,
documentary credit or other security;
(c) the acquisition cost of any asset to the extent payable before or after the
time of acquisition or possession; or
(d) any guarantee, indemnity or similar assurance against financial loss of any
person in respect of the above.
FINANCING PARTIES means the financial institutions, certificate holders, any
pass through trust, any trustee of such trust, noteholders and/or other
provider(s) of finance or funds from whom finance or funds for the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for the time
being obtained and/or in whose favour or for whose benefit security over, or
respecting rights relating to, the Aircraft or this Agreement is to be or is for
the time being granted by Lessor or at its request.
FLIGHT HOUR means each hour or part thereof elapsing from the moment the wheels
of the Aircraft leave the ground on take off until the wheels of the Aircraft
next touch the ground.
GENEVA CONVENTION means the Convention for the International Recognition of
Right in Aircraft, signed (ad referendum) at Geneva, Switzerland, on June 19,
1948, and amended from time to time, but excluding the terms of any adhesion
thereto or ratification thereof containing reservations to which the Ireland
does not accede.
GOVERNING LAW means the Laws of ___________________.
GOVERNMENT ENTITY means:
(a) any national government, political subdivision thereof, or local
jurisdiction therein;
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(b) any instrumentality, board, commission, court, or agency of any of the
above, however constituted; and
(c) any association, organisation, or institution of which any of the above is a
member or to whose jurisdiction any thereof is subject or in whose
activities any of the above is a participation.
HABITUAL BASE means____________.
IATA means the International Air Transport Association.
INDEMNITEE means each of Lessor, Lessor Parent, the Security Trustee, the
Trustee.____________ as previous owner, the Financing Parties, and Babcock &
Brown or any other person as is notified to Lessee by Lessor as being the lease
manager and each of their respective successors and assigns, shareholders,
subsidiaries, affiliates, partners, contractors, directors, officers, servants,
agents and employees.
INSURANCES means insurances in respect of the Aircraft in form and substance
satisfactory to Lessor, and includes (without limitation) any insurances and
reinsurances required by Schedule 8.
LANDING GEAR means the landing gear assembly of the Aircraft excluding any
rotable components.
LAW means and includes (a) any statute, decree, constitution, regulation, order,
judgement or other directive of any Government Entity; (b) any treaty, pact,
compact or other agreement to which any Government Entity is a signatory or
party; (c) any judicial or administrative interpretation or application of any
Law described in (a) or (b) above; and (d) any amendment or revision of any Law
described in (a), (b) or (c) above.
LESSEE AFFILIATE means (a) any Subsidiary for the time being of Lessee; and (b)
any Person that directly of indirectly is controlled by, or controls, or is
under common control with, Lessee.
LESSOR LIEN means:
(a) any Security Interest whatsoever from time to time created by Lessor,
Security Trustee, Trustee or any of the Financing Parties in connection with
the financing of the Aircraft or arising as a result of the Security
Documents;
(b) any other Security Interest in respect of the Aircraft which results from
acts of or claims against the Security Trustee or any of the Financing
Parties, Lessor or any other person not related to Lessee or the
transactions contemplated by or permitted under this Agreement: and
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(c) any Security Interest in respect of the Aircraft for Lessor Taxes.
LESSOR PARENT means [AerCo].
LESSOR TAX means any Tax that is:
(a) imposed solely as the result of activities of Lessor in the jurisdiction
imposing the Tax that is unrelated to Lessor's dealings with Lessee or the
transactions contemplated by this Agreement or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by any Government
Entity including ___________; but excluding any Tax imposed by any
government or taxing authority of any jurisdiction if and to the extent
that such Tax results from (i) the use, operation, presence or registration
of the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organisation, any place of business
or any activity of Lessee or any other Person having use, possession or
custody of the Aircraft, the Airframe, any Engine or any Part in the
jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the Expiry Date
and that is unrelated to Lessor's dealings with Lessee or to the
transactions contemplated by this Agreement.
LIBOR means the number which is the arithmetic mean of the rates of interest per
annum (if not already such a multiple, rounded up to the nearest whole multiple
of 1/16 of 1 percent) at which at or about 11:00 a.m. (London time) deposits in
Dollars are offered for the period most nearly corresponding to the Rental
Period on the Reuters "LIBO" page or, if on that the day the Reuters "LIBO" page
is not available or does not display rates for the required period, the
arithmetic mean (rounded up to the nearest whole multiple of 1/16 of 1 percent)
of the respective rates notified to Lessor by each of the Reference Banks as the
rate at which such Reference Bank is offered deposits in Dollars in the London
interbank market for the period most nearly corresponding to the Rental Period.
LOSS means any claim, proceeding, loss, liability, suit, judgement, cost,
expense, fee, penalty or fine.
MAINTENANCE RESERVES means all amounts payable by Lessee under Clause 1.1 of
Schedule 6.
MAJOR CHECKS means any C-Check, multiple C-Check, D-Check or annual heavy
maintenance visit or segment thereof suggested for commercial aircraft of the
same model as the Aircraft by its manufacturer (however denominated) as adopted
and set out in the Agreed Maintenance Programme.
MANUFACTURER means Boeing.
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MANUFACTURER'S MAINTENANCE PLANNING DOCUMENT means the recommended maintenance
programme for the Aircraft issued by the Manufacturer.
MINIMUM LIABILITY COVERAGE means $__________.
OPERATIVE DOCUMENTS means this Agreement, any schedules or documents executed
pursuant to this Agreement, including the Schedules hereto, any side letters
related hereto and any amendments, revisions, supplements or modifications
hereto or thereto.
OTHER AGREEMENTS means any aircraft lease agreement from time to time entered
into between Lessor (or any subsidiary, associate or affiliate of Lessor) and
Lessee (or any other Lessee Affiliate).
PART means, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete Engine)
furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a complete
Engine), with effect from the time when title thereto has passed to Lessor
pursuant to this Agreement;
but excludes any such items title to which should have passed to Lessee
pursuant to this Agreement.
PERMITTED LIEN means:
(a) any lien for Taxes not assessed or, if assessed, not yet due and payable,
or being contested in good faith by appropriate proceedings;
(b) any lien of a repairer, mechanic, carrier, hangar-keeper or other similar
lien arising in the ordinary course of business by operation of Law in
respect of obligations which are not overdue or are being contested in good
faith by appropriate proceedings;
but only if (in the case of both (a) and (b)) (i) adequate reserves have
been provided by Lessee for the payment of the Taxes or obligations; and
(ii) such proceedings, or the continued existence of the lien, do not give
rise to any likelihood of the sale, forfeiture or other loss of the
Aircraft or any interest therein or of criminal liability on Lessor,
Security Trustee, Trustee or any Financing Party; and
(c) any Lessor Lien.
PERSON means any individual person, corporation, partnership, firm, joint stock
company, joint venture, trust estate, unincorporated organisation, association.
Government Entity, or organisation or association of which any of the above is a
member or a participant.
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REDELIVERY LOCATION means____________or such other airport as may be agreed in
writing by Lessor and Lessee.
REFERENCE BANKS means____________.
RENT means all amount payable pursuant to Clause 5.2.
RENTAL PERIOD means each period ascertained in accordance with Clause 5.1.
RENT COMMENCEMENT DATE means the date on which Lessor tenders the Aircraft for
Delivery to Lessee under Clause 4.1.
RENT DATE means the first day of each Rental Period.
REPLACEMENT ENGINE means an engine complying with Clause 8.11(e).
RETURN OCCASION means the date on which the Aircraft is redelivered to Lessor in
accordance with Clause 12.
SCHEDULED DELIVERY DATE means___________________.
SECURITY DOCUMENTS means each and every such mortgage, lease assignment,
insurance assignment or other document from time to time in effect, if any, as
notified to Lessee by Lessor, as being a "Security Document" and granting the
Security Trustee a Security Interest in the Aircraft, this Agreement and/or any
of Lessor's rights or benefits under this Agreement, including the Insurances
(other than to the extent such Insurances relate to third party liabilities).
SECURITY INTEREST means any mortgage, charge, pledge, lien, security interest,
encumbrance, assignment, hypothecation, right or set-off or any other agreement
or arrangement having the effect of conferring security.
SECURITY TRUSTEE means,__________and its permitted successors and assigns as
security trustee and/or collateral agent for and on behalf of certain of the
Financing Parties and Babcock & Brown and/or such other institution or
institutions as Lessor may from time to time advise Lessee.
STATE OF INCORPORATION means______________.
STATE OF REGISTRATION means_______________.
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SUBSIDIARY means:
(a) in relation to any reference to accounts, any company whose accounts are
consolidated with the accounts of Lessee in accordance with accounting
principles generally accepted under accounting standards of the State of
Incorporation;
(b) for any other purpose, an entity from time to time:
(i) of which another has direct or indirect control or owns directly or
indirectly more than 50 percent of the voting shares capital; or
(ii) which is a direct or indirect subsidiary of another under the Laws of
the jurisdiction of its incorporation.
TAXES means any and all present and future taxes, duties, withholdings, levies,
assessments, imposts, fees and other governmental charges of all kinds
(including without limitation any value added or similar tax and any stamp,
documentary, registration or similar tax), together with any penalties, fines,
surcharges and interest thereon and any additions thereto.
TERM means the period commencing on the Delivery Date and ending on the Expiry
Date.
TRUSTEE means _____________________________.
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SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
LESSEE'S REPRESENTATIONS AND WARRANTIES
1.1 Lessee's representations and warranties to Lessor are as follows:
(a) STATUS: Lessee is a company duly incorporated and validly existing under
the Laws of the State of Incorporation and has the corporate power to own
its assets and carry on its business as it is being conducted and is the
holder of all necessary air transportation licenses required in connection
therewith and with the use and operation of the Aircraft;
(b) POWER AND AUTHORITY: Lessee has the corporate power to enter into and
perform, and has taken all necessary corporate action to authorize the
entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) LEGAL VALIDITY: this Agreement has been duly authorised, executed and
delivered by Lessee, and this Agreement does, and the Operative Documents
when executed and delivered by Lessee will, constitute legal, valid and
binding obligations of Lessee, enforceable in accordance with their
respective terms, except as may be stated in any of the qualifications to
the legal opinion provided by Lessee to Lessor pursuant to Schedule 3
hereto;
(d) NON-CONFLICT: the entry into and performance by Lessee of, and the
transactions contemplated by, this Agreement do not and will not:
(i) conflict with any Laws binding on Lessee; or
(ii) conflict with the constitutional documents of Lessee; or
(iii) conflict with or result in default under any agreement or instrument
which is binding upon Lessee or any of its assets nor result in the
creation of any Security Interest over any of its assets;
(e) AUTHORISATION: all authorisations, consents, registrations and
notifications required in connection with the entry into, performance,
validity and enforceability of, this Agreement and the transactions
contemplated by this Agreement, have been (or will on or before the
Delivery Date have been) obtained or effected (as appropriate) and are (or
will on their being obtained or effected be) in full force and effect;
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(f) NO IMMUNITY:
(i) Lessee is subject to civil commercial Law with respect to its
obligations under this Agreement; and
(ii) neither Lessee nor any of its assets is entitled to any right of
immunity, and the entry into and performance of this Agreement by
Lessee constitute private and commercial acts;
(g) MATERIAL ADVERSE CHANGE: there has been no material adverse change in the
consolidated financial condition of Lessee since the date to which the
accounts most recently provided to Lessor on or prior to the Delivery Date
were drawn up;
(h) LITIGATION: no litigation, arbitration or administrative proceedings
proceeding are pending or to Lessee's knowledge threatened against Lessee
which, if adversely determined, would have any material respect adverse
effect upon its financial condition or business or its ability to perform
its obligation under this Agreement; and
(i) PARI PASSU: the obligations of Lessee under this Agreement rank at least
pari passu with all other present and future unsecured and unsubordinated
obligations (including contingent obligations) of Lessee, with the
exception of such obligations as are mandatorily preferred by Law and not
by virtue of any contract.
LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES
1.2 Lessee's further representations and warranties to Lessor are as follows:
(a) ACCOUNTS: the audited consolidated accounts of Lessee most recently
delivered to Lessor, including the balance sheets and statements of income
and retained earnings;
(i) have been prepared in accordance with accounting principals and
practices generally accepted and consistently applied in the State
of Incorporation; and
(ii) fairly represent the consolidated financial condition and
operations of Lessee as at the date to which they were drawn up.
(b) NO DEFAULT:
(i) no Default has occurred and is continuing or would result from the
entry into or performance of this Agreement; and
(ii) no other event or condition has occurred and is continuing which
constitutes (or with the giving of notice, lapse of time,
determination of materiality or the
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fulfillment of any other applicable condition, or any combination of the
foregoing, would constitute) a material default under any agreement or
instrument which is binding on Lessee or any assets of Lessee;
(c) REGISTRATION:
(i) Subject to matters specified in any legal opinion provided
pursuant to paragraph-1.1(c) of Schedule 3, no further filing or
recording of this Agreement or of any other document and no
further action, is or will be necessary under the Laws of the
State of Incorporation, the State of Registration and the
Habitual Base or any other states in order to (A) fully
establish, perfect and protect Lessor's title to, and the
interests of Lessor and Security Trustee in, the Aircraft or any
Engine or Part or this Agreement and their interest as against
Lessee or any third party, or (B) ensure the validity,
effectiveness and enforceability of this Agreement or any other
Operative Document to which the Lessee is a party; and
(ii) the rights and interests of Lessor and Security Trustee in the
Aircraft and this Agreement have been fully established,
perfected and protected under the laws of the State of
Incorporation, the State of Registration and the Habitual Base;
(d) TAXES: Lessee has delivered all necessary returns and payments due to the
tax authorities in the State of Incorporation, the State of Registration
and the Habitual Base and all other jurisdictions in which Lessee is
required to pay taxes and/or file tax returns or reports, and Lessee is not
required by Law to deduct any Taxes from any payments under this Agreement;
and
(e) FULL DISCLOSURE: each of this Agreement, each other Operative Document and
any other document, certificate or statement furnished to Lessor by or on
behalf of Lessee in connection with transactions contemplated hereby or
thereby (including financial information) do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained herein and therein not misleading;
all forecasts and opinions contained therein were honestly made on
reasonable grounds after due and careful inquiry by Lessee; and there is no
fact or circumstance which has not been disclosed by Lessee to Lessor in
writing on or before the date of this Agreement and which materially
adversely affects or will materially adversely affect the ability of Lessee
to carry on its business or to perform its obligations in any material
respect under this Agreement or any other Operative Document to which it is
a party.
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LESSOR'S REPRESENTATIONS AND WARRANTIES
1.3 Lessor's representations and warranties to Lessor are as follows:
(a) STATUS: Lessor is a company duly incorporated and validly existing under
the Laws of ____________ and has the corporate power to own its assets and
carry on its business as it is being conducted;
(b) POWER AND AUTHORITY: Lessor has the corporate power to enter into and
perform, and has taken all necessary corporate action to authorize the
entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) LEGAL VALIDITY: this Agreement constitutes Lessor's legal, valid and
binding obligation:
(d) NON-CONFLICT: the entry into and performance by Lessor of, and the
transactions contemplated by, this Agreement do not and will not:
(i) conflict with any Laws binding on Lessor; or
(ii) conflict with the constitutional documents of Lessor; or
(iii) conflict with any document which is binding upon Lessor; or any
of its assets.
(e) AUTHORISATION: so far as concerns the obligations of Lessor, all
authorisations, consents, registrations and notifications required under
the Governing Law or the laws of Lessor's state of incorporation in
connection with the entry into, performance, validity and enforceability
of, and the transactions contemplated by this Agreement by Lessor have been
(or will on or before the Delivery Date have been) obtained or effected (as
appropriate) and are (or will on their being obtained or effected be) in
full force and effect; and
(f) NO IMMUNITY:
(i) Lessor is subject to civil commercial Law with respect to its
obligations under this Agreement; and
(ii) neither Lessor nor any of its assets is entitled to any right of
immunity, and the entry into and performance of this Agreement by
Lessor constitute private and commercial acts.
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SCHEDULE 3
CONDITIONS PRECEDENT
The conditions precedent to Lessor's obligation to deliver and lease the
Aircraft are as follows. All documents delivered to Lessor pursuant to this
Schedule 3 will be in English, or if not in English, will be accompanied by a
certified English translation:
PRELIMINARY CONDITIONS
1.1 Lessor will receive from Lessee, not later than two Business Days prior to
the Scheduled Delivery Date, each of the following, satisfactory in form
and substance to Lessor:
(a) CONSTITUTIONAL DOCUMENTS: a copy of the constitutional documents of Lessee;
(b) RESOLUTIONS: a copy of the resolution of the board of directors of Lessee
(or committee of Lessee to which applicable authority has been delegated by
the board of directors of Lessee) approving the terms of, and the
transactions contemplated by, this Agreement, resolving that it enter into
this Agreement and the other Operative Documents, and authorising a
specified person or persons to execute this Agreement and the other
Operative Documents and accept delivery of the Aircraft on its behalf;
(c) OPINION: evidence that an opinion substantially in the form of Schedule 9
will be issued on the Delivery Date by independent legal counsel acceptable
to Lessor in the State of Registration, the Habitual Base and the State of
Incorporation;
(d) APPROVALS: evidence of the issue of each approval, licence and consent
which may be required in relation to, or in connection with the performance
by Lessee of any of its obligations under this Agreement (including without
limitation the remittance by Lessee to Lessor in Dollars of all amounts
payable under this Agreement);
(e) CONSENTS: [to be included as applicable];
(f) PROTECTION OF INTERESTS: evidence of any recordation or any other action
with respect to Lessor's and Security Trustee's interest, as applicable, in
the Aircraft, this Agreement and the Security Documents necessary or
desirable to protect such interests on the State of Incorporation, State of
Registration and the Habitual Base;
(g) IMPORT: evidence that any required import license, and all customs
formalities, relating to the import of the Aircraft into the Habitual Base
have been obtained or complied with, and that the import of the Aircraft
into the Habitual Base is exempt from Taxes.
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(h) LICENSES: copies of Lessee's air transport license, air operator's
certificates and all other licenses, certificates and permits required by
Lessee in relation to, or in connection with, the operation of the
Aircraft;
(i) CERTIFICATE: a form of certificate of a duly authorised officer of
Lessee:
(i) setting out a specimen of each signature of the authorised person
or persons referred to in paragraph (b) above;
(ii) certifying that each copy of each document specified in this
Schedule is correct, complete and in full force and effect;
(iii) certifying that Lessee's representations and warranties in Schedule
2 are true and correct on the Delivery Date as if given on such
date; and
(iv) certifying that there has been no material change in Lessee's
constitutional documents since originally delivered by Lessee to
Lessor;
(j) [AIR TRAFFIC CONTROL: a letter from Lessee addressed to Eurocontrol and
each other relevant air traffic control authority pursuant to which
Lessee authorises the addressee to issue to Lessor, upon Lessor's request
from time to time, a statement of account of all sums due by Lessee to
the authority in respect of all aircraft (including the Aircraft)
operated by Lessee. Lessor hereby undertakes that it will not present
such letter to Eurocontrol unless (i) a Default shall have occurred and
(ii) Lessor shall have demanded from Lessee that Lessee procure the
aforementioned statement of account from Eurocontrol and Lessee shall not
have procured the same within 48 hours following such demand;]1
(k) [DEREGISTRATION: an irrevocable power of attorney authorising Lessor or
such other person as Lessor may from time to time specify to do any thing
or act or to give any consent or approval which may be required to obtain
deregistration of the Aircraft and to export the Aircraft from the
Habitual Base upon termination of the leasing of the Aircraft under this
Agreement, duly notarised and legalised;]1
(l) [Include fee/security deposit/guaranty/letter of credit provisions if
applicable]
(m) GENERAL: such other documents as Lessor may reasonably request;
1.2(a) FINAL DOCUMENTS: Lessor shall receive on or before the Delivery Date each
of the following:
__________________
1 To be inserted only if applicable.
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(i) CERTIFICATE OF ACCEPTANCE: the Certificate of Acceptance, dated and
fully completed by Lessor and Lessee, certifying that Lessee has
completed its inspection of the Aircraft in accordance with Clause
4.5 and that the Aircraft conforms to the provisions set forth
therein, and is in all respects acceptable to Lessee, or if not so
acceptable, then setting forth all discrepancies and corrective
action to be taken;
(ii) CORPORATE CERTIFICATE: the certificate referred to in Clause 1.1(i)
of this Schedule, duly executed by an authorised officer of Lessee
and dated the Delivery Date;
(iii) OPINIONS: a signed original of each of the opinions referred to in
Clause 1.1(i) of this Schedule, dated the Delivery Date;
(iv) PAYMENTS: all sums due to Lessor under this Agreement on or before
the Delivery Date including, without limitation, the first payment
of Rent;
(v) INSURANCES: certificates of insurance, an opinion and undertaking
from Lessee's insurance broker and other evidence satisfactory to
Lessor that Lessee is taking the required steps to ensure due
compliance with the provisions of this Agreement as to Insurances
with effect on and after the Delivery Date;
(vi) ACCOUNTS: the latest available accounts of Lessee as described in
Clause 8.2(b);
(vii) AGREED MAINTENANCE PROGRAMME: such information and documents
relating to the proposed Agreed Maintenance Programme as Lessor may
reasonably require, and Lessor having approved in writing the
Agreed Maintenance Programme, such approval not to be unreasonably
withheld;
(viii) FILINGS: evidence that on the Delivery Date all filings,
registrations, recordings and other actions have been or will be
taken which are necessary or advisable to ensure the validity,
effectiveness and enforceability of this Agreement and to protect
the property rights of Lessor as owner of the Aircraft and lessor
thereof under this Agreement in the Aircraft, any Engine or any
Part, and the applicable rights of Security Trustee; and
(ix) [Include fee/security deposit/guaranty/letter of credit provision
if applicable].
(x) GENERAL: such other documents as Lessor may reasonably request; and
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(xi) ACKNOWLEDGMENT OF ASSIGNMENTS: if applicable. an acknowledgment in
the form set out in Part 2 of Schedule II relating to the notice of
assignments set out in Part I of that Schedule.
(b) REPRESENTATIONS/WARRANTIES: the representations and warranties of Lessee
in Schedule 2 shall be correct, and would be correct if repeated on
Delivery; and
(C) NO DEFAULT: no Default shall have occurred and be continuing on Delivery
or would result from the leasing of the Aircraft to Lessee under this
Agreement.
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SCHEDULE 4
DESCRIPTION OF AIRCRAFT
AIRCRAFT
Manufacturer:
Model:
Serial Number:
ENGINES
Engine Type:
Serial Nos:
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SCHEDULE 5
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on the date set out below by
__________ ("Lesser"), to __________ ("Lessor"), pursuant to the Aircraft
Lease Agreement dated __________, _____ between Lessor and Lessee (the
"Agreement"). The capitalized terms used in this Certificate shall have
the meaning given to such terms in the Agreement.
DETAILS OF ACCEPTANCE
1. Lessee hereby confirms to Lessor that Lessee has at [] o'clock on this
__________ day of __________, _____, at __________, technically accepted the
following, in accordance with the provisions of the Agreement:
(a) __________ Aircraft, Manufacturer's Serial Number __________;
(b) __________ Engines;
Engine Number Manufacturer's Serial Number
1 __________; and
2 __________;
(c) Fuel Status; Kilos __________; and
(d) Loose Equipment Check List: in accordance with the list signed by Lessor
and Lessee and attached hereto.
(e) Aircraft Documents: in accordance with the list signed by Lessor and
Lessee and attached hereto.
HOURS AND CYCLES DATA (AS OF DELIVERY DATE)
2.(a) AIRFRAME:
Number of Hours since last phase "D" Check (Heaviest Check): _____ hours
"C" Check (or Equivalent):
Interval: __________
Time Since: __________
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(b) LANDING GEAR OVERHAUL:
Number of Cycles Since Last Overhaul:
Left Gear_________________________________cycles
Right Gear________________________________cycles
Nose Gear_________________________________cycles
Centre Gear_______________________________cycles
Interval: Left Gear_____________________________
Right Gear______________________________________
Nose Gear_______________________________________
(c) ENGINES:
Number of Hours Since Last Performance Restoration Shop Visit:
S/N______:______ hours
S/N______:______ hours
Time Remaining to First Restriction:
Engine S/N:
Hours:___________ Restriction:__________
Cycles:__________ Restriction:__________
Engine S/N:
Hours:___________ Restriction:__________
Cycles:__________ Restriction:__________
(d) AUXILIARY POWER UNIT:
Number of APU Hours Since Last Hot Section Restoration:
___________ hours Date accomplished___________
Hot Section Restoration:
Interval:_____________________________
(e) TIME CONTROLLED COMPONENTS:
[See attached DUJX Report]
Interior Equipment:
Number of passenger Seats and Configuration:_______________________
Number of Galleys and Location:___________
Number of Lavatories and Location:___________
LOPA - Attached ___________
List of Loose Equipment on Board:
(g) AVIONICS:
Description Model Part No.
[(h) VIDEO SYSTEM:
Projector________________________
Tape Reproducer__________________
System Control Unit______________
System Monitor___________________]
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Acceptance:
3. Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
Documents are technically acceptable to it, and are in the condition for
delivery and acceptance as required under the Agreement.
IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Acceptance on the date in
paragraphe 1 above.
LESSEE:
By: __________________
Title: __________________
LESSOR:
By: __________________
Title: __________________
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SCHEDULE 6
[Maintenance Reserves/Fees/Security Deposit/Guaranty/Letter
of Credit Provisions]
[LESSEE PAYMENTS
1.1 In respect of each calendar month (or part thereof) during the Term,
Lessee will pay to Lessor in accordance with Clause 5.3(a) the
following Maintenance Reserves:
(a) Airframe: in respect of the Airframe, $___ for each Flight Hour opera-
ted by the Aircraft during that calendar month ("AIRFRAME MAINTENANCE
RESERVES");
(b) Engine Life-Limited Parts: in respect of the life-limited Parts for
each Engine, $___ for each Flight Hour operated by the Engine during
that calendar month ("ENGINE LLP MAINTENANCE RESERVES"); and
(c) Engines in respect of each Engine, $___ for each Engine Flight Hour
(or fraction thereof) operated by that Engine during that calendar
month ("ENGINE MAINTENANCE RESERVES").
RELEASE OF MAINTENANCE RESERVES
Provided no Default has occurred and is continuing, Lessor will
release the following amounts to Lessee from the Maintenance Reserves,
upon receipt by Lessor, within six months after commencement of such
maintenance and before the date falling one year following the Expiry
Date, of an invoice and supporting documentation reasonably
satisfactory to Lessor evidencing performance of the following work by
the Agreed Maintenance Performer:
(a) AIRFRAME: With respect to the Airframe, the complication, in
accordance with this Agreement, of those items of maintenance
characterized by the Manufacturer's Maintenance Planning Document and
best industry practice as "D" Check ("D CHECK AIRFRAME MAINTENANCE")
and/or those structural inspection type items for Boeing 737 Aircraft,
which have an inspection interval of at least 12,000 hours per the
Boeing 737 structural inspection programme (but not including repairs
arising as the result of accidents or incidents (whether or not
eligible for recovery under Lessee's insurance), operational or
maintenance mishandling or airworthiness directive work)(the "AIRFRAME
MAINTENANCE"):
(i) in respect of Airframe Maintenance the lesser of (i) the amount
of that invoice and (ii) an amount equal to the aggregate of the
Airframe Maintenance Reserves held by Lessor at the date of
commencement of such work (such amount being hereinafter referred
to as due "AVAILABLE AIRFRAME AMOUNT") less the aggregate amount
previously paid by Lessor under this sub-clause or sub-clause
(ii) before from the Available Airframe Amount; and
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(ii) In respect to D Check Maintenance an amount equal to the lesser
of (x) $________, less the aggregate amount previously paid by
Lessor under sub-clause (i) above and (y) the balance of the
Available Airframe Amount after deduction of the aggregate amount
previously paid by Lessor under sub-clause (i) above.
(b) ENGINE REFURBISHMENT: With respect to the Engine Refurbishment of any
Engine, the performance, in accordance with this Agreement, of all
shop visits (other than (i) repairs arising as a result of accidents
or incidents (whether or not eligible for recovery under Lessee's
insurance), foreign object damage or operational or maintenance
mishandling, the lesser of (i) the amount of that invoice and (ii) an
amount equal to the aggregate of the Engine Maintenance Reserves held
by Lessor in respect of that Engine at the date of commencement of
such work (such amount being hereinafter referred to as the "AVAILABLE
ENGINE AMOUNT") less the aggregate amount previously paid by Lessor
under this sub-clause from the Available Engine Amount.
(c) ENGINE LIFE LIMITED PARTS REPLACEMENT: With respect to the replacement
of any Engine Life Limited Parts, the performance in accordance with
this Agreement of the replacement of Engine Life Limited Parts (other
than in connection with (i) repairs arising as a result of accidents
or incidents (whether or not eligible for recovery under Lessee's
insurance), foreign objects damage or operational or maintenance
mishandling, the lesser of (i) the amount of that invoice and (ii) an
amount equal to the aggregate of the Engine LCP Maintenance Reserves
held by Lessor in respect of that Engine at the date of commencement
of such work (such amount being hereinafter referred to as the
"AVAILABLE ENGINE LLP AMOUNT") less the aggregate amount previously
paid by Lessor under this sub-clause from the Available Engine LLP
Amount.
MAINTENANCE RESERVES ON REDELIVERY
1.3 All sums remaining in the aforementioned Maintenance Reserves upon
redelivery of the Aircraft hereunder shall be retained by Lessor and shall be
deemed to be the property of Lessor provided that in the event Lessee fails to
comply with its obligations under Schedule 7 and Lessor agrees to accept a cash
payment in lieu of such compliance, Lessee may draw on the aforementioned funds
in respect of such payments to the extent of the balance thereof.
(Fee/Security Deposit/Guaranty/letter of Credit Provisions if applicable)
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SCHEDULE 7
PROCEDURES AND OPERATING CONDITION AT REDELIVERY
On the Return Occasion the Aircraft will be redelivered to Lessor by Lessee in
accordance with the procedures and in the condition set out below, subject to
fair ordinary wear and tear of a kind and to an extent consistent with similar
aircraft engaged in commercial airline operations.
FINAL INSPECTION
1.1 Immediately prior to the Return Occasion, Lessee will make the
Aircraft available to Lessor for inspection ("FINAL INSPECTION") in
order to verify that the condition of the Aircraft compiles with this
Agreement. The Final Inspection will be long enough to permit Lessor
to:
(a) inspect the Aircraft Documents;
(b) inspect the Aircraft and uninstalled Parts;
(c) inspect the Engines, including without limitation (i) a complete video
borescope inspection of (A) the low pressure and high pressure
compressors and (B) turbine area and (ii) engine condition runs;
(d) observe a two hour demonstration flight (with Lessor's representatives
as on-board observers);
PROVIDED THAT Lessor will make all reasonable efforts to accomplish
the inspections contemplated by sub-paragraphs (b), (c) and (d) hereof
within 48 hours.
GENERAL CONDITION
1.2 The Aircraft will:
(a) be in good operating condition and be clean;
(b) have installed the full complement of equipment, parts, accessories,
furnishings and loose equipment as when originally delivered to
Lessee; and if either of the engines redelivered with the Aircraft is
not one of the engines referred to in the Acceptance Certificate or a
Replacement Engine installed pursuant to Clause 8.11(e) following an
Engine Event of Loss, Lessor shall have no obligation to accept such
engine unless Lessee furnishes to Lessor all the documents and
evidence in respect of such engine specified in Clause 8.11(e), as if
such engine were a Replacement Engine;
(c) have in existence a valid certificate of airworthiness (or if required
by Lessor, a valid export certificate of airworthiness) with respect
to the Aircraft issued by the Air Authority;
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<PAGE> 191
(d) comply with the manufacture's original specifications as at the
Delivery Date as amended by subsequent agreed modifications;
(e) have undergone, immediately prior to redelivery, a "C" Check in
block format so that all Airframe inspections falling due within the
next following 3,000 Flight Hours and one year of operation in
accordance with the Agreed Maintenance Programme, have been
accomplished;
(g) have had accomplished all outstanding Airworthiness Directives
affecting that model of Aircraft issued by the FAA which, if the
Aircraft were registered with the FAA, would have to be complied with
during the Term; for this purpose, compliance shall be by terminating
action if:
(i) Lessee has complied by terminating action for other aircraft of
the same model and series then operated by Lessee; or
(ii) the latest date permitted by such Airworthiness Directive for
compliance by terminating action falls within 60 days after the
Expiry Date;
(h) have installed all applicable vendor's and manufacturer's service
bulletin kits received free of charge by Lessee that are appropriate
for the Aircraft and, to the ____________ installed, those kits will
be furnished free of charge to Lessor;
(i) be in such external livery as advised by Lessor, the cost of such
painting not to exceed industry standards;
(j) have all ______________________
(k) have no open, deferred, continued, carry over or placorded log book
items.
COMPONENTS
1.3(a) Each Flight Hour and Cycle limited component (other than the APU)
shall have not less than ______ Flight Hours/______ Cycles of life
remaining to the next scheduled removal, in accordance with the
Agreed Maintenance Programme and shall be supported by appropriate
certification documentation indicating TSN, LSN, TSO and LSO such as
JAR form I or FAA form 8130-I, as applicable;
(b) Each calendar-limited component including safety equipment will have
not less than 12 months life remaining to the next scheduled removal
in accordance with the Agreed Maintenance Programme;
(c) Each life-limited component will be supported by certification
documentation necessary to demonstrate back-to-birth traceability;
(d) The APU shall be serviceable and will have not more than ______
running hours since the last hot section restoration;
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(e) The Engines will have on an average not less than _____ Flight
Hours and _____ Cycles, with no one Engine having less than _____
Flight Hours and _____ Cycles, expected life remaining to the next
expected removal. The expected life remaining will be determined by
the inspection and checks accomplished by Lessor in accordance with
this Agreement;
(f) Each Engine will have no defect which places less that _____ Flight
Hours and _____ Cycles of remaining life pursuant to Manufacturer's
airworthiness requirements until removal; and
(g) Each Engine will be in a condition which can operate at maximum rated
take-off power at sea level at a temperature of 34 Celsius degrees.
FUSELAGE, WINDOWS AND DOORS
1.4(a) The fuselage will be free of major dents and abrasions, loose or
palled or missing rivets:
(b) Windows will be free of delamination, blemishes, crazing and will be
properly sealed, within maintenance manual limits; and
(c) Doors will be free moving, correctly rigged and be fitted with
serviceable seals.
WINGS AND _________________
1.5(a) Leading edges will be free from damage, within maintenance manual
limits;
(b) All control surfaces shall be waxed and polished; and
(c) Wings shall be free of fuel leaks.
INTERIOR AND COCKPIT
1.6 Carpets and seat covers will be in good condition, clean and free of
stains and meet FAR fire resistance regulations.
LANDING GEAR AND APU
1.7(a) The Landing Gear and wheel wells will be clean, free of leaks and
repaired as necessary;
(b) Each installed Landing Gear shall have not less than _____ Flight
Hours/ _____ Cycles and ___ months life remaining to the next
scheduled removal in accordance with the Agreed Maintenance
Programme; and
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(c) The APU shall have just completed a borescope inspection and shall
meet all air outputs and temperature limitations under load in
accordance with the Agreed Maintenance Programme and the
manufacturer's maintenance manual, and any defects discovered in
such inspection which exceed the APU manufacturer's in service
limits shall be corrected at Lessee's expense.
WHEELS AND BRAKES
1.8 The Landing Gear and wheel wells will be clean, free of leaks and
repaired as necessary.
CORROSION
1.9(a) The Landing Gear and wheel wells will be clean, free of leaks and
repaired as necessary.
(b) The entire fuselage will be substantially free from corrosion and
will be adequately treated and a corrosion prevention programme
approved by Lessor will be in operation; and
(c) Fuel tanks will be free from contamination and corrosion and a tank
treatment programme will be in operation.
FUEL
1.10 At redelivery, Lessor will pay to Lessee or Lessee will pay to Lessor
(as the case may require) a cash adjustment in respect of the difference in fuel
on board at Delivery versus redelivery, at the then prevailing cost of fuel at
the Redelivery Location.
MAINTENANCE PROGRAMME
1.11(a) Prior to the Return Occasion and upon Lessor's request, Lessee will
provide Lessor or its agent reasonable access to the Agreed
Maintenance Programme and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet; and
(b) Lessee will, if requested by Lessor to do so, upon return of the
Aircraft grant Lessor access to full details of the Agreed
Maintenance Programme. Lessor agrees that it will not disclose the
contents of the Agreed Maintenance Programme to any person or entity
except to the extent necessary to monitor Lessee's compliance with
this Agreement and/or to bridge the maintenance programme for the
Aircraft from the Agreed Maintenance Programme to another programme
after the Return Occasion.
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SCHEDULE 8
INSURANCE REQUIREMENTS
TYPES OF INSURANCE
1.1 The Insurances required to be maintained are as follow:
(a) HULL ALL RISKS of loss or damage whilst flying and on the ground with
respect to the Aircraft on an agreed value basis for the Agreed Value and
with a deductible not exceeding $__________, or such other amount agreed
by Lessor from time to time;
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the Hull All
Risks Policy to the fullest extent available from the leading intentional
insurance markets, including confiscation and requisition by the State of
Registration for the Agreed Value;
(c) ALL RISKS (including War and Allied Risk except when on the ground or in
transit other than by air) property insurance on all Engines and Parts
when not installed on the Aircraft on an "agreed value" basis for their
full replacement value; and
(d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO AND MAIL
AND AIRLINE GENERAL THIRD PARTY (including Products) LEGAL LIABILITY for a
combined single limit (bodily injury/property damage) of an amount not
less than the Minimum Liability Coverage for the time being for any one
occurrence (but in respect of products and personal injury liability, this
limit may be an aggregate limit for any and all losses occurring during
the currency of the policy). War and Allied Risks are also to be covered
under the policy to the fullest extent available from the leading
international insurance markets.
TERMS OF HULL AND SPARES INSURANCE
1.2 All required hull and spares insurance, so far as it relates to the
Aircraft, will:
(a) ADDITIONAL ASSUREDS: same Lessor, Security Trustee and their respective
successors and assigns as additional assureds for their respective rights
and interests:
(b) SETTLEMENT OF LOSSES: provide that any loss will be settled jointly with
Lessor, and will be payable in Dollars to Lessor, or, if applicable,
Security Trustee, for the account of all interests, except where the loss
does not exceed the Damage Notification Threshold, and neither Lessor nor
Security Trustee has notified the insurers to the contrary, in which case
the loss will be settled with and paid to Lessee;
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(c) NOTICE: include a notice and/or acknowledgement of assignment
(relating to the assignment of Lessor's interest in the Insurances to
the Security Trustee if applicable) in a form acceptable to Lessor;
(d) 50/50 PROVISION: if separate Hull "all risks" and "war risks"
insurances are arranged, include a 50/50 provision in accordance with
market practice (AVS. 10G is the current market language); and
(e) NO OPTION TO REPLACE: confirm that the insurers are not entitled to
replace the Aircraft in the event of an insured Event of Loss.
TERMS AND LIABILITY INSURANCE
1.3 All required liability insurances will:
(a) ADDITIONAL ASSUREDS: include Lessor and each of the other Indemnitees,
and their respective successors and assigns and their respective
shareholders, subsidiaries, directors, officers, agents, employees and
indemnitees, as additional insureds for their respective rights and
interests, warranted, each as to itself only, no operational interest;
(b) SEVERABILITY: include a severability of interests clause which
provides that the insurance, except for the limit liability, will
operate to give each assured the same protection as if there was a
separate policy issued to each assured; and
(c) PRIMARY POLICY: contain a provision confirming that the policy is
primary without right of contribution and the liability of the
insurers will not be affected by any other insurance of which Lessor,
Security Trustee or any other Indemnitee or Lessee have the benefit so
as to reduce the amount payable to the additional insureds under such
policies.
TERMS OF ALL INSURANCES
1.4 All Insurances will:
(a) PRUDENT INDUSTRY PRACTICE: be in accordance with prudent industry
practice of persons operating similar aircraft in similar
circumstances;
(b) DOLLARS: provide cover denominated in Dollars and any other
currencies which Lessor may reasonably require in relation to
liability insurance;
(c) WORLDWIDE: operate on a worldwide basis subject to such limitations
and exclusions as Lessor may agree;
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(d) ACKNOWLEDGMENT: acknowledge the insurer is aware (and has seen a copy)
of this Agreement and that the Aircraft is owned by Lessor, leased by
Lessor and is subject to the interest of the Security Trustee as
applicable and that, if applicable, including the Lessor's interest in
the Insurances are subject to a security assignment in favour of the
Security Trustee;
(e) BREACH OF WARRANTY: provide that, in relation to the interests of
each of the additional assureds, the Insurances will not be
invalidated by any act or omission by Lessee or any other person
other than the respective additional assured seeking protection and
shall insure the interests of each of the additional assureds
regardless of any breach or violation by Lessee or any other person
other than the respective additional assured seeking protection of
any warranty, declaration or condition, contained in such Insurances.
(f) SUBROGATION: provide that the insurers will hold harmless and waive
any rights of recourse against the additional assureds or to be
subrogated to any rights or Lessor or Lessee;
(g) PREMIUMS: provide that the additional assureds will have no
obligation or responsibility for the payment of any preniums due (but
reserve the right to pay the same should any of them elect so to do)
and that the insurers will not exercise any right to set-off or
counter-claim in respect of any premium due against the respective
interests of the additional assureds other than outstanding premiums
relating to the Aircraft, any Engine or Part the subject of the
relevant claim;
(h) CANCELLATION/CHANGE: provide that the Insurances will continue
unaltered for the benefit of the additional assureds for at least
30 days after written notice by registered mail or telex of any
cancellation, change, event of non-payment of premium or instalment
thereof has been sent to Lessor, Babcock & Brown and Security
Trustee, except in the case of war risks for which 7 days (or
such lesser period as is or may be customarily available in respect
of war risks or allied perils) will be given, or in the case of was
between the 5 great powers or nuclear peril for which termination
is automatic;
(i) REINSURANCES: if reinsurance is a requirement of this Agreement such
reinsurance will:
(aa) be on the same terms as the original insurances and will include
the provisions of this Schedule,
(bb) provide that notwithstanding any bankruptcy, insolvency,
liquidation, dissolution or similar proceedings of or affecting
the reinsured that the reinsurers' liability will be to make such
payments as would have fallen due under the relevant policy of
reinsurance if the reinsured had (immediately before such
bankrupty, insolvency, liquidation, dissolution or similar
proceedings) discharged its obligations in full under the
original insurance policies in respect of which the then relevant
policy of reinsurance has been effected; and
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(cc) contain a "cut-through" clause in the following form (or
otherwise satisfactory to Lessor):
"The Reinsurers and the Reinsured hereby actually agree that
in the event of any claim arising under the reinsurances in
respect of a total loss or other claim where as provided by
this Agreement dated [__________], _____ and made between
[Lessor] and [Lessee] such claim is to be paid to the person
named as sole loss payee under the primary insurances, the
Reinsurers will in lieu of payment to the Reinsured, its
successors in interest and assigns pay to the person named
as sole loss payee under the primary insurances effected by
the Reinsured that portion of any loss due for which the
Reinsurers would otherwise be liable to pay the Reinsured
(subject to proof of loss), it being understood and agreed
that any such payment by the Reinsurers will (to the extent
of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith",
subject to such provisions not contravening any Law of the
State of Incorporation;
(j) INITIATING CLAIMS: contain a provision entitled Lessor or any insured
party to initiate a claim under any policy in the event of the refusal
or failure to Lessee to do so; and
(k) INDEMNITIES: accept and insure the indemnity provisions of this
Agreement, to the extent of the risks covered by the policies.
DEDUCTIBLES
1.5 Lessee shall be responsible for any and all deductibles under the
Insurances.
APPLICATION OF INSURANCE PROCEEDS
1.6 The Insurances will be endorsed to provide for payment of proceeds as
follows:
(a) EVENT OF LOSS: all insurance payments received as the result of an
Event of Loss occurring during the Term will be paid to Lessor, or, if
applicable, Security Trustee, and Lessor, or, if applicable, Security
Trustee will pay the balance of those amounts to Lessee after
deduction of all amounts which may be or become payable by Lessee to
Lessor under this Agreement and the Other Agreements (including under
Clause 11.1(b));
(b) EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds of any
property, damage or loss to the Aircraft, any Engine or any Part
occurring during the Term not constituting an Event of Loss and in
excess of the Damage Notification Threshold will be paid to Lessor and
applied in payment (or to reimburse Lessee) for repairs or replacement
property upon Lessor being satisfied that the repairs or replacement
have been effected in accordance with this Agreement. Any balance
remaining may be retained by Lessor;
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(c) BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in amounts
below the Damage Notification Threshold may be paid by the insurer
directly to Lessee;
(d) LIABILITY PROCEEDS: all insurance proceeds in respect of third party
liability will, except to the extent paid by the insurers to the
relevant third party, be paid to Lessor to be paid directly in
satisfaction of the relevant liability or to Lessee in reimbursement
of any payment so made; and
(e) DEFAULT: notwithstanding the foregoing paragraphs, if at the time of
the payment of any such insurance proceeds a Default has occurred and
is continuing, all such proceeds will be paid to or retained by Lessor
to be applied toward payment of any amounts which may be or become
payable by Lessee in such order as Lessor may elect.
To the extent that insurance proceeds are paid to Lessee, Lessee agrees to
comply with the foregoing provisions and apply or pay over such proceeds as so
required.
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SCHEDULE 9
FORM OF LEGAL OPINION
[To be determined based on applicable lessee and jurisdictions].
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SCHEDULE 10
EVENTS OF DEFAULT
Each of the following events or conditions constitutes an Event of Default:
(a) NON-PAYMENT: Lessee fails to make any payment under this Agreement within
__ days of the due date; or
(b) INSURANCE: Lessee fails to comply with any provision of Clause 9 or
Schedule 1, or any insurance required to be maintained under this
Agreement is cancelled or terminated, or a notice of cancellation is given
in respect of any such insurance; or
(c) BREACH: Lessee fails to comply with any other provision of this Agreement
or any other Operative Document and, if such failure is in the reasonable
opinion of Lessor capable of remedy, the failure continues for __ days
after notice from Lessor to Lessee; or
(d) REPRESENTATION: any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any document or
certificate or statement is or proves to have been incorrect in any
material respect when made or deemed to be repeated; or
(e) CROSS-DEFAULT:
(i) any Financial Indebtedness of Lessee is not paid when due (subject
to any applicable grace periods); or
(ii) any such Financial Indebtedness becomes due or capable of being
declared due prior to the date when it would otherwise have become
due (subject to any applicable grace periods); or
(iii) the security for any such Financial Indebtedness becomes
enforceable (subject to any applicable grace periods; or
(iv) any event of default or termination event, howsoever described,
occurs under any Other Agreement or any lease, hire purchase,
conditional sale or credit sale agreement of Lessee; or
(f) APPROVALS:
(i) any authorisation required by Lessee to obtain and transfer freely
Dollars (or any other relevant currency) out of any relevant
country; or
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(ii) any authorisation required by Lessee to authorise, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement or the performance by
Lessee of its obligations under this Agreement; or
(iii) the registration of the Aircraft or the Aircraft's certificate of
airworthiness; or
(iv) any airline license or air transport license required by Lessee;
is modified in a manner which would have a material adverse effect on
Lessee's ability to perform its obligations under this Agreement, and/or on
Lessor's or Security Trustee's right, title and interest to and in the
Aircraft and/or under this Agreement or is withheld, or is revoked,
suspended, cancelled, withdrawn, terminated or not renewed, or otherwise
ceases to be in full force; or
(g) INSOLVENCY:
(i) Lessee is, or is deemed for the purposes of any relevant law to be,
unable to pay its debts as they fall due or to be insolvent, or
admits inability to pay its debts as they fall due; or
(ii) Lessee suspends making payments on all or any class of its debts or
announces an intention to do so, or a moratorium is declared in
respect of any of its indebtedness; or
(h) LIQUIDATION AND SIMILAR PROCEEDINGS:
(i) a meeting of the shareholders or directors of Lessee is convened to
consider a resolution to present an application for an
administration order or any such resolution is passed; or
(ii) any step (including petition proposal or convening a meeting) is
taken with a view to a composition, assignment or arrangement with
any creditors of, or the rehabilitation, administration,
custodianship, liquidation, or dissolution of Lessee or any other
insolvency proceedings involving Lessee; or
(iii) any order is made or resolution passed for any such composition,
assignment, arrangement, rehabilitation, administration,
custodianship, liquidation, dissolution or insolvency proceedings,
or Lessee becomes subject to or enters into any of the foregoing; or
(iv) any liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrator, examiner or similar
officer is appointed in respect of Lessee or any of its assets; or
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(i) RECEIVER:
(i) an administrative or other receiver or manager is appointed in
respect of Lessee or any part of its assets; or
(ii) Lessee requests any person to appoint such a receiver or manager; or
(iii) any other steps are taken to enforce any Security Interest over all
or any part of the assets of Lessee; or
(iv) any attachment, sequestration, distress or execution affects any
assets of Lessee and is not discharged within __ days; or
(j) OTHER JURISDICTION: there occurs in relation to Lessee any event anywhere
which, in the reasonable opinion of Lessor, corresponds with any of those
mentioned in paragraphs (g), (h) or (i) above; or
(k) SUSPENSION OF BUSINESS: Lessee suspends or ceases or threatens to suspend
or cease to carry on all or a substantial part of its business; or
(l) DISPOSAL: Lessee disposes, conveys or transfers or threatens to dispose,
convey or transfer of all or a material part of its assets, liquidates or
dissolves or consolidates or merges with any other Person (whether by one
or a series of transactions, related or not), subject to sub-paragraph
(n), other than for the purpose of a reorganisation the terms of which
have received the prior written approval of Lessor, such approval not to
be unreasonably withheld; or
(m) RIGHTS AND REMEDIES: Lessee or any other Person claiming by or through
Lessee challenges the existence, validity, enforceability or priority of
the rights of Lessor as owner of the Aircraft or as lessor thereof under
this Agreement or the rights of Security Trustee under the Security
Documents; or
(n) CHANGE OF CONTROL: any single person, or group of persons acquire control
of Lessee without the previous consent in writing of Lessor; or
(o) DELIVERY: Lessee fails to comply with its obligation under Clause 4 to
accept delivery of the Aircraft; or
(p) (insert security deposit/guaranty/letter of credit provisions if
applicable; or)
(q) REDELIVERY: Lessee fails to return the Aircraft to Lessor on the Expiry
Date in accordance with Clause 12; or
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(r) EUROCONTROL: Eurocontrol (or any authority on its behalf) or any other
authority notifies Lessor that there are Eurocontrol charges or other
navigation, landing, airport or similar charges due from Lessee, and such
charges remain outstanding for a period of 30 days from the date of such
notice; provided that (i) no Event of Default shall arise under this
paragraph (u) for so long as such charges are being contested in good faith
and by appropriate proceedings and such proceedings will not involve the
detention, interference with use or operation or sale, forfeiture or loss
of the Aircraft; and (ii) such 30 day period shall not apply if there is
any risk of detention, interference with use or operation or sale,
forfeiture or loss of the Aircraft; or
(s) ILLEGALITY: this Agreement or any other Operative Document is or becomes
wholly or partly invalid, illegal or unenforceable other than as a result
of an act on the part of Lessor.
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SCHEDULE 11
Part 1
Notice of Assignment
From: (1)
(2) ___________________ (The "Security Trustee")
To:
(___________________, __________)
Dear Sirs:
We refer to the Aircraft Lease Agreement date [______________] between ________
and ________ (the "Lease") relating to one Boeing 737-____ aircraft with
manufacturer's serial number ________ together with two installed General
Electric CFM 56-3C1 engines with serial number ________ and ________ (the
"Aircraft").
All terms defined in the Lease shall, unless the context otherwise requires,
have the meaning herein.
We hereby give you notice that by an assignment dated _______________, ________
and made between ________ and the Security Trustee (the "Security
Assignment"), ________ has assigned to ________ by way of security all its
right, title and interest in and to the Lease and including without limitation
the Insurances.
Henceforth, all monies that may be payable by you under the Lease shall continue
to be paid to the bank account specified in the Lease unless and until the
Security Trustee otherwise directs, whereupon you are authorised and required
to comply with the Security Trustee's directions.
By your signature on the enclosed Acknowledgement you acknowledge, that ________
has appointed Babcock & Brown Limited as its servicer, agent and attorney in
respect of the Lease and the Aircraft and the servicing of both. Communications
received by you from Babcock & Brown Limited in connection with the Lease and
the Aircraft may and shall be relied upon (and complied with where the context
calls for compliance) by you as if received from ________. You may rely on this
notice of such appointment until notified in writing to the contrary by ________
or the Security Trustee.
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This notice and the instructions herein contained are irrevocable. Please
acknowledge receipt of this notice to ___________, Babcock & Brown Limited and
the Security Trustee on the enclosed Acknowledgement, it being provided hereby
that your signature on such Acknowledgement shall confirm your acknowledgement
and agreement for the benefit of, Babcock & Brown Limited and the Security
Trustee that neither Babcock & Brown Limited nor the Security Trustee shall be
bound by, or have any liability to you for the performance of any of the
obligations of ___________ under the Lease save and to the extent otherwise
expressly agreed in writing by Babcock & Brown Limited and the Security Trustee
with you and that ___________ shall not, nor shall have any authority to, agree
to any termination of or amendment to the Lease without the prior written
consent of Babcock & Brown Limited and the Security Trustee.
You are hereby authorised to assume the obligations expressed to be assumed by
you under the enclosed Acknowledgement to the effect that, so far as the same
would otherwise be incompatible with the Lease, your obligations to ___________
under the Lease shall be modified accordingly.
This Notice shall be goverment by and construed in accordance with ________ law.
Yours faithfully,
For and on behalf of
For and on behalf of
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PART 2
ACKNOWLEDGEMENT
From: ____________
To: (1) __________ ("Security Trustee")
(2) Babcock & Brown Limited
(3)
[_________ , 1997]
Dear Sirs,
We acknowledge receipt of a Notice of Assignment dated [_________] (the
"Assignment Notice") relating to an assignment between ________ and the Security
Trustee (the "Security Assignment").
We acknowledge the effectiveness of the Security Assignment to confer on the
Security Trustee all rights, title and interests of ________ under the Aircraft
Lease Agreement dated [________] between ________ and ourselves (the "Lease")
relating to one Boeing 737-______ aircraft with manufacturer's serial number
________ together with two installed General Electric CFM 56-3C1 engines (the
"Aircraft").
In consideration of payment to us of US$1 we hereby agree as follows:
(1) to comply with the provisions of the Assignment Notice;
(2) If the Security Trustee issues to us a notice (a "Relevant Notice") that
its rights as assignee under the Security Assignment have become
exercisable we agree that we shall thereafter (a) perform, observe and
comply with all our other undertakings and obligations under the Lease in
favour and for the benefit of the Security Trustee (as the case may be) as
if the Security Trustee were named as lessor therein instead of ________;
and (b) if the Security Trustee so requests, enter into a lease with the
Security Trustee or its nominee at no cost to us, on the same terms
(mutatis mutandis) as the Lease;
(3) If ________ is in breach of any of its obligations, express or implied,
under the Lease, or if any event occurs which would permit us to terminate,
cancel or surrender the Lease we will (a) immediately upon becoming aware
of it, give the Security Trustee notice of such breach or event and
(b) accept as adequate remedy for any such breach performance by the
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Security Trustee of such obligations within seven days of our written
notice to the Security Trustee.
(4) We agree that after issue by the Security Trustee of any Relevant Notice,
we shall not recognise the exercise by the Security Trustee of any of its
rights and powers under the Lease unless and until requested to do so by
the Security Trustee;
(5) We agree that the Security Trustee and Babcock & Brown Limited shall have
the benefit of Clause 10 of the Lease (indemnity) and (as regards our
payment obligations to the Security Trustee and Babcock & Brown Limited)
Clause 5.12 (Net Lease) and agree that we are bound by the terms of such
Clauses, as though the same were set out herein in full mutatis mutandis;
and
(6) This acknowledgement shall be governed by and construed in accordance
with _______ law.
Yours faithfully,
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CONTENTS
Clause Page
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<PAGE> 210
Exhibit A
Pro Forma Lease
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<PAGE> 1
Exhibit 10.6
Dated 15 July 1998
GPA GROUP PLC
SKYSCAPE LIMITED
and
AERCO LIMITED
SHARE PURCHASE AGREEMENT
McCANN FITZGERALD
Solicitors
<PAGE> 2
CONTENTS
1. Interpretation 2
2. Purchase and Sale 8
3. Closing 8
4. Representations and Warranties of Sellers 9
5. Indemnity 10
6. Limitations on Warranties and Indemnity 13
7. Representations and Warranties of Purchaser 14
8. Additional Covenants and Agreements 14
9. Conditions to Closing 14
10. Miscellaneous 17
SCHEDULE 1 - Details relating to the Shares and AerCo USA Stock 21
SCHEDULE 2 - Further information Concerning the Companies 22
SCHEDULE 3 - Representations and Warranties of Sellers 26
SCHEDULE 4 - Purchaser's Representations and Warranties 45
SCHEDULE 5 - Deed of Tax Indemnity 47
SCHEDULE 6A - Form of Solvency Certificate (non-US companies) 54
SCHEDULE 6B - Form of Solvency Certificate (US companies) 55
SCHEDULE 7 - Intra-Group Debt at Closing 56
SCHEDULE 8 - Particulars of the Aircraft 58
<PAGE> 3
THIS AGREEMENT is made on 15 July 1998
BETWEEN
(1) GPA GROUP PLC ("GPA"), a company incorporated in Ireland and having its
registered office at GPA House, Shannon, Co Clare, Ireland and SKYSCAPE
LIMITED ("SKYSCAPE"), a company incorporated in Ireland and having its
registered office at GPA House, Shannon, Co Clare, Ireland (together the
"Sellers") and
(2) AERCO LIMITED, a company incorporated in Jersey and having its registered
office at 22 Grenville Street, St Heller, Jersey JE4 8PX, Channel Islands
(the "Purchaser").
RECITALS:
(A) Each of AerCo Ireland Limited ("AERCO") and AerCo Ireland II Limited
("AERCO IRELAND II") (together the "IRISH COMPANIES") is a private
limited company incorporated in Ireland under the Companies Acts 1963 to
1990 and with share capital as set out in Schedule 2.
(B) GPA is the beneficial owner of the whole of the issued share capital of
each of the Irish Companies. Skyscape holds one ordinary share in each of
the Irish Companies as nominee for GPA.
(C) It is proposed that AerCo Ireland II will contract to acquire all of the
issued share capital in AerFi Belgium N.V., brief particulars of which are
set out in Schedule 2 ("AERFI BELGIUM"), from the Sellers.
(D) AerCoUSA Inc ("AERCO USA") is a Delaware corporation, all the issued stock
in which was transferred by GPA to First Security Bank, National
Association (the "VOTING TRUSTEE") under the terms of a Voting Trust
Agreement (the "VOTING TRUST") dated as of 22 April 1998 between GPA as
Stockholder and the Voting Trustee. All Voting Trust Certificates issued
under the Voting Trust are held by GPA.
(E) The Sellers have agreed to sell and the Purchaser has agreed to purchase
all of the issued ordinary shares in the capital of each of the Irish
Companies (the "SHARES"), and GPA has agreed to sell (having first
terminated the Voting Trust) and the Purchaser has agreed to acquire all of
the issued and outstanding shares of common stock in AerCo USA (the "AERCO
USA STOCK"), in each case on the terms and conditions and on the basis of
the representations, warranties, undertakings, agreements and indemnities
hereinafter set out.
1
<PAGE> 4
NOW IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS: In this Agreement unless the context requires otherwise:
"ACTION" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority;
"AERCO GROUP" means the Purchaser, the Companies, an any other
companies which are, or which on or after the Closing Date become, direct
or indirect subsidiaries of the Purchaser;
"AERFI ACCOUNTS" means the audited balance sheets of AerFi Belgium as at
31 March 1998 and its audited profit and loss accounts for the financial
year ended on 31 March 1998;
"AFFILIATE" means, with respect to any person, any body corporate which
is (a) a subsidiary or the holding company of such person or (b) a
subsidiary of any body corporate of which that person is also a subsidiary;
"AIRCRAFT" means the aircraft listed in Schedule B together with, unless
otherwise specified, all Engines and Parts related thereto;
"AIRCRAFT DOCUMENTS" means all records, logs, technical data and manuals
relating to the maintenance and operation of the Aircraft;
"AIRCRAFT PURCHASE AGREEMENTS" means the Aircraft Purchase Agreements
relating to the Aircraft;
(i) dated 28 April 1998 between GPA as seller and AerCo Ireland II
(under its then name Littsfield Limited) as purchaser in respect of
the Aircraft with manufacturer's serial number 240;
(ii) dated 8 July 1998 between GPA as seller and AerCo Ireland as
purchaser in respect of the Aircraft with manufacturer's serial
numbers 085, 23868, 23979, 26066, 22496, 11341 and 11350;
(iii) dated 10 July 1998 between GPA Corporation as seller and AerCo USA
as purchaser in respect of the Aircraft with manufacturer's serial
number 46064; and
(iv) dated 7 July 1998 between AeroUSA II Inc as seller and AerCo USA as
purchaser in respect of the Aircraft with manufacturer's serial
number aircraft msn 46060;
"APPRAISERS" means Aircraft Information Services, Inc, Airclaims Limited
and BK Associates, Inc.;
"BASE VALUE" means, at any time, the value of any Aircraft on the basis
of an open, unrestricted, and stable market environment with a reasonable
balance of
2
<PAGE> 5
supply and demand of other aircraft and with full consideration of such
Aircraft's "highest and best use" and presuming an arm's length, cash
transaction between willing, able and knowledgeable parties, acting
prudently, with an absence of duress and with a reasonable period of time
available for marketing such Aircraft adjusted to account for the
maintenance status of such Aircraft (with certain assumptions as to use
since the last reported status, as set out, as regards any appraisal of
base value, in such appraisal);
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorised by law to be closed in London or
New York;
"CLOSING" means the closing of the sale and purchase of the Shares in
accordance with Clause 3 hereof;
"CLOSING DATE" means the date upon which Closing takes place;
"COMPANIES" means the Irish Companies and AerCo USA. The term "Companies"
also includes AerFi Belgium if that company is later sold by the Sellers to
the Purchaser and/or its nominees, and "Company" shall be construed
accordingly;
"DEED OF TAX INDEMNITY" means a deed in the form set out in Schedule 5;
"DIRECTORS" and "SECRETARY" in relation to a Company means the persons
described in Schedule 2 as directors and secretary thereof respectively;
"DISCLOSURE LETTER" means the disclosure letter of even date herewith from
the Sellers to the Purchaser, a copy of which is annexed hereto;
"DOLLARS" or "$" or "US$" means the lawful currency of the United States of
America;
"ENGINE" means each engine listed in Schedule 8 or, where any such engine
has been replaced under the terms of the relevant Lease, and title to the
replacement engine has passed to the relevant Company, such replacement
engine, and including any and all Parts incorporated in, installed on or
attached to such engine or replacement engine;
"GOVERNMENTAL AUTHORITY" means any governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body;
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority;
"INITIAL APPRAISED VALUE" means, in respect of any Aircraft, the average of
the aggregate Base Values for that Aircraft as at 1 March 1998 obtained
from the Appraisers and set out opposite the description of that Aircraft
in Schedule 8;
"INTRA-GROUP DEBT" means indebtedness incurred by the Companies to GPA, the
amount of which, as at Closing, is set out in Schedule 7;
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"LEASE" means, for each Aircraft, the aircraft lease agreement relating to
it described in Schedule 8 and the sub-leases referred to in Schedule 8;
"LESSEE" means a lessee under a Lease;
"LESSOR" means the lessor under a Lease;
"LIABILITIES" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising
under any law (including, without limitation, any environmental law),
Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking;
"LIEN" means any security interest, pledge, mortgage, lien (including,
without limitation, environmental and tax liens), charge, encumbrance,
adverse claim, preferential arrangement or restriction of any kind,
including, in the case of shares, without limitation, any restriction on
the use, voting, transfer, receipt of income or other exercise of any
attributes of ownership of such shares;
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the business
condition (financial or otherwise), operations, performance or properties
of the Companies, taken as a whole;
"MINISTER" means the Minister for the time being for Enterprise, Trade and
Employment;
"NOTE PURCHASE AGREEMENT" means the Purchase Agreement dated 23 June 1998
between the Purchaser, GPA and Morgan Stanley & Co. International Limited;
and
"NOTES INDENTURE" means the Indenture dated on or about the date hereof
made between the Purchaser as issuer and Bankers Trust Company as trustee;
"NOVATION AGREEMENTS" means the Novation Agreements to which one or more of
the Companies is party included within the descriptions of Leases in
Schedule 8;
"OFFERING MEMORANDUM" means the Offering Memorandum issued on 23 June 1998
in respect of a debt issue by the Purchaser;
"OTHER TRANSACTION DOCUMENTS" means the Offering Memorandum, the Aircraft
Purchase Agreements, the Deed of Tax Indemnity, the Novation Agreements and
the Notes Indenture;
"PARTS" means any part, component, appliance, accessory, instrument or
other item of equipment (other than any of the Engines) incorporated in,
installed on or attached to any Aircraft or Engine;
"PERMITTED LIENS", in respect of any Aircraft, means:
(a) any lien for taxes, assessments and governmental charges or levies
which are not yet due and payable or which are being contested in
good faith by
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appropriate proceedings (provided that if the member of the Seller
Group who is the owner or lessor of the relevant Aircraft has become
aware of any such lien, such lien shall not be a "Permitted Lien"
hereunder unless such owner or lessor is using commercially
reasonable efforts to have such lien lifted);
(b) any liens of a repairer, carrier or hangar keeper arising in the
ordinary course of business by operation of law, any other similar
lien or any engine or parts pooling arrangements in the ordinary
course of business;
(c) any "permitted lien" as defined under the relevant Lease (other than
liens created by the relevant Lessor);
(d) any liens created by or through or arising from debt or liabilities
or any act or omission of any Lessee, in each case in contravention
of the relevant Lease (whether or not such Lease has been terminated)
or without the consent of the relevant Lessor (provided that if such
Lessor has become aware of any such lien, such lien shall not be a
"Permitted Lien" hereunder unless such Lessor is using commercially
reasonable efforts to have any such liens lifted);
(e) any head lease, lease, conditional sale agreement or option permitted
under the Leases or purchase options relating to the Aircraft;
(f) any liens for air navigation authority, airport tending, gate or
handling (or similar) charges or levies;
(g) any lien which would not adversely affect the owner's rights
(provided that, taking all the Aircraft as a whole, liens which are
permitted under this paragraph (i) but do not otherwise qualify as
"Permitted Liens" shall not exceed 1% of the aggregate Initial
Appraised Values, or, if greater, $250,000 per Aircraft);
"PURCHASER INDEMNITY" means the indemnity set out in Clause 5.1 hereof;
"PURCHASER WARRANTIES" means the warranties and undertakings of the
Purchaser contained in Schedule 4;
"REFERENCE BALANCE SHEETS" means the balance sheets of the Companies
prepared as at 31 May 1998 showing the financial positions of each of the
Companies as they would have been if the transactions contemplated by the
Aircraft Sale Agreements and the Lease Novations had been completed as at
that date, and had AerFi Belgium been a subsidiary of AerCo Ireland II at
that date;
"REFERENCE BALANCE SHEET DATE" means 31 May 1998;
"RELATED DOCUMENTS" has the meaning attributed to it in the Notes
Indenture;
"SELLERS' ACCOUNTANTS" means KPMG, Dublin, independent accountants of the
Sellers;
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"SELLER GROUP" means GPA and its consolidated subsidiaries but excluding
(i) the Companies and (ii) the Purchaser and any other companies which are
or on or after Closing become subsidiaries of the Purchaser;
"SELLER INDEMNITY" means the indemnity set out in Clause 5.2 hereof;
"SHARES" has the meaning described in Recital (E) above;
"SOLVENT" means, in respect of any company at any date and on the
assumption that the transactions contemplated by this Agreement, the Other
Transaction Documents and the Related Documents have been completed or
will complete (as the case may be) on the terms and conditions set out
therein:--
(i) In respect of any company other than AerCo USA, that such company on
such date:
(a) is not unable to pay its debts nor would it be deemed to be
unable to pay its debts within the meaning of the Relevant
Solvency Acts (as defined below); and
(b) would not become unable to pay its debts nor would be deemed to
be unable to pay its debts within the meaning of the Relevant
Solvency Acts (as defined below)
where "RELEVANT SOLVENCY ACTS" means, (i) in respect of a company
incorporated in Ireland, Section 214 of the Companies Act, 1963 (ii)
in respect of a company incorporated outside Ireland, the equivalent
provisions under the laws of its state of Incorporation;
(ii) in respect of AerCo USA, that on such date:
(a) the fair value of its property is greater than the total amount
of its liabilities, including, without limitation, contingent
liabilities;
(b) the present fair saleable value of its assets is not less than
the amount that will be required to pay its probable liability
on its debts as they become absolute and matured;
(c) it does not intend to, and does not believe that it will, incur
debts or liabilities beyond its ability to pay such debts and
liabilities as they mature;
(d) it is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which its property
would constitute an unreasonably small capital;
for the purposes of this paragraph (ii), the amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability;
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and the term "insolvent" shall be construed accordingly:
"TCA" means the Taxes Consolidation Act, 1997;
"WARRANTIES" means the warranties and undertakings of the Sellers contained
in Schedule 3.
1.2 COMPUTATION OF TIME PERIODS: In this Agreement, in the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean
"to but excluding",
1.3 STATUTES: Any reference in this Agreement and/or in the Schedules hereto to
any statute or statutory provision shall be deemed to include any statute
or statutory provision which amends, extends, consolidates or replaces the
same, or which has been amended, extended, consolidated or replaced by the
same and shall include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute.
1.4 NUMBER, GENDER: Unless the context shall otherwise require words importing
the singular number shall include the plural number and vice versa and
words importing persons shall include corporations.
1.5 INTERNAL REFERENCES:
(a) Words such as "HEREUNDER", "HERETO", "HEREOF" and "HEREIN" and other
words commencing with "HERE" shall unless the context clearly
indicates the contrary refer to the whole of this Agreement and not to
any particular Clause, Sub-Clause, paragraph or sub-paragraph hereof.
(b) References to "this Agreement" include the schedules and annexes
hereto and the Disclosure Letter, and any amendments made in
accordance with clause 10.7 below.
(c) Any reference to any clause, sub-Clause, paragraph or sub-paragraph
shall be a reference to the clause, sub-Clause, paragraph or
sub-paragraph of this Agreement in which the reference occurs unless
it is indicated that reference to some other provision is intended.
(d) All references to Schedules refer to Schedules to this Agreement.
1.6 HEADINGS: The headings contained in this Agreement and the Schedules are
inserted for convenience of reference only and shall not in any way form
part of nor affect or be taken into account in the construction or
interpretation of any provisions of this Agreement or the Schedules.
2. PURCHASE AND SALE
Upon the terms and subject to the conditions of this Agreement, the Sellers
shall sell as beneficial owners (and as holder of record with respect to
the AerCo USA Stock), and the Purchaser shall purchase, the Shares and the
AerCo USA Stock for the aggregate of the amounts set out in the column
headed "Price" in Schedule
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1 (the "PURCHASE PRICE"). The Shares and AerCo USA Stock shall be sold
free from all Liens and with the benefit of all rights attached or
accruing thereto.
3. CLOSING
Subject to the satisfaction of the conditions specified in Clause 9
hereof. Closing shall take place on the Closing Date, when:
(a) the Sellers shall deliver to the Purchaser or its nominee (in Dublin,
in the case of the items referred to in paragraph (i), and in New York
in the case of the items referred to in paragraph (ii) and (iii), and
as regards the other items at such location as the Sellers and
Purchaser agree):
(i) duly executed transfers in favour of the Purchaser or its
nominees in respect of all the Shares together with all
existing share certificates issued in respect thereof or in the
case of any lost share certificate an indemnity in lieu thereof
in terms reasonably satisfactory to the Purchaser;
(ii) duly executed stock transfers in favour of the Purchaser in
respect of the AerCo USA Stock together with all existing
share certificates issued in respect thereof or in the case of
any lost share certificate an indemnity in lieu thereof in
terms reasonably satisfactory to the Purchaser;
(iii) Evidence satisfactory to the Purchaser of termination of the
Voting Trust;
(iv) the opinions, certificates and other documents to be delivered
pursuant to Clause 9.2;
(v) any power of attorney under which any document required to be
delivered to the Purchaser under this Clause has been executed
and such other documents including any waivers or consents as
the Purchaser may require to enable the Purchaser or its
nominees to be registered as holders of the Shares;
(vi) the Certificates of Incorporation and Certificates of
Incorporation on Change of Name in respect of the Irish
Companies, and the Certificate of Amendment of Certificate of
Incorporation in the case of AerCo USA, the by-laws of
AerCo USA and the seals, statutory books (duly written up to
date), books of account, and all other books, documents or
records and papers of the Companies other than AerFi Belgium;
(vii) the written resignations of the directors and the secretaries
from their respective offices in the Companies (other than in
the case of AerFi Belgium), with written acknowledgements
under seal from each of them in such form as the Purchaser
requires that he or she has no claim against the relevant
Company in respect of breach of contract, compensation for
loss of office, redundancy or unfair dismissal or on any
grounds whatsoever;
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(b) board meetings of the Irish Companies shall be held at which:
(i) such persons as the Purchaser may nominate shall be appointed
additional directors or equivalent officers of such companies;
(ii) the transfers referred to at paragraph 3(a)(i) shall be
approved (subject to stamping);
(iii) the resignations referred to in paragraphs 3(a)(vii) shall be
submitted and accepted;
(c) board meetings of AerCo USA shall be held at which the resignations
referred to in paragraphs 3(a)(vii) shall be submitted and accepted,
such persons as the Purchaser may nominate shall be appointed
additional directors or equivalent officers of such companies; and
(d) the Purchaser shall pay to the Sellers the Purchase Price by wire
transfer in immediately available funds to such bank account(s) as
the Sellers shall have specified by written notice to the Purchaser
not later than five (5) Business Days prior to the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 WARRANTIES IN TERMS OF SCHEDULE 3: Subject to such matters as are
contained in the Disclosure Letter, the Sellers and each of them jointly
and severally hereby represent, warrant and undertake to the Purchaser as
of the date hereof and at the Closing Date in the terms of the Warranties
set out in Schedule 3.
4.2 SEPARATE AND INDEPENDENT: Each of the Warranties shall be construed as a
separate and independent representation and warranty and shall not be
limited or restricted by reference to the terms of any other provision of
this Agreement or any other Warranty.
4.3 NOTICE AND REMEDY FOR BREACH:
(a) At any time after Closing, upon becoming aware of any breach of
Warranty, the Purchaser shall be entitled to deliver to the Sellers a
notice specifying the Warranty or Warranties which is or are untrue or
incorrect by reference to the facts and circumstances subsisting at
the Closing with details of such facts or circumstances (a "BREACH
NOTICE").
(b) The Sellers shall, on receipt of a Breach Notice, have a period of
30 days (or such longer period as the Purchaser may agree) from the
date of receipt of the Breach Notice to remedy the matter giving rise
to the breach of Warranty (if capable of remedy) specified in such
Breach Notice.
4.4 DISCLAIMER: SAVE AS EXPRESSLY PROVIDED IN SCHEDULE 3 HEREOF, THE SELLERS
MAKE NO WARRANTIES, GUARANTEES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO THE AIRCRAFT OR ANY OF THEM.
THE PURCHASER HEREBY WAIVES RELEASES AND RENOUNCES ALL WARRANTIES,
OBLIGATIONS AND
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LIABILITIES OF THE SELLERS INCLUDING BUT NOT LIMITED TO (1) ANY IMPLIED
WARRANTY AS TO THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR
ANY PURPOSE, VALUE, CONDITION, DESIGN, USE OR OPERATION OF THE AIRCRAFT OR
ANY PAST PERFORMANCE, COURSE OF DEALING, USAGE OR TRADE OR OTHERWISE, (2)
ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT (INCLUDING STRICT
LIABILITY), AND (3) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR
LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR LOSS OF USE, REVENUE OR PROFIT WITH
RESPECT TO THE AIRCRAFT, FOR ANY LIABILITY OF ANY LESSEE TO ANY THIRD
PARTY, FOR ANY LIABILITY OF THE PURCHASER TO ANY THIRD PARTY, OR FOR ANY
OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES; AND ALL SUCH WARRANTIES,
GUARANTEES, REPRESENTATIONS, OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS OR
REMEDIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, ARE EXPRESSLY
EXCLUDED.
5. INDEMNITY
5.1 PURCHASER INDEMNITY: The Purchaser agrees to indemnify the Sellers and
their affiliates, and any of their successors and assigns, officers,
directors, servants, agents and employees (each a "PURCHASER
INDEMNITEE") from and against any claims, damages, losses, costs,
expenses, fees (including counsel's fees), payments, demands, liabilities,
actions, proceedings, penalties or fines (together, the "LOSSES") which
any Purchaser Indemnitee may incur or suffer, (i) in relation to any
Aircraft to the extent it arises out of a loss or liability relating to
acts or omissions (other than acts or omissions of a Purchaser Indemnitee)
after the Closing Date, or (ii) in relation to any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by the
Purchaser pursuant to this Agreement (together the "PURCHASER
INDEMNITY"), provided that:-
(a) such loss or liability would exceed in the aggregate US$4.5 million
and, in such event, subject to clause 6 hereof, the Purchaser agrees
to indemnify for the full amount of such loss or liability; and
(b) the Purchaser Indemnity shall not extend to any claim on account of
any Taxes occasioned by any delivery of Aircraft.
5.2 SELLER INDEMNITY: The Sellers hereby jointly and severally agree to
indemnify the Purchaser and its affiliates, and any of their successors and
assigns, officers, directors, servants, agents and employees (each a
"SELLER INDEMNITEE" and, together with the Purchaser Indemnitees, the
"INDEMNIFIED PARTIES") against any Losses arising out of or resulting
from:-
(a) the breach by the Sellers of any Warranty;
(b) the breach of any covenant or agreement contained in this Agreement
by the Sellers; and
(c) Non-agreed Liabilities of the Companies or any of them not reflected
on the Reference Balance Sheets, whether arising before or after the
Closing Date, that are directly caused by any action or inaction on
the part of the
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Companies or any of them prior to the Closing Date other than any
actions or inactions in the ordinary course of the business of the
relevant Company,
in each case whether or not any action, investigation, litigation or
proceeding relating thereto is brought by the Purchaser, the Sellers or any
other Seller indemnitee and whether or not a Seller indemnitee is otherwise
a party thereto. To the extent that the Sellers' undertakings in this
Clause 5.2 may be unenforceable, the Sellers shall jointly and severally
contribute the maximum amount that it is permitted to contribute under any
applicable law to the payment and satisfaction of all Losses which any
Seller Indemnitee or any Company may incur or suffer,
PROVIDED THAT the indemnity contained in this clause 5.2 shall not extend
to or cover any liabilities or claims for Losses resulting from, incurred
in connection with or arising from a liability to Tax (it being the
intention of the parties that claims in respect of Tax would be subject
matter of the Deed of Tax Indemnity).
5.3 NOTICE OF CLAIMS:
(a) An Indemnified Party shall give the Purchaser or the Sellers (as the
case may be) (the "INDEMNIFYING PARTY") notice of any matter which
such Indemnified Party has determined has given, or could give, rise
to a right of indemnification under this Agreement, within sixty (60)
days of such determination. The notice shall state the amount of the
Loss, if known, and the method of its calculation and shall contain a
reference to the provisions of this Agreement in respect of which such
right of indemnification is claimed or arises.
(b) If an Indemnified Party receives written notice of any third party
claim or potential claim ("THIRD PARTY CLAIM") against it which is or
may be subject of a claim by it under the Purchaser Indemnity or the
Seller Indemnity (as the case may be), the obligations and liabilities
of the Indemnifying Party under this Clause 5 shall be subject to
the following terms and conditions:
(i) the Indemnified Party shall give written notice thereof to the
Indemnifying Party within thirty (30) days of receipt of such
notice provided that failure to give such notice shall not
release the Indemnifying Party from any of its obligations under
this clause 5 except to the extent such Indemnifying Party has
been released from any other obligation or liability that it may
have to an Indemnified Party otherwise than under this Clause 5;
(ii) the Indemnifying Party shall be entitled to assume and control
the defence of such Third Party Claim and take such further
action to contest, resist or appeal the validity, applicability
and amount of such claim in appropriate administrative or
judicial proceedings either:
(A) In the name of the Indemnified Party (provided the
Indemnifying Party shall Indemnify and secure the
Indemnified Party to its
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reasonable satisfaction against all losses costs damages and
expenses which may be incurred thereby), or
(B) In its own name,
in either case, at its own expense and through retaining legal
advisers of its choice provided that it gives notice of its
intention to do so to the Indemnified Party within five (5) days
of receipt of the notice of such Third Party Claim from the
Indemnified Party; provided however, that if there exists or is
reasonably likely to exist a conflict of interest that would make
it inappropriate in the judgment of the Indemnified Party, in its
sole and absolute discretion, for the same legal advisers to
represent both the Indemnified Party and the Indemnifying Party,
then the Indemnified Party shall be entitled to retain its own
legal advisers, in each jurisdiction for which the Indemnified
Party reasonably determines counsel is required, at the expense
of the Indemnifying Party. In the event that the Indemnifying
Party exercises its right hereunder to undertake the defence of
any such Third Party Claim, the Indemnified Party shall
co-operate with the Indemnifying Party in such defence as is
reasonably required by the Indemnifying Party. In the event that
the Indemnified Party is, directly or indirectly, conducting the
defence against any such Third Party Claim, the Indemnifying
Party shall co-operate with the Indemnified Party in such defence
as is reasonably required by the Indemnified Party. No such Third
Party Claim may be settled by the Indemnifying Party without the
prior written consent of the Indemnified Party.
5.4 TO BE MADE FREE FROM DEDUCTIONS: All sums payable under or pursuant to the
Purchaser Indemnity or the Seller Indemnity shall be paid free and clear of
all deductions or withholdings whatsoever save only as may be required by
law. If any such deductions or withholdings are required by law the
Indemnifying Party shall be obliged to pay to the Indemnified Party such
sums as will after such deduction or withholding have been made leave the
Indemnified Party with the same amount as it would have been entitled to
receive in the absence of any such requirement to make a deduction or
withholding together with interest on the amount payable by the
Indemnifying Party under this sub-clause at a rate equal to the rate of
interest applicable to the Class D Notes (as defined in the Notes
Indenture) in respect of the period commencing on the date upon which
payment of the full amount was due until payment by the Indemnifying Party
of such amount is made (both before and after judgment). If any sum payable
by the Indemnifying Party under or pursuant to the Purchaser Indemnity or
the Seller Indemnity is subject to tax in the hands of the Indemnified
Party the same obligation to make an increased payment shall apply in
relation to such tax liability as if it were a deduction or withholding
required by law. For the avoidance of doubt, the parties hereby agree and
confirm that any Indemnifying Party shall not be under any obligation to
make any payment to any Indemnified Party under this Clause 5.4 to the
extent that the Indemnified Party would be in a better position than if no
payment by way of indemnity was required to be made.
6. LIMITATIONS ON WARRANTIES AND INDEMNITY
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6.1 TIME LIMIT ON CLAIMS: No claim shall be brought by the Purchaser in respect
of any breach of the Warranties or under or pursuant to the Seller
Indemnity unless notice in writing of such claim (specifying in reasonable
detail (a) the event matter or default which gives rise to the claim, (b)
the breach that results and (c) the amount claimed) has been given to the
Sellers not later than; in the case of a tax Warranty, the expiration of a
period of seven (7) years from Closing or, in the case of any other
Warranty, the expiration of a period of three (3) years from Closing.
6.2 FINANCIAL LIMIT ON CLAIMS: Notwithstanding anything to the contrary
contained in this Agreement, the Deed of Tax Indemnity, or the Aircraft
Sale Agreements the maximum aggregate liability of:
(a) the Sellers and their Affiliates arising out of or resulting from or
by reason of any claims under or pursuant to (i) the Warranties, (ii)
the Seller Indemnity (iii) the Deed of Tax Indemnity and (iv) the
Aircraft Sale Agreements shall not exceed US$185 million; and
(b) the Purchaser arising out of or resulting from or by reason of any
claims under or pursuant to the representations and warranties
contained in this Agreement or the Purchaser Indemnity shall not
exceed US$5 million.
6.3 EXCLUSION OF SMALL CLAIMS: The Sellers shall only be liable in respect of
any claim brought by the Purchaser for a breach of the Warranties or Seller
Indemnity if the aggregate liability of the Sellers for such claims, when
aggregated with any claims under the Deed of Tax Indemnity, would exceed in
aggregate US$4.5 million (the "THRESHOLD"). In the event that such claim or
claims exceed the Threshold, the Sellers shall be liable (subject to clause
6.2 (a)) for the full amount of such claim.
6.4 RETROSPECTIVE LEGISLATION: The Sellers shall not be liable for any breach
of any of the Warranties if such breach arises as a result of any statute,
enacted or any amendment, modification or order made or Statutory
Instrument passed or the occurrence of any analogous event after this date.
6.5 LIABILITY OF SKYSCAPE: The Purchaser hereby acknowledges that Skyscape is a
party to this Agreement in its capacity only as holder of one Ordinary
Share in each of the Irish Companies as nominee for GPA. Skyscape's maximum
liability to the Purchaser in respect of any claims under this Agreement
(including any breaches of Warranty or under the Seller Indemnity) or under
the Deed of Tax Indemnity shall be limited to IR (pound) 1.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER
WARRANTIES IN TERMS OF SCHEDULE 4: The Purchaser hereby represents,
warrants and undertakes to the Sellers and each of them in the terms of the
Purchaser Warranties.
8. ADDITIONAL COVENANTS AND AGREEMENTS
8.1 FURTHER ACTION: At the request of the Purchaser, the Sellers and each of
them shall (and shall procure that any other necessary parties shall)
execute and do all
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such documents acts and things as may reasonably be required subsequent to
Closing by the Purchaser in order to perfect the right, title and interest
of the Purchaser to and in the Shares and the AerCo USA Stock and to
procure the registration of the Purchaser as the registered holder of the
Shares and the AerCo USA Stock as appropriate.
8.2 INSURANCE: The Purchaser covenants and agrees to use its best endeavours to
procure or to cause the Lessees to continue to maintain in accordance with
the terms of the Leases until the third anniversary of the Closing Date,
insurances relating to the Aircraft naming as additional insureds those of
the Sellers or their Affiliates, or any existing Servicer of any of them,
who are named as insureds on the Insurance policies in effect at the
Closing Date. In the event that any such existing insurance coverage in
respect of the Sellers or their Affiliates, or any existing Servicer,
cannot be maintained, the Purchaser shall provide written notice to the
Seller before such coverage is terminated.
8.3 MANUFACTURERS' WARRANTIES/FURTHER ASSURANCE: The Sellers agree to assign,
or, as appropriate, to use their best endeavours to procure that their
Affiliates assign to the relevant Company, to the extent permitted by law,
any rights and benefits under any manufacturers' warranties still in effect
to the extent that they (a) relate to the Aircraft and (b) have not already
been assigned to the relevant Company. After the Closing Date, the
Purchaser and the Sellers agree to take all appropriate action which may be
reasonably necessary or advisable to carry out any of the provisions
hereof; provided that, with respect to carrying out the assignments
referred to in the preceding sentence, the Sellers shall not be obliged to
seek the consent of any such manufacturer.
9. CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF SELLERS: The obligation of the Sellers under
this Agreement are conditional upon satisfaction of the following
conditions on or prior to Closing:--
(a) compliance with rules regarding provision of financial assistance in
Ireland;
(b) all authorisations, consents, orders and approvals of Government
Authorities and officials listed in the Disclosure Letter having been
obtained in form and substance reasonably satisfactory to the Sellers;
(c) the representations and warranties of the Purchaser contained in this
Agreement being true and correct when made and being true and correct
in all material respects as of the Closing Date, other than such
representations and warranties as are made as of another date, and the
covenants and agreements contained in this Agreement to be complied
with by the Purchaser on or before Closing having been complied with
in all material respects, and the Seller having received a duly
executed certificate of the Purchaser to such effect;
(d) no Action having been commenced by or before any Governmental
Authority against either the Sellers, the Purchaser, the Companies or
any of them seeking to restrain or materially and adversely alter the
transactions
14
<PAGE> 17
contemplated by this Agreement which, in the reasonable, good faith
determination of the Sellers, is likely to render it impossible or
unlawful for any of the parties to perform their obligations
hereunder PROVIDED HOWEVER that this condition shall not apply to any
Action directly or indirectly solicited or encouraged by the Sellers;
(e) the Purchaser having performed or having satisfied in all material
respects all covenants, agreements and conditions on its part to be
performed or satisfied by it under this Agreement and, to the extent
required to be satisfied on or prior to the Closing Date, the Other
Transaction Documents and Related Documents to which it is a party,
and no material default having occurred and being still in existence,
or resulting from the execution, delivery or performance of this
Agreement under any Other Transaction Document;
(f) the Note Purchase Agreement having been duly entered into on terms
satisfactory to the Sellers and having become unconditional in all
respects save for any conditions relating to this Agreement or the
satisfaction of the conditions precedent hereunder;
(g) receipt of a certified copy resolution of the board of directors of
the Purchaser duly authorising the execution, delivery and
performance by the Purchaser of this Agreement and the Deed of Tax
Indemnity and the transactions contemplated hereby and thereby; and
(h) receipt of a certificate of the Secretary or Assistant Secretary of
the Purchaser certifying the names and signatures of each of the
directors or other officers of the Purchaser authorised to sign this
Agreement and the Deed of Tax Indemnity and the documents to be
delivered thereunder.
9.2 CONDITIONS TO OBLIGATIONS OF PURCHASER: The obligations of the Purchaser
under this Agreement are conditional upon satisfaction of the following
conditions on or prior to Closing:-
(a) compliance with rules regarding provision of financial assistance in
Ireland;
(b) all authorisations, consents, orders and approvals of Government
Authorities and officials listed in the Disclosure Letter having been
obtained in form and substance reasonably satisfactory to the
Purchaser;
(c) the Warranties being true and correct when made and being true and
correct as of the Closing Date other than such Warranties as are made
as of another date and the covenants and agreements contained in this
Agreement to be complied with by the Sellers on or before Closing
having been complied with in all material respects and the Purchaser
having received a duly executed certificate from the Sellers to such
effect;
(d) no Action having been commenced or threatened by or before any
Governmental Authority against the Sellers, the Purchaser, the
Companies or any of them seeking to restrain or materially and
adversely alter the transactions contemplated hereby which the
Purchaser reasonably believes is likely to render it impossible or
unlawful for any of the parties to perform
15
<PAGE> 18
their obligations hereunder or which could have a Material Adverse
Effect and the Purchaser having received a duly executed certificate
of the Sellers to such effect in regard to the Sellers and the
Companies; PROVIDED HOWEVER that this condition shall not apply to
any Action solicited or encouraged by the Purchaser;
(e) receipt of a certified copy resolution of the board of each of the
Sellers duly authorising the execution, delivery and performance by
the Sellers of this Agreement and the Deed of Tax Indemnity and the
transactions contemplated hereby and thereby;
(f) receipt of a certificate of the Secretary or Assistant Secretary of
each of the Sellers certifying the names and signatures of each of
the officers of the Sellers authorised to sign this Agreement and the
Deed of Tax Indemnity and the documents to be delivered thereunder;
(g) GPA having delivered to the Purchaser a certificate of solvency in
the form set out in Schedule 6A or such other form as may be agreed
with the Purchaser;
(h) the Note Purchase Agreement and Other Transaction Documents having
been duly entered into and having become unconditional in all
respects save for any conditions relating to this Agreement or the
satisfaction of the conditions precedent hereunder;
(i) insofar as not already provided to the Purchaser or held by the
Companies, receipt of:--
(i) the Leases (and, as regards the Aircraft with serial number 240,
the head lease), or confirmation (in terms satisfactory to the
Purchaser) that same are held to the order of the Purchaser or
the relevant Company; and
(ii) delivery acknowledgements or bills of sale evidencing the title
of the relevant Companies to the Aircraft PROVIDED that nothing
in this Clause shall compel the Sellers to produce any original
bills of sale at any location in the United Kingdom;
(j) the Purchaser having determined that each member of the Seller Group
has performed or caused to have performed on or prior to the Closing
Date each covenant, agreement, delivery or condition to be performed
or satisfied under all of the Leases on or prior to the Closing Date,
the non-performance of which, taken as a whole, would materially
affect the decision of a reasonable purchaser of the Notes to
purchase Notes;
(k) receipt of certified copies of the reports of the Appraisers;
(l) receipt of the Deed of Tax Indemnity duly executed by the Sellers;
(m) receipt of the Disclosure Letter (including any supplements to the
Closing Date). In form and substance reasonably satisfactory to the
Purchaser; and
16
<PAGE> 19
(n) receipt of an option of the Insurance Adviser.
9.3 LEGAL OPINIONS: The Sellers shall deliver to the Purchaser on or
immediately after Closing:-
(i) an opinion from McCann FitzGerald addressed to the Purchaser and
certain other parties and dated the Closing Date;
(ii) an opinion of Morris, James, Hitchens & Williams with respect to the
transfer of the AerCo USA Stock, addressed to the Purchaser and
certain other parties and dated the Closing Date; and
(iii) an option of Davis Polk and Wardwell as to the efficacy of the
termination of the Voting Trust, addressed to the Purchaser and
certain other parties and dated the Closing Date.
9.4 FURTHER CONDITION AND AGREEMENT: The obligations of the Sellers and the
Purchaser under this Agreement are further conditional upon no change
having occurred after the date of this Agreement in any applicable law
which would make it illegal for any party to this Agreement or the Other
Transaction Documents or Related Documents to perform any of their
respective obligations under this Agreement or such Other Transaction
Documents or Related Documents; provided, however, that if any such change
has occurred in relation to this Agreement, the parties shall cooperate
and for such purposes use all reasonable endeavours to restructure their
respective obligations under this Agreement as to avoid the aforementioned
illegality.
10. MISCELLANEOUS
10.1 WAIVER: The Sellers or the Purchaser may (a) extend the time for the
performance of any of the obligations or other acts of the other party,
(b) waive any inaccuracies in the representations and warranties of the
other party contained in this Agreement or in any document delivered by
the other party pursuant hereto or (c) waive compliance with any of the
agreements or conditions of the other party contained herein. Any such
waiver or extension shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or
a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure by any party to
assert any of its rights hereunder shall not constitute a waiver of any of
such rights.
10.2 AGREEMENT NULL AND VOID: If this Agreement does not become unconditional
on or before 15 September 1998 (or such later day as the Sellers and the
Purchaser shall agree), then this Agreement shall be null and void and the
parties shall be released from their obligations hereunder. The Sellers
and the Purchaser shall use their respective best endeavours to ensure
that this Agreement becomes unconditional by such date.
10.3 EXPENSES: Except as otherwise specified in this Agreement, each party to
this Agreement shall pay its or his own costs of and incidental to this
Agreement and
17
<PAGE> 20
the sale and purchase hereby agreed to be made, whether or not Closing
shall have occurred.
10.4 NOTICES: Every notice, request, demand or other communication under this
Agreement shall:
(a) be in writing delivered personally, or by prepaid courier delivery
services such as Federal Express, DHL or other similar services, or
by telex (but only where being sent to a party for whom a telex
number is stated in paragraph (c) below) or facsimile (confirmed, in
the case of facsimile, by prepaid airmail letter sent within 24 hours
of dispatch but so that non-receipt of such confirmation shall not
affect in any way the validity of the facsimile in question);
(b) be deemed to have been received, subject as otherwise provided in this
Agreement, in the case of a facsimile or telex, at the time of
dispatch with confirmed answerback of the addressee appearing at the
beginning and end of the communication, (provided, however, that, in
the case of a facsimile, if the date of dispatch is not a business day
in the country of the addressee it shall be deemed to have been
received at the opening of business on the next such business day),
and in the case of a letter, when delivered personally; provided,
however, that if personal delivery or delivery by courier of a notice
is tendered but refused, such notice shall be effective upon such
tender; and
(c) be sent:-
if to the Sellers, to:
GPA House
Shannon
Co Clare
Ireland
Attn: Company Secretary
Facsimile: 00 353 61 360 220
if to the Purchaser, to:
22 Grenville Street
St Heller
Jersey JE4 8PX
Channel Islands
Attn: Mourant & Co. Secretaries Limited
Facsimile: 0044 1534 609 333,
with a copy to GPA Administrative Services Limited as Administrative
Agent at GPA House, Shannon, Co Clare, Ireland, Attn: Company
Secretary, Facsimile: 00 353 61 360503.
18
<PAGE> 21
10.5 SEVERABILITY: If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon any determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated by this
Agreement are effected as originally contemplated to the greatest extent
possible.
10.6 ASSIGNMENT: This Agreement shall be binding upon and enure to the benefit
of the successors of the parties but shall not be assignable by either the
Sellers or the Purchaser without the express written consent of the other
party (which consent may be granted or withheld in the sole discretion of
that other party) provided however that the Purchaser may assign this
Agreement to an Affiliate of the Purchaser without the consent of the
Sellers.
10.7 AMENDMENT: This Agreement may not be amended except (a) by an instrument in
writing signed by or on behalf of the Sellers and the Purchaser or (b) by a
waiver in accordance with clause 10.1 hereof.
10.8 APPLICABLE LAW AND JURISDICTION:
(a) This Agreement shall be governed by and construed in accordance with
the laws of Ireland, except that the warranties relating to AerCo USA
set out in Part 2 of Schedule 3 and the definition of "Solvency" as it
relates to AerCo USA shall be interpreted in accordance with the laws
of the State of New York.
(b) Each of the parties hereby submits to the non-exclusive jurisdiction
of the courts of Ireland. The Purchaser hereby irrevocably:-
(i) waives any objections on the ground of venue or forum non
conveniens or any similar grounds; and
(ii) consents to service of process by mail or in any other manner
permitted by applicable law.
(c) The Purchaser shall at all times maintain an agent for service of
process in Ireland. The Purchaser appoints GPA Administrative Services
Limited, of GPA House, Shannon, Co Clare, Ireland, Attn: Company
Secretary, as such agent. Any writ, judgment or other notice of legal
process issued out of the courts in Ireland in respect of this
Agreement shall be sufficiently served on the Purchaser if delivered
to such agent at its address for the time being. The Purchaser
undertakes not to revoke the authority of the above agent and if, for
any reason, such agent no longer serves as agent of the Purchaser, the
Purchaser shall promptly appoint another such agent and advise the
Sellers thereof.
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<PAGE> 22
10.9 SURVIVAL AFTER CLOSING: The provisions of this Agreement in so far as the
same shall not have been performed at Closing shall remain in full force
and effect notwithstanding Closing.
10.10 COUNTERPARTS: This Agreement may be executed in one or more counterparts
and by the different parties hereto in separate counterparts, each of
which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties have executed this Agreement on the date written
above.
Signed by __________________
the duly authorised attorney
of GPA GROUP PLC
in the presence of:
Signed by __________________
the duly authorised attorney
of SKYSCAPE LIMITED
in the presence of:
Signed by __________________
for and on behalf
of AERCO LIMITED
in the presence of:
20
<PAGE> 23
SCHEDULE 1 -- DETAILS RELATING TO THE SHARES AND AERCO USA STOCK
<TABLE>
<CAPTION>
SHARES/AERCO USA STOCK HELD BY PRICE
TO BE SOLD
<S> <C> <C>
1 Irish Pound Share of GPA Group plc US$150,000
IR(Pound)1
and 150,000 Ordinary
Shares of US$1 in AerCo
Ireland Limited
1 Irish Pound Share of Skyscape Limited
IR(Pound)1 in AerCo
Ireland Limited
1 Irish Pound Share of GPA Group plc US$150,000
IR(Pound)1 and 150,000
Ordinary Shares of US$1
in AerCo Ireland Limited
1 Irish Pound Share of Skyscape Limited
IR(Pound)1 in AerCo
Ireland II Limited
10,000 shares of GPA Group plc US$10,000
Common Stock of AerCo
USA Inc of par value $1
per share
</TABLE>
21
<PAGE> 24
SCHEDULE 2 - FURTHER INFORMATION CONCERNING THE COMPANIES
1. AERCO IRELAND LIMITED
Incorporated in Ireland under the Companies Acts, 1963 - 1990 on 21 November
1997 under the name Moomington Limited and changed its name to its current name
on 16 May 1998.
REGISTERED NUMBER: 275814
REGISTERED OFFICE: 2 Harbourmaster Place, Dublin 1
DIRECTORS:
Patrick Dalton
John Redmond
SECRETARY:
John Redmond
AUDITORS:
AUTHORISED SHARE CAPITAL: IR(pound)100,000 divided into 100,000 Irish Pound
shares of IR(pound)1 each, and US$1,000,000 divided into 1,000,000 Ordinary
Shares of US$1 each.
ISSUED SHARE CAPITAL; IR(pound)2 divided into 2 Irish Pound shares of
IR(pound)1 each, and US$150,000 divided into 150,000 Ordinary Shares of US$1
each, held as follows:
<TABLE>
<CAPTION>
REGISTERED HOLDER BENEFICIAL OWNER SHARES HELD
<S> <C> <C>
GPA Group plc GPA Group plc 1 IR(pound)1 Irish Pound share
GPA Group plc GPA Group plc 150,000 US$1 Ordinary shares
Skyscape Limited GPA Group plc 1 IR(pound)1 Irish Pound share
</TABLE>
22
<PAGE> 25
2. AERCO IRELAND II LIMITED
Incorporated in Ireland under the Companies Acts, 1963 - 1990 on 21 November
1997 under the name Littsfield Limited and changed its name to its current name
on 28 April 1998.
REGISTERED NUMBER: 275810
REGISTERED OFFICE: 2 Harbourmaster Place, Dublin 1
DIRECTORS:
Patrick Dalton
John Redmond
SECRETARY:
John Redmond
AUDITORS:
AUTHORISED SHARE CAPITAL: IR(pound)100,000 divided into 100,000 Irish Pound
shares of IR(pound)1 each, and US$1,000,000 divided into 1,000,000 Ordinary
Shares of US$1 each.
ISSUED SHARE CAPITAL: IR(pound)2 divided into 2 Irish Pound shares of
IR(pound)1 each, and US$150,000 divided into 150,000 Ordinary Shares of
US$1 each, held as follows:
<TABLE>
<CAPTION>
REGISTERED HOLDER BENEFICIAL OWNER SHARES HELD
<S> <C> <C>
GPA Group plc GPA Group plc 1 IR(pound)1 Irish Pound share
GPA Group plc GPA Group plc 150,000 US$1 Ordinary Shares
Skyscape Limited GPA Group plc 1 IR(pound)1 Irish Pound share
</TABLE>
<PAGE> 26
3. AERFI BELGIUM N.V.
Incorporated in Belgium on 31 January 1985 under the name Guinness Peat Aviation
(Belgium) N.V. and changed its name to its current name on 8 April 1998.
REGISTERED NUMBER: 467580
REGISTERED OFFICE: Neerveldstraat 101-103, Bus 3, 1200 Sint-Lambrechts-Woluwe,
Brussels, Belgium
DIRECTORS:
Frieda Declercq
Johan Dumon
John Redmond
AUDITORS:
KPMG
Authorised share capital: BEF1,250,000 divided into 1,250 shares with no par
value
Issued shares: 1,250 shares with no par value held as follows:
<TABLE>
<CAPTION>
REGISTERED HOLDER BENEFICIAL OWNER SHARES HELD
<S> <C> <C>
GPA Group plc GPA Group plc 1,249
Skyscape Limited Skyscape Limited 1
</TABLE>
24
<PAGE> 27
4. AERCOUSA INC.
Incorporated in Delaware on 13 July 1997 under the name Elasis Leasing USA Inc.
and changed its name to its current name on 13 April 1998.
REGISTERED OFFICE: c/o Nationwide Information Services, Inc.
15 North Street
Dover
Delaware 19901
DIRECTORS:
Patrick Dalton
Caren Mack
Stephanie Rudolph
OFFICERS:
President - Stephanie Rudolph
Secretary and Treasurer - Caren Mack
AUDITORS:
AUTHORISED SHARE CAPITAL: US$10,000 divided into 10,000 shares of US$1 each
ISSUED STOCK:
10,000 shares of Common Stock of par value $1, held by First Security Bank,
National Association, under terms of Voting Trust Agreement dated as of 22 April
1998 among GPA Group plc, AerCoUSA and First Security Bank, National Association
as amended on 9 July 1998; all Voting Certificates under the Voting Trust
Agreement are owned by GPA Group plc.
25
<PAGE> 28
SCHEDULE 3 - REPRESENTATIONS AND WARRANTIES OF SELLERS
PART 1 - GENERAL MATTERS AND MATTERS RELATING TO ALL OF THE COMPANIES
1. SELLERS
Each of the Sellers is duly incorporated and validly existing under the
laws of Ireland and each has all necessary power and authority to enter
into this Agreement and the Deed of Tax Indemnity and to carry out its
obligations thereunder. The execution and delivery of this Agreement and
the Deed of Tax Indemnity by each Seller and the performance of its
obligations thereunder have been duly authorised by all requisite action on
its part. This Agreement and the Deed of Tax Indemnity have been duly
executed and delivered by the Sellers and (assuming due authorisation,
execution and delivery by the Purchaser) constitute legal, valid and
binding obligations of each of the Sellers.
2. NO CONFLICTS
The entry into and performance by each Seller of this Agreement, and the
transactions contemplated hereby, do not and will not conflict with or
violate:
(a) the constitutional documents of such Seller or any of the Companies;
or
(b) any laws, rules, regulations, orders, judgments or decrees binding on
such Seller or any of the Companies; or
(c) in any material respect, any material agreement, instrument or
document which is binding upon such Seller or any of the Companies or
any of their respective assets nor result in the creation of any
Lien, other than Permitted Liens, over any of their assets to be
transferred to the Purchaser hereunder.
3. GOVERNMENT CONSENTS AND APPROVALS
(a) The execution, delivery and performance of this Agreement by each
Seller does not require any material consent, approval, authorisation
or other order of, action by, filing with or notification to any
Governmental Authority, other than (a) such consent, approval,
authorisation or other order, or action by, filing with or
notification to any Governmental Authority that will be made or
obtained at or prior to Closing or (b) as described in the Disclosure
Letter.
4. FULL AND FINAL TRANSFER
The sale of the Shares contemplated by this Agreement shall constitute,
following registration in the Registers of Members of the Irish Companies,
a full and final transfer of the legal and beneficial ownership of the
Shares to the Purchasers and/or its nominee(s) and after Closing the
Sellers shall retain no right, title or interest therein.
The sale of the AerCo USA Stock pursuant to the terms and conditions of
this Agreement shall constitute a full and final transfer of the legal and
beneficial
26
<PAGE> 29
ownership of GPA's right, title and interest in the AerCo USA Stock to the
Purchaser and after Closing GPA shall retain no right, title or interest
therein.
5. LITIGATION
No litigation, arbitration or administrative proceeding or claim which
could reasonably by itself or together with any other such proceedings or
claims:-
(a) have a Material Adverse Effect or
(b) materially adversely affect any Seller's ability to observe or perform
any of its obligations hereunder or challenge the legality, validity
or enforceability of this Agreement or the transactions contemplated
hereby
is at present in progress or pending or threatened in writing against any
Seller or any of the Companies (other than, in the case of proceedings
involving the Sellers or either of them, any which such Seller is
contesting in good faith by appropriate proceedings and in respect of which
proper provision has been made) except as set forth in the Disclosure
Letter which describes the parties, nature of the proceedings, the date and
method commenced, the amount of damages or other relief sought and, if
applicable, paid or granted.
6. COMPLIANCE WITH LAWS
6.1 None of the Companies has violated any applicable laws or Governmental
Orders in any material respect.
6.2 Save to the extend that same is the responsibility of the Lessee under the
Lease of an Aircraft, each of the Companies has obtained and is maintaining
all material permits, licences, authorisations, certificates, exemptions
and approvals necessary to enable it to carry on its business (including in
regard to any environmental matters) (collectively, "PERMITS") and failure
to obtain which would give rise to a fine, penalty or other liability or
sanction on the part of such Company and all such Permits are in full force
and effect.
7. MATERIAL CONTRACTS
7.1 None of the Companies is party to any contract other than the Aircraft
Purchase Agreements, the Leases and head leases (details of which are set
out in Schedule 8) the Intra-Group Debt and Other Transaction Documents and
Related Documents;
8. AIRCRAFT
8.1 LIST OF AIRCRAFT
Schedule 8 of this Agreement lists:
(a) each Aircraft and Engine owned by the Companies as of the date hereof
and each Aircraft (including Engines) which the Companies have
contracted to acquire on or prior to Closing;
27
<PAGE> 30
(b) each Lease, and, in the case of the Aircraft with serial numbers
240 and 22496, the head leases and, in the case of the Aircraft
with serial number 46064, the sub-lease
(c) the Initial Appraised Value of each such Aircraft.
No head lease is in effect in respect of any Aircraft other than the
Aircraft with serial numbers 240 and 22496 and no sub-lease is in
effect in respect of any of the Aircraft other than the Aircraft with
serial number 46064.
8.2 TITLE TO ASSETS
The Companies have or will at Closing have full legal and beneficial
title to their respective Aircraft free and clear from any Liens (other
than Permitted Liens).
8.3 THE LEASES AND RELATED MATTERS
At Closing, the Sellers shall have delivered or shall have caused a
copy of each Lease (and, where applicable, head lease) and related
collateral document to which a Company is party (or to which a Company
will become party on Closing) to be delivered to or made available to
or held to the order of the Purchaser or the relevant Company.
(a) Each Lease, and, where applicable, head lease, constitutes the
whole agreement between the parties thereto relating to the
applicable Aircraft other than agreements the existence of which
would not individually or taken together with all other such
agreements in respect of the Leases materially affect the decision
of a reasonable purchaser of the Notes to purchase Notes;
(b)(i) The Disclosure Letter contains details of any current Events of
Default (as such term is defined in such Lease) under each
Lease and, where applicable, head lease involving failure by
the Lessee to make any payment when due under such Lease or
head lease, as at 30 June 1998;
(ii) To the knowledge of such Seller no other material Events of
Default under any Lease (or, where applicable, head lease) (as
such term is defined in such Leases) have occurred and are
continuing;
(c) No Event of Loss or Casualty Occurrence under any Lease (as such
terms are defined in such Lease) has occurred;
(d) To the Sellers' knowledge, there are no outstanding claims which
have been validly asserted by any Lessee arising out of any Lease
(or, where applicable, head lease), other than claims constituting
Permitted Liens;
(e) To the Sellers' knowledge, no event has occurred or act or thing
has been done or omitted to be done by any of the Sellers or the
Companies pursuant to which or as a result of which any of the
Leases (or, where applicable, head lease) can be terminated or
obligations of any such party thereunder would be rendered
invalid, illegal or unenforceable;
28
<PAGE> 31
(f) To the Sellers' knowledge, there are no Aircraft subject to a Lease
with respect to which certificates of airworthiness are not in force;
and, based on the existence of such certificates of airworthiness, the
Sellers have no reason to believe that any compulsory airworthiness
directives are outstanding against any Aircraft;
(g) No claims for contributions to the cost of compliance with
airworthiness directives pursuant to the terms of any lease (or, where
applicable, head lease) by the Sellers or the Companies are
outstanding against any Aircraft;
(h) Since the date of the Appraisers' reports, none of the Aircraft has
been involved in any incident which caused damage in excess of the
relevant Damage Notification Threshold (as defined in the relevant
Lease); and
(i) The rental set out in Schedule B is the current rental payable in
respect of the relevant Aircraft and there are no separate agreements
or understandings with respect to such Aircraft or all of the Aircraft
taken as a whole, which would materially affect the decision of a
reasonable purchaser of the Notes to purchase Notes.
9. EMPLOYMENT
None of the Companies has or has ever had any employees.
10. INSURANCES
10.1 The opinion of the Insurance Adviser, with respect to the insurances
maintained by the Companies in respect of the Aircraft, Engines and Parts,
will be delivered by Closing.
10.2 All material assets, properties and risks of the Companies are, and for the
past five years (or, if shorter, since incorporation) have been, covered by
valid and, except for policies that have expired under their terms in the
ordinary course, currently effective insurance policies of insurance
(including, without limitation, general liability insurance, property
insurance and political risk insurance) issued in favour of the Companies,
as the case may be, in each case with responsible insurance companies, in
such types and amounts and covering such risks as are consistent with
customary practices and standards of companies engaged in businesses and
operations similar to those of the Companies, as the case may be. At the
time of Closing, and upon the completion of the transactions contemplated
hereby, all insurance policies currently in effect will be outstanding and
duly in force. The Disclosure Letter sets out a true and complete list of
all insurance policies maintained by or for the Companies other than those
which are referred to in the opinion of the Insurance Advisor. All such
insurance policies are in full force and effect; the Companies have duly
paid or have required Lessees to pay or have otherwise caused to be paid
all premiums accrued thereon and no notice of termination has been received
from any issuer of any such policies.
11. BANK ACCOUNTS
29
<PAGE> 32
A statement of all bank, deposit or similar accounts of the Companies and
of the credit or debit balance thereon at the Reference Balance Sheet Date
is included in the Disclosure Letter and the Companies do not maintain any
other accounts with any bank or other lender or deposit taken and there
have been no payments out of any such accounts not reflected therein.
12. RELATIONS WITH SELLER GROUP
None of the Companies has taken part in the management of the affairs of
any members of the Seller Group or has held itself out as being liable or
responsible for any debts or liabilities of any member of the Seller Group.
13. INTRA-GROUP DEBT
Schedule 7 sets out all of the debt owed by the Companies to GPA as at
Closing. None of the Companies has or will at Closing have any indebtedness
to any member of the Seller Group other than as set out in Schedule 7.
14. DISCLOSURE OF INFORMATION
14.1 ALL DISCLOSURES MADE
The Sellers are not aware of any facts pertaining to the Companies which
would result in a Material Adverse Effect or would affect the decision of a
reasonable purchaser of the Notes to purchase Notes and which have not been
disclosed in (a) this Agreement, (b) the Disclosure Letter, (c) the AerFi
Accounts, the Reference Balance Sheets or any related notes, schedules or
auditors reports thereon or (d) have otherwise been previously disclosed
to the Purchaser by the Sellers in writing.
14.2 None of the Warranties, or any warranties of the Sellers in connection with
the transactions contemplated by this Agreement, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein
not misleading. All information in the Disclosure Letter is true and
correct in all material respects.
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PART 2 - THE IRISH COMPANIES AND AERFI BELGIUM
1. GENERAL
Each of the Irish Companies and AerFi Belgium is duly incorporated and
validly existing under the laws of the jurisdiction of its incorporation
and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry on
its business as it has been and is currently conducted. All corporate
actions taken in connection with this Agreement by the Irish Companies and
AerFi Belgium have been duly authorised and none of the Companies has taken
any action that in any respect conflicts with, constitutes a default under
or results in a violation of, any provision of its constitutional
documents. True and correct copies of the certificates of incorporation and
constitutional documents of each of the Irish Companies, each as in effect
on the date hereof, have been delivered by the Sellers to the Purchaser or
to its order.
2. SHARE CAPITAL
(a) The information relating to the Irish Companies and AerFi Belgium in
the Recitals and Schedules 1 and 2 is and will on Closing be accurate
and complete in all respects. The issued share capitals of the Irish
Companies and AerFi Belgium will be fully paid up and beneficially
owned by the persons set out in the relevant Schedule in the
proportions set out therein;
(b) On Closing, the Sellers will be entitled to sell and transfer to the
Purchaser the full legal and beneficial ownership of the Shares free
from any Lien on the terms set out in this Agreement. Immediately upon
Closing, the Shares will be legally and beneficially owned by the
Purchaser free and clear of any Liens (other than Liens in favour of
Bankers Trust under the Related Documents); and
(c) Other than the transactions contemplated by this Agreement and the
Other Transaction Documents or Related Documents, there will be no
options or other agreements (including conversion rights) in force on
Closing which call or may call for the present or future issue of or
accord to any person the right to call for the issue of any share or
loan capital of any of the Irish Companies or AerFi Belgium and there
has been no exercise, purported exercise, or claim of any charge,
lien, encumbrance or equity over any of the issued or unissued share
capital or loan capital or any of the Irish Companies or AerFi
Belgium.
3. STATUTORY BOOKS
The register of members and other statutory books of each of the Irish
Companies and AerFi Belgium are in the possession or held to the order of
such Company, have been properly maintained and contain accurate and
complete records of all matters with which they should deal and do not
contain or reflect any material inaccuracies or discrepancies and none of
the Companies has received any notice or allegation that any of the
foregoing is incorrect and, in
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particular, none of the Companies has received any notice of any intended
application or proceedings to rectify the said registers.
4. SUBSIDIARIES
(a) The Sellers will be entitled on Closing to the full beneficial
ownership of the shares in AerFi Belgium free from any Lien.
(b) None of the Irish Companies is the holder or beneficial owner of, or
has agreed to acquire, any share or loan capital of any other body
corporate, or is a member of any joint venture or partnership or other
unincorporated association.
5. PURCHASE OF OWN SHARES
Save as disclosed or as may arise in connection with the Related Documents,
none of the Irish Companies has purchased, redeemed or repaid any share
capital or given any financial assistance in connection with any
acquisition of share capital as would fall within Section 60 of the
Companies Act 1963 and Part XI of the Companies Act 1990, and AerFi Belgium
has not purchased, redeemed or repaid any share capital or given any
financial assistance in connection with any acquisition of share capital
which would fall within the equivalent provisions under the laws of
Belgium.
6. SHARES
The Minister has not made:
(a) any request under Section 15 of the Companies Act 1990 to any person
in respect of the ownership of the Shares or any of them;
(b) any direction under Section 16 of that Act in respect of the Shares or
any of them; or
(c) any direction to either of the Irish Companies under Section 19(1) of
that Act.
7. DIRECTORS
(a) The only directors of the Irish Companies and AerFi Belgium are the
persons whose names are listed in Schedule 2.
(b) In regard to the Irish Companies, no other individual is a shadow
director (within the meaning of Section 27 of the Companies Act 1990).
8. COMPANIES FILINGS
All documents relating to the Irish Companies required to be filed with the
Registrar of Companies pursuant to the Companies Acts, 1963 to 1990 and
the European Communities (Companies) Regulations 1973, and all documents
relating to AerFi Belgium which require to be filed under the equivalent
Belgian
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legislation, have been duly filed and all statutory records required to be
kept by the Irish Companies and AerFi Belgium have been properly kept and
will be so kept until Closing.
9. MISCELLANEOUS
(a) None of the Irish Companies or AerFi Belgium has at any time been
struck off the register maintained by the Registrar of Companies in
the relevant jurisdiction.
(c) None of the Irish Companies has at any time:
(i) had a notice served on it by its auditors under Sections 185 or
194 of the Companies Act 1990;
(ii) entered into any transaction or arrangement within the terms of
Section 29 of the Companies Act 1990; and
(iii) entered into any transaction or arrangement within the terms of
Section 31 of the Companies Act 1990 or which would, but for
Section 32 to 37 of that Act, be prohibited by Section 31.
10. ACCOUNTS AND BALANCE SHEET
10.1 THE ACCOUNTS
(a) True and complete copies of the AerFi Accounts have been delivered by
the Sellers to the Purchaser.
(b) Each of the Irish Companies was incorporated on 21 November 1997 and
no statutory accounts have been prepared in respect of either of them.
10.2 REFERENCE BALANCE SHEETS
The Reference Balance Sheets represent fairly in all material respects the
financial positions of each of the Irish Companies and AerFi Belgium as
they would have been at 31 March 1998, had the transfers of shares and
aircraft, and the lease novations, assignments and amendments, contemplated
by the Aircraft Sale Agreement, the Lease Novations been completed as at
that date, and had AerFi Belgium been a subsidiary of AerCo Ireland II at
that date, and are prepared on a basis consistent with the accounting
policies of the Seller Group at the Reference Balance Sheet Date.
10.3 RECORDS
The books of account and other financial records of the Irish Companies and
AerFi Belgium:
(a) contain proper records of all matters required to be entered therein
by, in the case of the Irish Companies, the Companies Acts, 1963 to
1990 and
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any other Acts or regulations or orders for the time being in force
and, in the case of AerFi Belgium, the equivalent Belgian
legislation;
(b) do not contain or reflect any inaccuracies or discrepancies which
will, taken together, have a Material Adverse Effect; and
(c) have been maintained in accordance with good business and accounting
practices.
10.4 No guarantee has been executed or filed by either of the Irish Companies
with the Registrar of Companies pursuant to Section 17 of the Companies
(Amendment) Act 1986.
10.5 LIABILITIES
There are no Liabilities of the Irish Companies or AerFi Belgium other
than Liabilities (a) reflected or reserved against on the AerFi Accounts
or the Reference Balance Sheets, (ii) disclosed in the disclosure Letter
or (iii) Liabilities not being Liabilities in respect of borrowed monies)
incurred since the date of the Reference Balance Sheet in the ordinary
course of business and consistent with the past practice of the Companies
and which do not have a Material Adverse Effect or (iv) the Intra Group
Debt. Reserves are reflected on the Reference Balance Sheet against all
Liabilities of the Companies in amounts that have been established on a
basis consistent with the past practices of the Seller Group.
11. COMPETITION LAW
None of the Irish Companies or AerFi Belgium is or has been a party to, or
engaged in, any agreement, arrangement, decision, concerted practice, or
activity which contravenes the provisions of any competition, anti-trust,
anti-monopoly or anti-cartel law of any jurisdiction, including without
limitation Article 85 of the Treaty of Rome and the provisions of the
Competition Act 1991.
12. MERGER CONTROL LEGISLATION
None of the Irish Companies has been involved in any merger or take-over
prior to the date of this Agreement nor been the object of a report of the
Competition Authority under Section 8(1) of the Mergers Act or its Belgian
equivalent or has been involved in any arrangement or transaction or
agreement which is or was a concentration with a community dimension
within the meaning of Council Regulation (EEC) No. 4064/89 of 21 December
1989 on the control of concentrations between undertakings (the "MERGER
CONTROL REGULATION") and none of the Irish Companies is or has been
involved prior to or at the date of this Agreement in any arrangement or
transaction or agreement which at the request of a Member State has been
the subject of findings or decisions of the Commission of the European
Communities pursuant to Article 22 of the Merger Control Regulation.
13. RECEIVERS/EXAMINERS/LIQUIDATORS
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(a) No distress, execution or other process has been levied in respect
of either of the Irish Companies or AerFi Belgium which remains
undischarged and there is no unfulfilled or unsatisfied judgment or
Court order outstanding against either of the Irish Companies or
AerFi Belgium.
(b) No receiver or manager or, (as regards AerFi Belgium), special
administrator or equivalent officer has been appointed of the whole
or any part of the assets or undertaking of either of the Irish
Companies or AerFi Belgium.
(c) None of the Irish Companies nor AerFi Belgium is insolvent nor has
any of them stopped or suspended payment of its debts or sought
from its creditors significant extensions of time for the payment
of its debts and AerFi Belgium has not applied for a composition
with its creditors.
(d) No meeting has been convened at which a resolution will be
proposed, no resolution has been passed, no petition has been
presented and no order has been made for the winding-up of either
of the Irish Companies or AerFi Belgium.
(e) No arrangement or reconstruction has been proposed under Section
201 of the Companies Act 1963 in respect of either of the Irish
Companies.
(f) No examiner is, or has been, appointed to any of the Companies
under the Companies (Amendment) Act 1990 and there is no petition
pending or threatened in respect of such an appointment.
(g) No order has been made or circumstances arisen which could give
rise to any order being made against the Companies or any of them
under Section 140 of the Companies Act, 1990.
(h) None of the Companies has at any time acquired any property in
circumstances which may lead to an application under Section 139 of
the Companies Act 1990 for an order of the Court on terms
contemplated by that Section.
(i) No event analogous to any of the foregoing has occurred outside
Ireland.
(j) No circumstances have arisen which entitle any person to take any
action, appoint any person, commence proceedings or obtain any
order of the type mentioned in any part of this paragraph 13.
14. Taxation - Irish Companies
General
14.1 All taxation of any nature whatsoever or other sums imposed charged
assessed levied or payable under the provisions of applicable legislation
relating to taxation for which either of the Irish Companies is liable as
a result of any act or omission by such Company prior to Closing will if,
and in so far as such taxation or other sums ought to be paid prior to or
on Closing, have been paid at or before Closing
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and in particular, but, without prejudice to the generality of the
foregoing, at Closing, all amounts due for payment to the Revenue
Commissioners in respect of excise duty and of Value Added Tax in respect
of goods or services supplied prior to Closing or goods imported prior to
Closing will have been paid so that neither of the Irish Companies will
have any liability in respect thereof.
14.1A Neither of the Irish Companies pays emoluments to its directors.
14.2 Neither of the Irish Companies has acquired or disposed of any asset or
entered into any transaction otherwise than by way of bargain at arm's
length.
14.3 There is no appeal by either of the Irish Companies pending against any
assessment to tax and neither of the Irish Companies is in default in
payment of any tax within the period prescribed for payment thereof.
14.4 Neither of the Irish Companies has committed any act nor made any omission
which might constitute an offence under Section 1078 of the TCA. [aiding,
abetting, assisting etc. tax evasion]
14.5 Neither of the Irish Companies has been at any time, for taxation
purposes, resident in any jurisdiction other than Ireland nor has it been
at any time managed or controlled in or from any country other than
Ireland and neither of the Irish Companies has at any time carried on any
trade in any other country.
14.6 Each of the Irish Companies has for each accounting period up to and
including the accounting period ending on the Reference Balance Sheet Date
furnished such Company's Inspector of Taxes with full and accurate
particulars relating to the affairs of any of the Irish Companies, and
also has properly and within the prescribed periods of time made all
returns and given or delivered all notices, accounts and information
required for the purpose of taxation, and all such have been correct in
all material respects and on a proper basis and none such are disputed by
the Revenue Commissioners or other authority concerned, there are no
grounds or circumstances which might cause any such dispute and any of the
Irish Companies has made all claims which would be of benefit to it within
the time limits laid down in the relevant legislation.
14.7 To the best of the knowledge and belief of the Sellers, neither of the
Irish Companies has entered into or been a party to any schemes or
arrangements designed partly or wholly for the purpose of avoiding
taxation. Neither of the Irish Companies has been involved in any "tax
avoidance transaction" within the meaning of Section 811 of the TCA and no
provisions of that Section apply to either of the Irish Companies in
respect of any event (whether or not involving either of the Irish
Companies) which took place before Closing or in respect of any series of
events (whether or not such events or any of them involve any of the Irish
Companies) taking place partly before Closing and partly after Closing.
[transactions to avoid tax liability]
14.8 No act or transaction has been effected in consequence of which any of the
Irish Companies is liable for any taxation primarily chargeable against
some other company.
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14.9 The making of returns, payment of preliminary tax and all other
requirements of Part 41 of the TCA have been complied with fully by each
of the Irish Companies.
14.10 No surcharge for late submission of returns under Section 1084 of the TCA
has or will become payable by either of the Irish Companies in respect of
any period prior to Closing.
14.11 No notice of attachment has been served on either of the Irish Companies
or in relation to any funds of either of the Irish Companies under section
1002 of the TCA. [attachment of defaulter's funds]
CORPORATION TAX
14.12 (a) Neither of the Irish Companies has paid remuneration to its directors;
and
(b) Neither of the Irish Companies has paid or agreed to pay remuneration
or compensation for loss of office or made or agreed to make any
gratuitous payment or any other payment in respect of management or
other services rendered or to be rendered to either of the Irish
Companies to any of its directors.
14.13 Neither of the Irish Companies has, within the meaning of Part 18, 1 of
the TCA, received payment in respect of professional services from an
accountable person. [withholding tax on professional fees]
14.14 Each of the Irish Companies has duly complied with the requirements of
Section 239 of the TCA [payments made under deduction of tax] and with the
requirements of all other provisions relating to the deduction and
withholding of tax at source up to the date hereof and all such tax which
has become due to the Revenue Commissioners has been paid to the Revenue
Commissioners.
14.15 The limitation on the meaning of "distribution" provided for by Sections
133 and 134 of the TCA does not apply to any financial arrangements of
either of the Irish Companies. [limitation on use of Section 130 finance]
14.16 Neither of the Irish Companies has effected or entered into any act
transaction or arrangement of any nature whereby it has incurred or may
hereafter incur any liability under or by virtue of any of Sections 98,
99, 100 and 103 of the TCA. [treatment of premiums on rental income]
14.17 Neither of the Irish Companies is liable to make a subvention payment or
any other payment for an amount surrendered by any other company under or
in connection with the provisions of Section 411 of the TCA. [payment for
group relief]
14.18 Neither of the Irish Companies has at any time:-
(a) repaid or redeemed or agreed to repay or redeem any shares of any
class of its share capital or otherwise reduced or agreed to reduce
its issued share capital or any class thereof; or
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(b) capitalised or agreed to capitalise in the form of shares, debentures
or other securities or in paying up any amounts unpaid on any shares
debentures or other securities any profits or reserves of any class
or description or passed or agreed to pass any resolution to do so;
or
(c) provided capital to any company on terms whereby the company so
capitalised has in consideration thereof issued shares loan stock or
other securities where the terms of any such capitalisation were
otherwise than by way of a bargain made at arm's length or where the
shares loan stock or other securities acquired are shown in [any
relevant accounts] at a value in excess of their market value at the
time of acquisition.
14.19 No allowable loss which has arisen or which may hereafter arise on the
disposal by either of the Irish Companies of shares in or securities of
any company is liable to be disallowed in whole or in part by virtue of
the application of Section 621 [transactions in a group] or Section 622
[dividend stripping] of the TCA. [anti avoidance provisions]
14.20 No change of ownership of either of the Irish Companies has taken place in
circumstances such that Section 401 of the TCA [change in ownership of
Company; disallowance of trading losses] has or may be applied to deny
relief for a loss or losses incurred by either of the Irish Companies.
14.21 The restrictions on the use of capital allowances for certain leased
assets as set out in Section 403 of the TCA do not have application to any
transactions entered into by either of the Irish Companies. [use of
capital allowances against leasing income only]
14.22 Neither of the Irish Companies has received notice under Section 445(4) or
(5) of the TCA and GPA has not received notice under section 445(4) or (5)
of the TCA in respect of any certificate relevant to, or the revocation of
which would adversely affect, the Irish Companies. [Shannon Airport:
revocation of certain certificates]
14.23 The provisions of Section 1013 of the TCA do not apply to any transaction
entered into by either of the Irish Companies. [limited partnerships:
relief restrictions]
14.24 Neither of the Irish Companies has entered into any transaction as a
result of which it could be assessed to tax under Part 22, Chapter 1 of
the TCA. [transactions in land]
14.25 No allowance in respect of capital expenditure is or may be restricted by
virtue of Part 9 of, or paragraph 9 of Schedule 32 to, the TCA.
[limitation on 100% write off]
14.26 Neither of the Irish Companies has entered into or taken any steps the
object of which is a transaction which comes or may come within Section
817 of the TCA. [schemes to avoid liability to tax under Schedule F]
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14.27 Neither of the Irish Companies beneficially owns nor has it ever
beneficially owned shares to which Sections 155 and 489(14) of the TCA
apply or may have applied. [removal of tax free status from certain
dividends].
14.28 Neither of the Irish Companies owns or has ever owned an asset which
constitutes a material interest in an off-shore fund which is or has at
any time been a non qualifying off-shore fund within the terms of Part
27, Chapter 2 of the TCA [off-shore funds].
ADVANCE CORPORATION TAX ("ACT")
14.29 Neither of the Irish Companies has any liability to ACT under Part 6,
Chapter 8 of the TCA.
14.30 Neither of the Irish Companies has made an election under Section 165
[group dividends], and no surrender has been made under Section 166
[surrender of ACT], of the TCA.
14.31 Neither of the Irish Companies is affected by the provisions of Section
167 [carrying forward of ACT where change in ownership of company] or
Section 170 of the TCA. [application of ACT to interest on certain loans
- transitional provisions re S.130 loans]
CAPITAL GAINS TAX
14.32 Neither of the Irish Companies has made any claim under Section 597 of
the TCA [replacement of business assets: roll over relief] as respects
the consideration for the disposal of or of its interest in any assets
which are defined in the said Section 28 (amended as aforesaid) as "the
old assets".
14.33 Neither of the Irish Companies has made any such transfer as is referred
to in Section 589 of the TCA [transfers at undervalue] or received any
asset by way of gift as mentioned in Section 987 of the TCA.
14.34 Neither of the Irish Companies has been a party to or involved in any
share for share exchange nor any scheme of reconstruction or amalgamation
such as are mentioned in Sections 583 to 588 or 615 of the TCA under
which shares or debentures have been issued or any transfer of assets
effected.
14.35 Neither of the Irish Companies has entered into any transaction which
has, will or may give rise to a charge to tax under the provisions of the
TCA relating to companies' capital gains or under the provisions of the
Capital Acquisitions Tax Act 1976.
14.36 Neither of the Irish Companies has made any claim under Section 1005 of
the TCA [unremittable profits made abroad] and no tax liability has been
deferred under any other provision of the TCA including Sections 563 and
981. [e.g. instalment sales]
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14.37 Neither of the Irish Companies has entered into any transactions which
give rise to a liability under Sections 590(11), 616, 623, 625 or 626 of
the TCA. [capital gains tax group relief]
14.38 There have been no claims under Section 538(2) of the TCA. [capital losses
allowed where no sale]
14.39 Neither of the Irish Companies has entered into or taken any steps the
object of which is a transaction which comes within or might come within
Section 549 of the TCA [creation of capital gains tax losses].
STAMP/CAPITAL DUTY
14.40 All documents in the possession or under the control of either of the
Irish Companies which attract stamp duty have been properly stamped.
14.41 No relief, exemption or reduction has been obtained from Irish Companies
capital duty or stamp duty and without prejudice to the generality of the
foregoing no relief, exemption or reduction has been obtained from Irish
Companies capital duty or stamp duty under Section 72 of the Finance Act
1973 [reconstruction or amalgamation] or from stamp duty under Section 19
of the Finance Act 1952 or Statutory Instrument No. 244 of 1979 or
Statutory Instrument No. 272 of 1981 [associated company relief] or
Section 31 of the Finance Act 1965 [relief from capital and stamp duty in
certain cases] which (a) has become liable to forfeiture or (b) may be
forfeited in the future.
14.42 All capital duty and/or stamp duty payable by either of the Irish
Companies in respect of any of the transactions referred to in the
following sections of the Finance Act 1973 has been duly and promptly paid
by such Company so that there is no liability in respect thereof or any
interest thereon;
(a) section 63 [stamp duty on security documents];
(b) section 64 [replacement of headings in Stamp Act 1891];
(c) section 68 [capital duty]; and
(d) sections 69 and 70 [stamp duty on certain Irish Companies Registration
Office statements].
14.43 All other capital and/or stamp duty howsoever arising or payable has been
paid by either of the Irish Companies and there is no outstanding
liability therefor or interest thereon.
VALUE ADDED TAX
14.44 Each of the Irish Companies is a registered and taxable person for the
purposes of the Value Added Tax Acts and has complied in all respects with
such legislation and all regulations made or notices issued thereunder and
has maintained full complete correct and up to date records, invoices and
other
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documents (as the case may be) appropriate or requisite for the purposes
thereof.
14.45 Neither of the Irish Companies is in arrears with its payments or returns
or notifications under the Value Added Tax Acts regulations or notices or
liable to any abnormal or non routine payment or any forfeiture or penalty
or to the operation of any penal provisions contained therein.
14.46 Neither of the Irish Companies has been required by appropriate fiscal
authorities to give security under the Value Added Tax Acts.
14.47 No arrangement exists or has existed whereby pursuant to Section 8(8) of
the Value Added Tax Act 1972 and Regulation 5 of the Value Added Tax
Regulation 1979 (as amended) the business activities of either of the
Irish Companies are or were deemed to be carried on by any other person or
the business activities of any other person are or were deemed to be
carried on by either of the Irish Companies. [membership of a group of VAT
purposes]
CAPITAL ACQUISITIONS TAX
14.48 There is no unsatisfied liability to capital acquisitions tax attached or
attributable to the Shares and the Shares are not subject to a charge in
favour of the Revenue Commissioners.
14.49 No person is liable to capital acquisitions tax attributable to the value
of any of the Shares and in consequence no person has the power to raise
the amount of such tax by sale or mortgage of or by a terminable charge on
any of the Shares.
14.50 Neither of the Irish Companies has entered into or taken any steps the
object of which is a transaction which comes within Section 90 of the
Finance Act 1989 [arrangements reducing value of company's shares].
15. TAXATION -- AERFI BELGIUM
In respect of AerFi Belgium, the statements in paragraph 14 are true and
accurate as though references therein to the Irish Companies were to AerFi
Belgium and references to specific provisions of Irish statutes or
regulations were references to the equivalent statutes or regulations in
Belgium.
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PART 3 -- AERCO USA
1. ORGANISATION, AUTHORITY AND QUALIFICATION OF AERCO USA
AerCo USA is a corporation duly organised, validly existing and in good
standing under the laws of the State of Delaware and has all the necessary
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it and to carry on its business as it has been
and is currently conducted. AerCo USA is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes
such licensing or qualification necessary and all such jurisdictions are
set forth in Part 3 paragraph 1 of the Disclosure Letter. All corporate
actions taken in connection with this Agreement by AerCo USA have been duly
authorised, and AerCo USA has not taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of
any provision of its Certificate of Incorporation or by-laws. True and
correct copies of the Certificate of Incorporation and by-laws of AerCo
USA, each as in effect on the date hereof, have been delivered by GPA to
the Purchaser.
2. CAPITAL STOCK OF AERCO USA
The authorised capital stock of AerCo USA consists of 10,000 shares of
Common Stock. As of the date hereof, 10,000 shares of Common Stock ("the
AERCO USA SHARES") are issued and outstanding, all of which are validly
issued, fully paid and nonassessable. None of the issued and outstanding
shares of Common Stock was issued in violation of any preemptive rights.
There are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments or any character relating to the
capital stock of AerCo USA or obligating GPA, the Voting Trustee or AerCo
USA to issue or sell any shares of capital stock of, or any other interest
in, AerCo USA. There are no outstanding contractual obligations of AerCo
USA to repurchase, redeem or otherwise acquire any shares of Common Stock.
The AerCo Stock constitutes all the issued and outstanding capital stock of
AerCo USA and is owned of record by the Voting Trustee and beneficially
solely by GPA free and clear of all Liens, except for the Voting Trust,
which is to be terminated on Closing; and at Closing, following the
termination of the Voting Trust and transfer of the shares of stock
previously held of record by the Voting Trustee to the name of GPA as
record owner on the books of AerCo USA, GPA will be the owner of record of
the AerCo USA Stock and will transfer and deliver to the Purchaser the
legal and beneficial ownership of the right, title and interest in the
AerCo USA Stock free and clear of all Liens. Immediately upon Closing, the
AerCo USA Stock will be fully paid, nonassessable and will be legally and
beneficially owned by the Purchaser free and clear of all Liens. There are
no voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of
the shares in the AerCo USA Stock, except (prior to Closing) the Voting
Trust.
The Stock register of AerCo USA accurately records: (i) the name and
address of each Person owning shares of capital stock of AerCo USA and (ii)
the certificate number of each certificate evidencing shares of capital
stock issued by AerCo
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USA, the number of shares evidenced by each such certificate, the date of
issuance thereof and, in the case of cancellation, the date of
cancellation.
3A. SUBSIDIARIES
AerCo USA has no Subsidiaries.
3. THE VOTING TRUST
A true and complete copy of the Voting Trust Agreement has been provided to
the Purchaser. No fees, expenses or other amounts are due and owing to the
Voting Trustee under the Voting Trust. GPA is duly registered as the holder
of all the Voting Trust Certificates.
4. CORPORATE BOOKS AND RECORDS
Complete and accurate copies of the minute books and of the stock register
of AerCo USA have been provided by GPA to the Purchaser. All statutory
records required to be kept by AerCo USA have been properly kept and will
be so kept until Closing.
5. FINANCIAL INFORMATION, SOLVENCY, BOOKS AND RECORDS ETC
(a) No audited accounts have been prepared in respect of AerCo USA. The
Reference Balance Sheet represents fairly in all material respects the
financial position of AerCo USA at the Reference Balance Sheet Date
and has been prepared on a basis consistent with the accounting
policies of the Seller Group at 31 May 1998.
(b) AerCo USA is Solvent.
(c) The books of account and other financial records of AerCo USA: (i)
reflect all items of income and expense and all assets and Liabilities
required to be reflected therein in accordance with and applied on a
basis consistent with the past practices of the Seller Group's U.S.
members, (ii) are complete and correct, and do not contain or reflect
any material inaccuracies or discrepancies and (iii) have been
maintained in accordance with good business and accounting practices.
7. NO UNDISCLOSED LIABILITIES
There are no Liabilities of AerCo USA other than Liabilities (i) reflected
or reserved against on the Reference Balance Sheet, (ii) disclosed in Part
3 paragraph 7 of the Disclosure Letter or (iii) Liabilities (not being
Liabilities in respect of borrowed monies) incurred since the Reference
Balance Sheet Date in the ordinary course of business and consistent with
the past practice of Seller Group's U.S. members and which do not have a
Material Adverse Effect or (iv) the Intra-Group Debt. Reserves are
reflected on the Reference Balance Sheet against all Liabilities of AerCo
USA in amounts that have been established on a basis consistent with the
past practices of the Seller Group's U.S. members.
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<PAGE> 46
8. CONDUCT IN THE ORDINARY COURSE: ABSENCE OF CERTAIN CHANGES, EVENTS AND
CONDITIONS.
Since the Reference Balance Sheet Date, the business of AerCo USA has been
conducted in the ordinary course and consistent with past practice and
AerCo USA has not suffered any change or occurrence which would be
reasonably expected to result in a Material Adverse Effect.
9. IDENTITY OF DIRECTORS
The details of the directors and officers of AerCo USA set out in Schedule
2 are correct.
10. AERCO USA TAX REPRESENTATIONS
(a) all tax returns, statements, reports and forms (including estimated tax
or information returns and reports) required to be filed with any taxing
authority with respect to any pre-closing tax period by or on behalf of
AerCo USA (collectively, the "RETURNS") have, to the extent required to be
filed on or before the date hereof been or will be filed when due in
accordance with all applicable laws; (b) as of the time of filing, the
Returns, if any, correctly reflected (and, as to any Returns not filed as
of the date hereof, will correctly reflect) the facts regarding the income,
business, assets, operations, activities and status of AerCo USA and any
other information required to be shown therein; (c) all taxes shown as due
and payable on the Returns that have been filed, if any, have been timely
paid, or withheld and remitted to the appropriate taxing authority; (d)
AerCo USA is not delinquent in the payment of any tax and has not requested
any extension of time within which to file any Return which has not yet
been filed; (e) AerCo USA has not granted any extension or waiver of the
statue of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired; (f) there
is no claim, audit, action, suit, proceeding or investigation now pending
or threatened against or with respect to AerCo USA in respect of any tax;
(g) AerCo USA has not been a member of an affiliated, consolidated,
combined or unitary group.
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<PAGE> 47
SCHEDULE 4 - PURCHASER'S REPRESENTATIONS AND WARRANTIES
1. CAPACITY AND AUTHORITY
1.1 PURCHASER
The Purchaser is duly incorporated and validly existing under the laws of
Jersey, Channel Islands and has all necessary corporate power and
authority to enter into and perform its obligations under this Agreement
which constitute legal, valid, binding obligations on the Purchaser
enforceable in accordance with its terms. The execution, delivery and
performance by the Purchaser of this Agreement has been duly authorised
by all requisite action on its part. This Agreement has been duly
executed and delivered by the Purchaser and (assuming due authorisation,
execution and delivery by the Sellers) this Agreement constitutes a
legal, valid and binding obligation of the Purchaser enforceable against
in accordance with its terms.
1.2 NO CONFLICTS
Assuming the making and obtaining of all filings, notifications,
consents, approvals, authorisations and other actions referred to in
paragraph 1.3 below, except as may result from any facts or circumstances
relating solely to the Sellers, the execution, delivery and performance
of this Agreement by the Purchaser does not and will not:-
(a) violate, conflict with or result in the breach of any provision
of any constitutional document of the Purchaser, which conflict
with or breach would materially impair the Purchaser's ability to
perform its obligations under this Agreement;
(b) conflict with or violate any Law or Government Order applicable
to the Purchaser, which conflict or violation would materially
impair the ability of the Purchaser to perform its obligations
under this Agreement; or
(c) conflict, result in any breach of, constitute a default (or event
with the giving of notice or lapse in time or both would become a
default) under, or result in the creation of any Lien on any of
the assets or properties of the Purchaser pursuant to any note,
bond, mortgage, or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or
arrangement to which the Purchaser is a party or by which any of
its assets or properties are bound or affected, which conflict,
breach or default would materially impair the Purchaser's ability
to perform its obligations under this Agreement.
1.3 GOVERNMENT CONSENTS AND APPROVALS
The execution, delivery and performance by the Purchaser of this
Agreement does not and will not require any consent, approval,
authorisation or other order of, action by, filing with or notification
to any governmental authority, except as described in writing given to
the Sellers by the Purchaser on or prior to Closing.
45
<PAGE> 48
2. PURCHASE FOR INVESTMENT
Purchase for investment
The Purchaser is buying the Shares and AerCo USA Stock for investment for
its own account and not with a view to, or for sale in connection with, any
distribution thereof.
3. LITIGATION
There is no action, suit, investigation or proceeding pending against, or
to the knowledge of Purchaser, threatened against or affecting, Purchaser
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and the
Other Transaction Documents or the Related Documents.
4. NO IMPLIED WARRANTIES
The Purchaser has not relied upon any express or implied warranties of any
nature made by or on behalf of or imputed to the Sellers except as
expressly set out in this Agreement.
5. TRANSFER
Full and final transfer
The Purchaser intends that the sale of the Shares and AerCo USA Stock
contemplated hereby shall constitute a full and final transfer of the legal
and beneficial ownership of the Shares and AerCo USA Stock and after
Closing the Sellers shall retain no right, title or interest therein.
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<PAGE> 49
SCHEDULE 5 - DEED OF TAX INDEMNITY
THIS DEED OF INDEMNITY is made on 1998
BETWEEN
(1) GPA GROUP PLC ("GPA"), a public limited company incorporated in Ireland and
having its registered office at GPA House, Shannon, Co Clare, Ireland
("GPA") and (2) SKYSCAPE LIMITED, ("SKYSCAPE"), a limited liability company
incorporated in Ireland and having its registered office at GPA House,
Shannon, Co Clare (together the "COVENANTORS"); and
(2) AERCO LIMITED, a company incorporated in Jersey and having its registered
office at 22 Grenville Street, St Helier, Jersey JE4 8PX, Channel Islands
(the "PURCHASER" which expression shall unless the context does not so
permit include its successors in title).
RECITALS
By Share Purchase Agreement dated 15 July 1998 between the Covenantors and the
Purchaser (the "AGREEMENT"), the Purchaser agreed to purchase, and the
Covenantors agreed to sell, all of the issued shares (the "SHARES") in the
capital of the Irish Companies and AerCo USA (as defined below). The
Covenantors have agreed to indemnify the Purchaser in respect of certain
liabilities of the Companies and their subsidiaries on the terms and conditions
contained herein.
NOW IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS: In this Deed unless the context otherwise requires:
"AERCO USA" means AerCoUSA Inc;
"AERFI" means AerFi Belgium N.V.;
"AERFI ACCOUNTS" means the audited balance sheets of a AerFi as at 31 March
1998 and its audited profit and loss accounts of the financial year ended
on 31 March 1998;
"CLOSING" means completion of the sale and purchase of the Shares in
accordance with the Agreement;
"COMPANIES" means (i) AerCo Ireland Limited ("AERCO IRELAND"), a company
incorporated in Ireland and having its registered office at GPA House,
Shannon, Co Clare, (ii) AerCo Ireland II Limited ("AERCO IRELAND II" and,
together with AerCo Ireland, the "IRISH COMPANIES"), a company incorporated
in Ireland and having its registered office at GPA House, Shannon, Co
Clare, (iii) AerFi and (iv) AerCo USA;
"CLAIM" includes any demand notice letter or other document issued or
action taken by or on behalf of any person or authority (whether within or
outside
47
<PAGE> 50
Ireland) from which it appears that any Company is liable or is sought to
be made liable to make any payment or a tax liability is likely to be
imposed on any Company;
"LIBOR" means the per annum offered rate for deposits in US dollars for a
period of one month that appears on the display designated as page 3750 on
the Telerate Monitor (or such other page or service as may replace it for
the purpose of displaying LIBOR of major banks for US dollar deposits) at
approximately 11:00 am (London time):
"TAX ASSESSMENT" includes any assessment demand or other similar formal
notice of a tax liability issued by or on behalf of any taxing or other
competent authority or estimates and amounts which are due and payable
without any formal demand or notice by or on behalf of any taxing or other
competent authority (whether within or outside Ireland) by virtue of which
any Company is or will with the passing of time become liable to make a
payment of tax;
references to any tax liability of any Company shall include not only
liabilities of the Company to make payments of or in respect of tax but
also:
(a) the loss or setting off against income profits or gains of any relief
allowance or credit in respect of any tax which would (were it not for
the said loss or setting off) have been available to the Company and
has been taken into account in computing (and so reducing) any
provision for deferred taxation which appears (or which but for such
relief allowance or credit would have appeared) in the Reference
Balance Sheet;
(b) the loss or setting off against any tax liability (for which no
provision has been made in preparing the Reference Balance Sheet) of a
right to repayment of tax which has been treated as an asset of the
Company in preparing the Reference Balance Sheet; and
(c) the setting off against income profits or gains earned accrued or
received on or before Closing of any relief allowance or credit which
is not available before Closing but arises in respect of any event
occurring after Closing in circumstances where but for such setting
off the Company would have had an actual tax liability in respect of
which it or the Purchaser would have been able to make a claim against
the Covenantor under this Deed and in such a case the amount of the
relief allowance or credit so lost or set off (or if such relief
allowance or credit is a deduction from or offset against gross income
or profits the amount of tax which would (in the case of a lost relief
allowance or credit and on the basis of the tax rates current at the
date of such loss) have been saved thereby but for such loss or in the
case of a set off relief allowance or credit the amount of tax which
has been saved thereby in consequence of such set off) or the amount
of the repayment which would otherwise have been obtained shall be
treated for the purposes of this Deed as a tax liability of the
Company;
"TAX" includes (without prejudice to the generality of the expression):
48
<PAGE> 51
(a) within Ireland all taxes including (without limitation) income tax,
corporation tax (including any additional duty of corporation tax and
any surcharge), advance corporation tax, capital gains tax, capital
acquisition tax, value added tax, stamp duty, capital duty, excise
duty, customs and other import duties, PAYE deductions, pay related
social insurance (PRSI) social welfare and social insurance
contributions, payroll taxes generally, general rates and water
rates, withholding tax, deposit interest retention tax and any other
tax, levy, duty or impost whether similar to, replaced by or
replacing any of them or otherwise and any penalty, charge and
interest included in or relating to any tax assessment therefor; and
(b) outside Ireland all taxes including (without limitation) taxes on
gross or net income profits or gains, receipts, sales, use,
occupation, franchise, value added, personal property and any other
tax, levy, impost, excise duty, duty, charge or withholding of any
nature whatsoever PAYE deductions, payroll taxes and contributions
generally and any penalty, charge and interest included in or
relating to any tax assessment therefor, in either case regardless of
whether such taxes penalties charges and interest are directly or
primarily chargeable against or attributable to any Company or any
other person firm or company;
References to:
(i) income or profits or gains earned accrued or received on or before a
particular date or in respect of a particular period shall include
income or profits or gains which have been deemed to have been earned
accrued or received at or before that date or in respect of that
period for the purposes of any tax assessment;
(ii) any payment or distribution made on or before a particular date shall
include:
(A) any payment or distribution which on or before that date has
fallen due to be made; and
(B) any act or transaction which has occurred on or before that date
and is or has been deemed to be a payment or distribution for
the purposes of any tax assessment; and
(iii) any dividend shall include anything which has been deemed to be a
dividend or distribution to shareholders or others for the purposes
of any tax assessment;
"EVENT" includes (without limitation) the death of any person any
transaction action or omission and a failure to make sufficient dividend
payments to avoid any apportionment or deemed distribution of income or
notional and deemed events which give rise to tax liabilities or an
additional duty of corporation tax or overcharge; and
49
<PAGE> 52
1.2 TERMS DEFINED IN THE AGREEMENT: Unless otherwise indicated, words and
expressions used but not defined in this Deed shall have the same meaning
as in the Agreement.
2. INDEMNITY
2.1 NATURE OF INDEMNITY: The Covenantors hereby jointly and severally covenant
to hold the Purchaser (without prejudice to any other rights which the
Purchaser may have) indemnified and to keep the Purchaser indemnified
against:
(a) any claim for tax on and any tax liability of any Company arising:
(i) as a consequence of any event which occurred on or before
Closing; or
(ii) in respect of or with reference to any income profits or gains
which were earned accrued or received on or before or in respect
of a period ending on or before Closing;
(b) any claim for tax on and any tax liability of any Company resulting
from or made by reference to any of the following events:
(i) the disposal of any asset (including trading stock) in
circumstances where the cash consideration actually received for
such disposal is less than the consideration deemed to have been
received for taxation purposes; or
(ii) the supply of any service or business facility of any kind for a
consideration which was less than might reasonably have been
regarded as the open market value of such service or business
facility; or
(iii)any other act or transaction which gives rise to a tax liability
on deemed (as opposed to actual) income profits or gains by the
operation of the Tax Acts (as defined in section 1(2) of the
Taxes Consolidation Act, 1997) or which results in any Company
becoming liable to pay or bear a tax liability directly or
primarily chargeable against or attributable to another person
firm or company (other than a Company) but only where the
relevant event occurred on or before Closing; and
(c) any interest and any costs and expenses reasonably and properly
incurred by the Purchaser and the Companies in connection with any
such liability (or claim therefor) or in taking or defending any
action under this Deed.
3. LIMITATIONS ON INDEMNITY
3.1 CERTAIN TAX LIABILITIES EXEMPTED: The indemnity given by Clause 2 of this
Deed shall not cover any tax liability:
50
<PAGE> 53
(a) to the extent that provision or reserve in respect of such tax
liability was made in the Reference Balance Sheets; or
(b) to the extent that the liability of the Covenantors arising by reason
of any claims hereunder when aggregated to the liability of the
Covenantors and their Affiliates in respect of any claims under or
pursuant to (i) the Warranties and (ii) the Seller Indemnity would
exceed US$185 million at the time payment of such amount is made; or
(c) to the extent that the aggregate liability of the Sellers and their
Affiliates for such claims when aggregated with any liability of the
Sellers and/or such Affiliates in respect of claims under or pursuant
to (i) the Warranties and (ii) the Seller Indemnity would not exceed
in aggregate US$5 million; or
(d) to the extent that the Purchaser waives or surrenders after Closing
any exemption, relief, allowance, credit, deduction or set-off
available to the Companies or any of them at the date hereof relevant
to the computation of any liability to taxation or any credit against
taxation; or
(e) with respect to and to the extent attributable to the passing of any
primary or subordinate legislation or any judicial decision altering
the generally accepted interpretation of existing legislation or
making of any other government regulation, not in force at the date
hereof, or the withdrawal or alteration after the date hereof of any
published or unpublished extra statutory concession made by any fiscal
authority and presently in operation; or
(f) which would not have arisen but for (or if the same is increased by
reason of) a breach by the Purchaser of its obligations hereunder; or
(g) which would not have arisen but for a voluntary act or transaction not
contemplated by this Deed, the Agreement, the Other Transaction
Documents or the Related Documents (as defined in the Indentures)
carried out by any Company after Closing and otherwise than in the
ordinary course of business.
3.2 LIABILITY OF SKYSCAPE: The Purchaser hereby acknowledges that Skyscape is a
party to this Deed in its capacity only as holder of one Ordinary Share in
each of the Irish Companies as nominee for GPA. Skyscape's maximum
liability to the Purchaser in respect of any claims under or pursuant to
this Deed of Tax Indemnity shall be limited to IR(pound)1.
4. CLAIMS
4.1 NOTICE OF PURCHASER: TIME LIMIT ON CLAIMS: No claim shall be brought by the
Purchaser in respect of any claim under this Deed unless notice in writing
of such claim (specifying in reasonable detail (a) the event matter or
default which gives rise to the claim and (b) the amount claimed) has been
given to the Covenantors not later than the expiration of a period of seven
(7) years from Closing. Upon the Purchaser or any Company becoming aware of
such a claim,
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<PAGE> 54
it shall forthwith give written notice thereof to the Covenantors and shall
(if the Covenantors shall indemnify and secure the Company) to its
reasonable satisfaction against all losses costs damages and expenses
including interest on overdue tax which may be incurred thereby) take such
action as the Covenantors may reasonably and promptly by written notice
request to avoid resist appeal or compromise the claim:
Provided that the Company shall not be obliged to appeal against any tax
assessment raised on it if having given the Covenantors' written notice of
the receipt of such tax assessment it has not within 15 days thereafter
received instructions in writing from the Covenantors in accordance with
the preceding provisions of this sub-clause to do so.
5. INTEREST
LATE PAYMENT TO CARRY INTEREST: If any payment due to be made by the
Covenantors under this Deed is not made on the due date for payment thereof
the same shall carry interest from such due date of payment until actual
payment at the rate of 1 per cent per annum above LIBOR.
6. PAYMENTS
6.1 TO BE MADE FREE FROM DEDUCTIONS: All sums payable by the Covenantors to the
Purchaser under this Deed shall be paid free and clear of all deductions or
withholdings whatsoever save only as may required by law. If any such
deductions or withholdings are required by law the Covenantors shall be
obliged to pay to the Purchaser such sums as will after such deduction or
withholding has been made leave the Purchaser with the same amount as it
would have been entitled to receive in the absence of any such requirement
to make a deduction or withholding. If any sum payable by the Covenantors
to the Purchaser under this Deed shall otherwise be subject to tax in the
hands of the Purchaser the same obligation to make an increased payment
shall apply in relation to such tax liability as if it were a deduction or
withholding required by law. The Purchaser and the Covenantors hereby
undertake to co-operate to avoid or to minimise any such grossing up where
possible at no extra cost to the Purchaser or the Covenantors.
6.2 RECOVERY FROM THIRD PARTIES: If the Purchaser recovers any sum from a third
party in respect of or relating to a tax liability which has been the
subject of a successful claim by the Purchaser against any of the
Covenantors or their Affiliates hereunder, the Purchaser shall forthwith
reimburse to the Sellers an amount equal to the sum recovered in respect of
that claim.
7. RIGHTS OF PURCHASER
RIGHT OF PURCHASER TO RELEASE COVENANTOR: The Purchaser and the Companies
may release or compromise the liability of any of the Covenantors hereunder
or grant to any Covenantors time or other indulgences without affecting the
liability of any other covenantor hereunder.
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<PAGE> 55
8. NOTICES
MANNER OF SERVICE: Any notice or demand given under this Deed shall be in
writing and shall be deemed to be duly served if left at or sent by
registered post to the address of the appropriate party set out above or
such other address in Ireland as such party may from time to time notify to
the other parties for the purposes of this Deed. Any such notice or demand
shall be deemed to be given at the time when the same is left at the said
address or if sent by registered post at the commencement of the fifth
business day after the day of posting.
9. GOVERNING LAW
LAW OF IRELAND TO APPLY: This Deed shall be governed by and construed in
accordance with the law of Ireland and each of the parties hereto submits
to the non-exclusive jurisdiction of the Courts of Ireland.
IN WITNESS WHEREOF the parties have executed this Deed on the date written
above.
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<PAGE> 56
SCHEDULE 6A - FORM OF SOLVENCY CERTIFICATE (NON-US COMPANIES)
SOLVENCY CERTIFICATE
OF
[Name of Company]
I HEREBY CERTIFY that the Board of Directors of ___________________ has duly
considered the provisions of Section 214 of the Companies Act, 1963 (as amended)
and Section 2 of the Companies (Amendment) Act, 1990 and, all due enquiries
having been made, and having considered all matters which they considered
relevant to the Company's financial position has determined, to the best of its
knowledge, information and belief, provided that the closings of the current
transactions described in the Offering Memorandum take place that:
(a) the Company is not [, was not at any time in the preceding three months,]*
nor would it be deemed to be unable to pay its debts within the meaning of
Section 214 of the Companies Act, 1963 (as amended) and/or Section 2 of the
Companies (Amendment) Act, 1990; and
(b) the Company would not become unable to pay its debts, nor would be deemed
to be unable to pay its debts, within the meaning of Section 214 of the
Companies Act, 1963 (as amended) and/or Section 2 of the Companies
(Amendment) Act, 1990, in consequence of any of the Documents listed in the
Schedule hereto and any other documentation to be entered into by it in
connection therewith or the transactions the subject matter thereof.
_______________________
for and on behalf of
* include only where the company has sold assets over the previous three months.
54
<PAGE> 57
SCHEDULE 6B - FORM OF SOLVENCY CERTIFICATE (US COMPANIES)
SOLVENCY CERTIFICATES
of
[Name of Company]
I HEREBY CERTIFY that the Board of Directors of ______________________ having
duly considered all matters which they consider relevant to the Company's
financial position has determined, to the best of its knowledge, information and
belief, provided that the closings of the current transactions described in the
Offering Memorandum take place that:
(a) the fair value of its property is greater than the total amount of its
liabilities, including, without limitation, contingent liabilities;
(b) the present fair saleable value of its assets is not less than the amount
that will be required to pay its probable liability on its debts as they
become absolute and matured;
(c) it does not intent to, and does not believe that it will, incur debts or
liabilities beyond its ability to pay such debts and liabilities as they
mature;
(d) it is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which its property would constitute an
unreasonably small capital;
for the purposes of this paragraph (ii), the amount of contingent
liabilities at any time shall be computed as the amount that, in the light
of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability
for and on behalf of
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<PAGE> 58
SCHEDULE 7 -- INTRA-GROUP DEBT AT CLOSING
1. DEBT OWED BY AERCO IRELAND LIMITED
<TABLE>
<CAPTION>
DEBT OWED TO INCURRED IN RESPECT OF AMOUNT
- -------------- --------------------------- -----------
<S> <C> <C>
GPA Group plc Acquisition of aircraft msn $26,508,000
085 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $23,912,000
23868 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $24,375,000
23979 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $27,182,000
26066 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $31,092,000
22496 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $15,732,000
11341 from GPA Group plc
GPA Group plc Acquisition of aircraft msn $16,278,000
11350 from GPA Group plc
</TABLE>
Total AerCo Ireland Limited intra-group debt: US$165,079,000
2. DEBT OWED BY AERCO IRELAND II LIMITED
<TABLE>
<CAPTION>
DEBT OWED TO INCURRED IN RESPECT OF AMOUNT
- -------------- --------------------------- -----------
<S> <C> <C>
GPA Group plc Acquisition of aircraft msn $13,167,000
240 from GPA Group plc
</TABLE>
Total AerCo Ireland II Limited intra-group debt: US$13,167,000
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<PAGE> 59
3. DEBT OWED BY AERCOUSA INC
<TABLE>
<CAPTION>
DEBT OWED TO INCURRED IN RESPECT OF AMOUNT
- ------------ ---------------------- ------
<S> <C> <C>
GPA Group plc Acquisition of aircraft msn US$16,015,000
46064 from GPA Corporation
GPA Group plc Acquisition of aircraft msn US$15,807,000
46040 from AeroUSA II
</TABLE>
Total AerCo USA intra-group debt: US$31,822,000
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<PAGE> 60
SCHEDULE 8 - PARTICULARS OF THE AIRCRAFT
<TABLE>
<CAPTION>
CURRENT INITIAL
MONTHLY APPRAISED
SERIAL RENTAL VALUE
NO TYPE ENGINES LESSEE DETAILS OF LEASE US$ (US$,000's)
<S> <C> <C> <C> <C> <C> <C>
085 Airbus Two CFM International Compagnie nationale Aircraft Lease Agreement dated as 271,580 26,777
A320-200 engines model CFM56- Air France of 22 February 1990 between
5A1 serial numbers GPAA Limited and Compagnie
731233 and 731239 nationale Air France (formerly
known as Lignes Aeriennes
Interieures - Air Inter S.A.) as
amended and novated by Aircraft
Lease Amendment and Novation
Agreement dated as of 10 July
1998 between GPAA Limited,
AerCo Ireland and Compagnie
nationale Air France
23868 Boeing Two CFM International BMA Aircraft Lease Agreement dated as 289,225 24,214
737-400 engines model CFM56- of 24 May 1988 between GPA
3C serial numbers and BMA, as amended by three
725122 and 725126 Lease Amending Agreements
dated as of 21 December 1988,
17 April 1991 and 24 June 1991
respectively, as amended by a
Lease Novation and Amendment
Agreement dated as of 28 June
1991 between GPA, BMA and
Midland Montagu Equipment
Finance (UK) Limited and as
further amended and novated by a
Lease Novation and Amendment
Agreement dated as of 9 July
1998 between GPA, BMA and
AerCo Ireland
23979 Boeing Two CFM International Pegasus Aircraft Lease Agreement dated as 271,295 24,667
737-400 engines model CFM56- of 9 April 1997 between GPA and
3C1 serial numbers Pegasus as amended by Letter
725151 and 725283 Agreement dated as of 6 May
1997 and as amended and
novated by Aircraft Lease
Amendment and Novation
Agreement dated as of 2 June
1998 between GPA, Pegasus and
AerCo Ireland
26066 Boeing Two CFM International THY Aircraft Lease Agreement dated as 251,400 28,143
737-400 engines model CFM56- of 5 June 1992 between GPA
3C1 serial numbers Group plc and THY, as
856214 and 857196 supplemented by Side Letter No.1,
Side Letter No.2 and Side Letter
No.3 each dated as of 5 June
1992 and as amended by Aircraft
Lease Amendment Agreement
dated as of 10 June 1993 and as
amended and novated by Aircraft
Lease Amendment and Novation
Agreement dated as of 14 July
1998 between GPA, THY and
AerCo Ireland
22496 Boeing Four Pratt & Whitney Tower Air Inc. Aircraft Lease Agreement dated as 301,000 31,270
747-283B engines model JT9D-7Q of 11 December 1997 between
serial numbers 702390, GPA Corporation and Tower Air
702392, 702391 and Inc. and as assigned, assumed and
702385 amended by Aircraft Lease
Assignment, Assumption and
Amendment Agreement dated as
of 14 July 1998 between GPA
Corporation, Tower Air, Inc. and
AerCo USA
Details of Head Lease:
(Lease Agreement dated as of 5
December 1997 between GPA
Group plc and GPA Corporation)
11350 Fokker Two Rolls Royce TAM - Aircraft Lease Agreement dated as 137,522 16,710
100 engines model Tay Transportes of 23 October 1997 made
MK650-15 serial Aereos between GPA Fokker 100 Limited
numbers 17359 and Regionais S.A. and TAM - Transportes Aeros
17370 Regionais S.A. as novated and
amended by Aircraft Lease
Novation and Amendment
Agreement dated as of 8 July
1998 made between GPA Fokker
100 Limited, AerCo Ireland Limited,
TAM - Transportes Aereos
Regionais S.A. and Helisul-
Linhas Aereas S.A.
11341 Fokker Two Rolls Royce TAM - Aircraft Lease Agreement dated as 137,531 16,163
100 engines model Tay Transportes of 23 October 1997 made
MK650-15 serial Aereos between GPA Fokker 100 Limited
numbers 17352 and Regionais S.A. and TAM - Transportes Aeros
17348 Regionais S.A. as amended by a
Lease Novation and Amendment
Agreement dated as of 8 July
1998 and made between GPA
Fokker 100 Limited, TAM -
Transportes Aereos Regionais S.A.
and AerCo Ireland
240 Airbus Two CFM International Indian Airlines Intra-Group Aircraft Lease 145,000 13,317
A300-B4-200 engines model CFM56- Limited Agreement dated as of 8 May
5A1 serial numbers 1998 between AerCo Ireland II
517827 and 455869 and AerFi Belgium (formerly
known as Guinness Peat Aviation
(Belgium) N.V.) and Aircraft Lease
Agreement dated 9 April 1998
between AerFi Belgium) and Indian
Airlines Limited
46064 McDonnell Four CFM International BAX Aircraft Lease Agreement dated as 161,625 16,020
Douglas model CFM56-C1 serial of 22 February 1993, between
DC8-71F numbers 692111, AeroUSA Inc and Burlington Air
693354, 693380 and Express, Inc., as supplemented by
693117 the Certificate of Acceptance
dated 14 April 1993; Lease
Supplement No.1 dated as of 31
August 1993; Supplement No.2
dated as of 26 January 1996;
Aircraft Lease Assignment,
Assumption and Amendment
Agreement dated as of 26 January
1996 between AerUSA, Inc., GPA
Corporation and Burlington Air
Express, Inc.; and Aircraft Lease
Assignment, Assumption and
Amendment Agreement dated as
of 10 July 1998 between GPA
Corporation, BAX Global Inc. and
AerCoUSA.
There is also a sublease in respect
of this Aircraft created by Aircraft
Lease Agreement dated as of 14
April 1993 made between BAX
Global Inc. and Air Transport
International Limited Liability
Company (formerly known as Air
Transport International, Inc.) (as
supplemented by the Certificate of
Acceptance mentioned above)
46040 DC8-71F Four CFM International Aircraft International Aircraft Lease Agreement dated 3 185,000 15,997
engines model CFM56- Leasing Limited July 1998 made between AerCo
2C1 serial numbers USA and Aircraft International
693363, 693367, Leasing Limited
693369, and 693372
</TABLE>
<PAGE> 1
Exhibit 10.7
EXECUTION COPY
AERCO LIMITED
and
BANKERS TRUST COMPANY
DEPOSIT AGREEMENT
Dated as of July 15, 1998
$340,000,000 Initial Aggregate Principal Amount of Subclass A-1 Notes
$290,000,000 Initial Aggregate Principal Amount of Subclass A-2 Notes
$85,000,000 Initial Aggregate Principal Amount of Subclass B-1 Notes
$85,000,000 Initial Aggregate Principal Amount of Subclass C-1 Notes
<PAGE> 2
DEPOSIT AGREEMENT
THIS AGREEMENT is made as of July 15, 1998 by and between AerCo Limited, a
Jersey limited liability company (the "COMPANY"), which is a party for the
limited purposes referred to herein, and Bankers Trust Company, as depositary
(as more fully defined below, the "BOOK-ENTRY DEPOSITARY").
ARTICLE ONE
DEFINITIONS AND OTHER GENERAL PROVISIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ADDITIONAL NOTES" shall have the meaning ascribed to it in the Indenture.
"AFFILIATE" means, as applied to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with such Person or is a director or officer of such Person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), when used with
respect to any specified Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"BASIC TERMS MODIFICATION" shall have the meaning ascribed to it in the
Indenture.
"BOARD" shall have the meaning ascribed to it in the Indenture.
"BOARD RESOLUTION" shall have the meaning ascribed to it in the Indenture.
"BOOK-ENTRY DEPOSITARY" means the party named as such in this Agreement or
its nominee or the custodian of either until a successor shall have been
appointed pursuant to Section 3.08 hereof, and thereafter "BOOK-ENTRY
DEPOSITARY" shall mean such successor or its nominee or the custodian of
either.
"BOOK-ENTRY INTERESTS" means interests, as reflected in the records
maintained by the Depository, in the CDIs which are eligible for trading
through the Depository's book-entry system.
"CDI" means a certificateless depositary interest, as reflected in the
records maintained by the Book-Entry Depositary, in one of the Global Notes
held by the Book-Entry Depositary which (a) is issued by the Book-Entry
Depositary to the Depository or its nominee and (b) shall at all times
represent the right to receive up to 100% of the principal of, interest and
premium, if any, on such Global Note in accordance with the terms thereof, and
the right to require the Book-Entry Depositary to procure the issue of one or
more Definitive Registered Notes representing in the aggregate up to 100% of
the principal amount at maturity represented by such Global Note.
<PAGE> 3
2
"COMPANY" means the party named as such in this Agreement until a
successor replaces it pursuant to the applicable provisions of the Indenture
and, thereafter, means such successor.
"CORPORATE TRUST OFFICE" means the office of the Book-Entry Depositary in
the Borough of Manhattan, the City of New York, at which at any particular time
its corporate trust business shall be principally administered, which at the
date hereof is located at Four Albany Street, Mail Stop 5101, New York, New
York 10006.
"DEFAULT" shall have the meaning ascribed to it in the Indenture.
"DEFINITIVE REGISTERED NOTES" means Notes issued in definitive registered
form pursuant to Section 2.01 of the Indenture, substantially in the form set
forth in the Indenture.
"DEPOSITORY" means DTC, or any successor thereto, that is indicated in the
records of the Book-Entry Depositary as the owner of the CDIs.
"DTC" means The Depository Trust Company or its nominee.
"EVENT OF DEFAULT" shall have the meaning ascribed to it in the Indenture.
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended.
"GLOBAL NOTES" means the Rule 144A Global Notes and the Regulation S
Global Notes.
"HOLDER" shall have the meaning ascribed to it in the Indenture.
"INDENTURE" means the Indenture dated as of July 15, 1998, between the
Company and Bankers Trust Company, as Trustee, as originally executed or as may
from time to time be supplemented or amended by one or more supplemental
indentures entered into pursuant to the applicable provisions thereof,
including, for all purposes, the provisions of the TIA that are deemed to be a
part of and govern such instruments.
"LETTER OF REPRESENTATIONS" means the Letter of Representations to DTC
dated July 15, 1998 from the Company and the Book-Entry Depositary.
"NOTES" means $800,000,000 initial aggregate principal amount of floating
rate notes due 2023 of the Company, issued as $340,000,000 initial aggregate
principal amount of Subclass A-1 Notes due July 15, 2023, $290,000,000 initial
aggregate principal amount of Subclass A-2 Notes due July 15, 2023, $85,000,000
initial aggregate principal amount of Subclass B-1 Notes due July 15, 2023 and
$85,000,000 initial aggregate principal amount of Subclass C-1 Notes due July
15, 2023, and any Additional Notes, each issued, authenticated and delivered
under the Indenture, as amended or supplemented from time to time pursuant to
the terms of the Indenture.
<PAGE> 4
3
"OFFICERS' CERTIFICATE" shall have the meaning ascribed to it in the
Indenture.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who may
be counsel of the Company and who shall otherwise be reasonably satisfactory to
the Book-Entry Depositary.
"PARTICIPANT" shall have the meaning ascribed to it in Section 2.02(a) of
this Agreement.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PRIVATE PLACEMENT LEGEND" shall have the meaning ascribed to it in the
Indenture.
"REFINANCING NOTES" shall have the meaning ascribed to it in the
Indenture.
"RESPONSIBLE OFFICER" means (a) with respect to the Book-Entry Depositary,
any officer within the Corporate Trust Office, including any managing director,
principal, vice president, assistant vice president, treasurer, assistant
treasurer, assistant secretary, or any other officer of the Book-Entry
Depositary customarily performing functions similar to those performed by any
of the above-designated officers and also means, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge and familiarity with the particular subject and (b) with
respect to the Company, any director of the Company.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
"TIA" means the United States Trust Indenture Act of 1939 (15 U.S.C.
Section Section 77aaa-77bbbb) as in effect on the date of this Agreement.
"TRUSTEE" means the Person acting as Trustee under the Indenture until a
successor Trustee shall have been appointed pursuant to the applicable
provisions of the Indenture, and thereafter means such successor.
SECTION 1.02. Rules of Construction. Unless the content otherwise
requires: (a) a term has the meaning ascribed to it; (b) any capitalized term
not otherwise defined herein shall have the meaning ascribed to it in the
Indenture; (c) "or" is not exclusive; (d) "including" means including without
limitation; (e) words in the singular include the plural and words in the plural
include the singular; and (f) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
<PAGE> 5
4
ARTICLE TWO
BOOK-ENTRY INTERESTS
SECTION 2.01. Deposit of the Global Notes; Issuance of CDIs. The
Book-Entry Depositary hereby accepts custody of the Global Notes and shall act
as Book-Entry Depositary in accordance with the terms of this Agreement. The
Book-Entry Depositary shall hold the Global Notes at its Corporate Trust
Office in the Borough of Manhattan, the City of New York or at such place or
places as it shall determine with the consent of the Company for the purposes
of Section 2.03 below, and shall issue the CDIs to the Depository in
accordance with the Letter of Representations and the terms hereof.
SECTION 2.02. Book-Entry System. (a) Upon acceptance by the Depository of
the CDIs for entry into its book-entry settlement system in accordance with the
terms of the Letter of Representations, Book-Entry Interests will be reflected
on and traded through the Depository's book-entry system, and ownership of such
Book-Entry Interests shall be shown in, and the transfer of such ownership shall
be effected only through, records maintained by (i) the Depository or its
successors or (ii) institutions that have accounts with the Depository or its
successors ("PARTICIPANTS"). Book-Entry Interests shall be transferable only as
units in the same authorized denominations as the Notes.
(b) The CDIs shall be issuable only to the Depository, or successors of
the Depository, or their respective nominees. Except as provided in Section
2.04 hereof, no owner or beneficial owner of Book-Entry Interests shall be
entitled to receive a Definitive Registered Note on account of such ownership,
and such owner's or beneficial owner's interest therein shall be shown only in
accordance with the terms of this Agreement and the procedures of the
Depository as set forth in the Letter of Representations.
SECTION 2.03. Transfers of the CDIs and Book-Entry Interests. (a) The
Book-Entry Depositary shall, as agent of the Company, maintain at the
Book-Entry Depositary's Corporate Trust Office records in which the Book-Entry
Depositary shall (i) record the Depository or any of its nominees as the
initial owner of the CDIs and (ii) record each transfer, to the extent
permitted hereunder, of any CDI. The CDIs cannot be transferred unless such
transfer is noted in the records of the Book-Entry Depositary. The Book-Entry
Depositary shall treat the Persons in whose name the CDIs are recorded in the
records of the Book-Entry Depositary as the owners thereof for all purposes
whatsoever and shall not be bound or affected by any notice to the contrary,
other than an order of a court having jurisdiction over the Book-Entry
Depositary. The provisions of this Section 2.03(a) shall not impose an
obligation on the Book-Entry Depositary to record the interests in or
transfers of Book-Entry Interests owned by Participants, or Persons that may
own Book-Entry Interests through Participants or restrict transfers of such
Book-Entry Interests held by Participants or such Persons.
<PAGE> 6
5
(b) (b) The transfer and exchange of Book-Entry Interests shall be
effected through the Depository, in accordance with the Indenture, this
Agreement and the applicable rules and procedures of the Depository therefor.
Each of the parties hereto acknowledges that none of the Notes, the CDIs
or the Book-Entry Interests have been registered under the Securities Act or
with any securities regulatory authority in any jurisdiction and, accordingly,
may not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons, as such term is defined under Regulation S of the
Securities Act. Unless and until a Global Note is exchanged for an Exchange
Note in connection with an effective registration under the Securities Act
pursuant to the Registration Rights Agreement, each Book-Entry Interest shall
be subject to the transfer restrictions set forth in the Private Placement
Legend to the extent required by the Securities Act.
The transfer restrictions set forth in the Private Placement Legend and in
Section 2.13 of the Indenture are hereby incorporated by reference in this
Agreement and shall have effect as if such restrictions were set out in full
herein. By its acceptance of a Book-Entry Interest corresponding to any Global
Note, each owner thereof acknowledges the restrictions on transfer of such
Book-Entry Interest set forth in the Indenture and this Agreement and agrees
that it will transfer such Book-Entry Interest only in accordance with the
terms of the Indenture, this Agreement, the Securities Act and other applicable
law. In connection with any transfer of Book-Entry Interests each owner
thereof agrees by its acceptance of such Book-Entry Interests to furnish to the
Trustee the certifications and legal opinions described in the Indenture to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities
Act.
Any Book-Entry Interest corresponding to one of the Global Notes of any
subclass that is transferred to a Person who will own such Book-Entry Interest
in the form of an interest in the other Global Note of such subclass will, upon
transfer, cease to be an interest in such first Global Note and become an
interest in such other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
Book-Entry Interests in such other Global Note for as long as it remains such
an interest. The Book-Entry Depositary shall endorse these schedules of the
Global Notes to reflect deductions in increases in the principle amounts
thereof as instructed from time to time by the Trustee.
SECTION 2.04. Transfer of the Global Notes. The Book-Entry Depositary
shall hold the Global Notes in custody for the benefit of the Depository or
any transferee permitted hereunder. The Book-Entry Depositary shall not
transfer, lend or dispose of any Global Note or any interest therein for any
reason, except that the Book-Entry Depositary may transfer a Global Note to a
successor Book-Entry Depositary in accordance with Section 3.08 hereof and may
exchange or cancel a Global Note as provided in this Section 2.04 and Section
2.05 hereof. Notwithstanding the foregoing, the Book-Entry Depositary shall
not under any circumstances surrender or deliver any Global Note to the
Depository or any of its custodians or nominees. In the event that:
<PAGE> 7
6
(a) the Book-Entry Depositary notifies the Company and the Trustee
under Section 3.08 hereof that it is unwilling or unable to continue as
Book-Entry Depositary with respect to the Global Notes, and no successor
Book-Entry Depositary has been appointed in accordance with the
provisions of Article III thereof by the Company within 90 days of such
notification;
(b) the Depository notifies the Book-Entry Depositary that it is
unwilling or unable to continue as Depositary with respect to the CDIs or
if at any time it is unable to or ceases to be a clearing agency
registered under the Exchange Act and a successor Depositary registered
as a clearing agency under the Exchange Act is not appointed by the
Book-Entry Depositary with respect to the CDIs at the written request of
the Company within 90 days of such notification; or
(c) after the occurrence of an Event of Default with respect to any
class of Notes, owners of Book-Entry Interests of a subclass within such
class representing an aggregate of not less than 51% of the aggregate
outstanding principal balance of Notes of such subclass advise the
Company, the Trustee, the Book-Entry Depositary and the Depository
through the Participants in writing that the continuation of a book-entry
system through the Depository (or a successor thereto) is no longer in
the best interests of such owners of such subclass;
then the Book-Entry Depositary shall promptly notify the Depository that the
Global Notes, or those of the relevant subclass, as the case may be, will be
exchanged in whole for Definitive Registered Notes pursuant to Section 2.07 of
the Indenture and Definitive Registered Notes shall be issued in such names and
denominations as the Depository shall specify in writing to the Book-Entry
Depositary upon cancellation of the corresponding CDIs and Book-Entry Interests
(it being understood that such specifications will be based upon directions
received by the Depository from its Participants reflecting the beneficial
ownership of the Book-Entry Interests).
The Book-Entry Depositary agrees that in any such event it will promptly
surrender the Global Notes held by it to the Trustee in connection with such
exchange for cancellation pursuant to Section 2.07 of the Indenture and shall
cancel the corresponding CDIs. None of the Depository, any of the Participants
or any owners or beneficial owners of Book-Entry Interests will be obligated to
pay or otherwise bear the costs of any tax or governmental charge or any cost
or expense of the Company or the Book-Entry Depositary relating to insurance,
postage, transportation or any similar charge, in connection with any issuance
of Definitive Registered Notes pursuant to this Section 2.04; all such costs
and expenses shall be paid by the Company subject to the exception set forth in
Section 3.06(b) hereof.
SECTION 2.05. Cancellation. If any Global Note is surrendered for
payment, or for redemption of the entire outstanding principal amount at
maturity of the Notes evidenced thereby or for exchange in its entirety for
Definitive Registered Notes to any Person other than
<PAGE> 8
7
the Trustee, such Global Note shall, subject to Sections 2.07, 2.08 and 2.09
hereof, be delivered to the Trustee for cancellation.
SECTION 2.06. Payments in Respect of the Global Notes and CDIs.
(a) Whenever the Book-Entry Depositary shall receive from a Paying Agent
appointed under the Indenture any payment on a Global Note, the amount so
received shall be distributed, with appropriate designation, promptly to the
Depository or its nominee on the relevant payment date. So long as DTC is the
Depository, such payments shall be made in accordance with the Letter of
Representations.
(b) The Book-Entry Depositary shall forward to the Company or its agents
such information from its records as the Company may reasonably request to
enable the Company or its agents to file necessary reports with governmental
agencies, and the Book-Entry Depositary, the Company or its agents may (but
shall not be required to) file any such reports necessary to obtain benefits
under any applicable tax treaties for the Depository or beneficial owners of
Book-Entry Interests.
(c) None of the Company, the Trustee, the Book-Entry Depositary or any
agent of the Company, the Trustee or the Book-Entry Depositary will have any
responsibility or liability for any aspect of the records relating to payments
made by the Depository (or its Participants) on account of Book-Entry
Interests or for maintaining, supervising or reviewing any records relating to
such Book-Entry Interests.
(d) Notwithstanding any other provision of this Agreement, the Book-Entry
Depositary shall be required to pay to the Depository only amounts received by
the Book-Entry Depositary in respect of the Global Notes.
SECTION 2.07. Redemption of Notes and Book-Entry Interests. In the event
that the Company redeems all or any part of a Global Note or Global Notes
pursuant to the terms of the Indenture and the Notes (including in connection
with the issuance of any Refinancing Notes), the Book-Entry Depositary shall,
promptly upon receipt of the redemption price and as instructed by the Trustee,
make the appropriate entry into its books and records to reflect the reduction
as a result of such redemption in the principal amount at maturity of the
Global Note or Global Notes. In addition, the Book-Entry Depositary shall
reflect such reduction in its records relating to the CDIs and notify the
Depository of the principal amount at maturity redeemed and of the
corresponding reduction of the principal amount at maturity of the CDI. The
Book-Entry Depositary shall immediately pay all such amounts received by it in
connection with such redemption to the Depository or its nominee as specified
in the DTC Letter of Representations.
SECTION 2.08. Record Date. Whenever (a) the Book-Entry Depositary shall
receive notice of any action to be taken by the Holder of any Global Note, or
(b) the
<PAGE> 9
8
Book-Entry Depositary otherwise deems it appropriate in respect of any other
matter, including any payment to be made in respect of any Global Note, the
Book-Entry Depositary shall fix a record date for the determination of the
principal amount at maturity represented by the respective CDIs at such record
date, with respect to which the Depository shall be entitled to take any such
action or to act in respect of any such matter, which record date shall be the
same date as that fixed with respect to the Holder of such Global Note or
Holders of the Definitive Registered Notes under the Indenture. Subject to the
provisions of this Agreement, only the Depository shall be entitled to receive
any such payment, to give instructions as to such action or to act in respect
of any such matter, as the case may be.
SECTION 2.09. Action in Respect of the CDIs. As soon as practicable after
receipt by the Book-Entry Depositary of written notice of any solicitation of
consents or request for a waiver or other action by a Holder under the Indenture
or by the Book-Entry Depositary under this Agreement, the Book-Entry Depositary
shall (a) set a record date (which shall, to the extent possible, be at least 15
days subsequent to the date of the mailing required under clause (b) of this
sentence) for the determination of the owners of Book-Entry Interests which
shall have the right to vote on any such consent, waiver or other action, and
(b) mail or otherwise send in accordance with the Letter of Representations to
the Depository a notice containing (i) such information as is contained in the
notice received, (ii) a statement that the Depository at the close of business
on a specified record date (established in accordance with Section 2.08 hereto)
will be entitled to instruct the Book-Entry Depositary in writing as to the
consent, waiver or other action, if any, pertaining to this Agreement or the
Indenture, (iii) a statement as to the manner in which such instruction may be
given, and (iv) the record date set pursuant to clause (a) of this sentence.
Upon the written request of the Depository received on or before the date
established by the Book-Entry Depositary for such purpose, the Book-Entry
Depositary shall endeavor insofar as practicable and permitted under the
provisions of this Agreement or the Indenture, as the case may be, to take such
action regarding the requested consent, waiver or other action in respect of all
or only a portion of the principal amount at maturity of the CDIs or Global
Notes, as the case may be, with respect to which instructions given in
accordance with any instructions set forth in such request have been received.
In addition, the Book-Entry Depositary will forward to the Depository, or, based
upon written instructions received from the Depository, to owners of the
Book-Entry Interests, all materials received by the Book-Entry Depositary
pertaining to any such solicitation, requests, offer or other action. The
Depository may grant proxies or otherwise authorize the Participants (or persons
owning Book-Entry Interests through such Participants) to provide such
instructions directly to the Book-Entry Depositary so that it may exercise any
rights of a Holder or take any other actions which a Holder is entitled to take
under the Indenture. The Book-Entry Depositary shall not itself exercise any
discretion in the granting of consents or waivers or the taking of any other
action in respect of the Global Notes but shall only grant such a consent or
waiver or take any such action pursuant to instructions from the Depository or
the owners of the Book-Entry Interests, as the case may be, pursuant to the
provisions of this Section 2.09 and the Letter of Representations. Without
prejudice to Section 2.06(c) hereof, the records of the Depository shall, absent
manifest error, be conclusive evidence of
<PAGE> 10
9
the owners of Book-Entry Interests and the principal amount at maturity
represented by the Book-Entry Interests, for the purposes of this Section 2.09.
SECTION 2.10. Changes Affecting the Global Notes. Upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting the Company or to which the Company is a party, any securities that
shall be received by the Book-Entry Depositary in exchange for or in respect of
any Global Note or Global Notes, as the case may be, shall be treated as new
global securities or as part of such Global Note or Global Notes under this
Agreement and the corresponding CDI or CDIs shall thenceforth represent such
Global Note or Global Notes, including such securities so received.
SECTION 2.11. Reports. The Book-Entry Depositary shall immediately send in
the manner specified in Section 4.02 hereof to the Depository copies of any
notices, reports and other communications received from the Company or the
Trustee that are received by the Book-Entry Depositary as Holder of the Global
Notes.
ARTICLE THREE
THE BOOK-ENTRY DEPOSITARY
SECTION 3.01. Certain Duties and Responsibilities. (a) The Book-Entry
Depositary shall act only as a custodian and bailee for hire under this
Agreement and not in any other fiduciary capacity. Accordingly, the
Book-Entry Depositary undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. No implied duties, covenants
or liabilities shall be read against the Book-Entry Depositary.
(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the duties and obligations of the Book-Entry Depositary with
respect to the CDIs and the Global Notes shall be determined solely by
the express provisions of this Agreement. The Book-Entry Depositary
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, and no
implied covenants or obligations shall be read into this Agreement
against the Book-Entry Depositary;
(ii) in the absence of bad faith on its part, the Book-Entry
Depositary may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Book-Entry Depositary, but in
the case of any such statements, certificates or opinions that by any
provision hereof are required to be furnished to the Book-Entry
Depositary, the Book-Entry Depositary shall be under a duty to examine
the same to determine whether or not they conform to the requirements of
this Agreement;
<PAGE> 11
10
(iii) the Book-Entry Depositary shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Book-Entry
Depositary, unless it shall be proved that the Book-Entry Depositary was
negligent in ascertaining the pertinent facts;
(iv) the Book-Entry Depositary shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Depository relating to the time, method and
place of conducting any proceeding for any remedy available to the
Book-Entry Depositary, or exercising any power conferred upon the
Book-Entry Depositary, under this Agreement; and
(v) no provision of this Agreement shall require the Book-Entry
Depositary to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or
in the exercise of any of its rights or powers hereunder, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(c) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct of, or affecting the liability of, or
affording protection to the Book-Entry Depositary shall be subject to the
provisions of this Section 3.01.
SECTION 3.02. Notice of Default. Within 30 days after the occurrence of
any Default of which a Responsible Officer of the Book-Entry Depositary has
actual knowledge, or promptly upon receipt from the Trustee of notice of any
Default as provided in the Indenture, the Book-Entry Depositary shall transmit
to the Depository in the manner provided in Section 4.02 hereof, notice of such
Default, provided that such Default shall be continuing. Upon the occurrence of
an Event of Default, or in connection with the exercise of any right of the
Holders under the Indenture, the Book-Entry Depositary shall, if requested by
the Depository, take any action so requested, subject to Section 3.03(f) hereof;
provided that such action is permitted to be taken by the Holders of the Notes
under the Indenture.
SECTION 3.03. Certain Rights of the Book-Entry Depositary. Subject to
the provisions of Section 3.01 hereof:
(a) the Book-Entry Depositary may conclusively rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate (including any Officers' Certificate delivered to the
Trustee), statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, coupon, security, or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
<PAGE> 12
11
(b) any request or direction of the Company shall be sufficiently
evidenced by an Officers' Certificate and any resolution of the Board of
Directors of the Company may be sufficiently evidenced by a Board
Resolution;
(c) the Book-Entry Depositary may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection with respect to any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon in accordance with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Book-Entry Depositary may, but shall not
be obligated to, make reasonable further inquiry or investigation into
such facts or matters relating to the Global Notes and, if the Book-Entry
Depositary shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, at reasonable times during normal business hours, personally or
by agent or attorney;
(e) the Book-Entry Depositary may execute any of the powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Book-Entry Depositary shall not be
responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder;
(f) the Book-Entry Depositary shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement at
the request, order or direction of the Depository pursuant to this
Agreement, unless (i) the Depository shall have offered to the Book-Entry
Depositary reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request, order or direction and (ii) such request, order or direction
shall not expose the Book-Entry Depositary to personal liability;
(g) the Book-Entry Depositary shall not be liable for any action
taken or omitted by it in good faith and reasonably believed by it to be
authorized or within the discretion, rights or powers conferred upon it
by this Agreement; and
(h) whenever in the administration of its duties under this
Agreement the Book-Entry Depositary shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering or
omitting action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of
negligence, wilful misconduct or bad faith on the part of the Book-Entry
Depositary, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Book-Entry Depositary.
<PAGE> 13
12
SECTION 3.04. Not Responsible for Recitals or Issuance of Notes. The
recitals contained in the Indenture and in the Notes shall be taken as the
statements of the Company, and the Book-Entry Depositary assumes no
responsibility for their correctness. The Book-Entry Depositary makes no
representations as to the validity or sufficiency of this Agreement or the
Notes or of any offering materials. The Book-Entry Depositary shall not be
accountable for the use or application by the Company of the proceeds of the
Notes.
SECTION 3.05. Money Held By Book-Entry Depositary. Money held by the
Book-Entry Depositary hereunder need not be segregated from other funds held by
the Book-Entry Depositary, except to the extent required by law. The Book-Entry
Depositary shall be under no obligation to invest or pay interest on any money
received by it hereunder, except as otherwise agreed with the Depository.
SECTION 3.06. Compensation and Reimbursement; Limitation of Liability. The
Company agrees:
(a) to pay to the Book-Entry Depositary from time to time such
compensation as is agreed between them in writing for all services rendered by
it hereunder;
(b) to reimburse the Book-Entry Depositary upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Book-Entry Depositary in accordance with any provisions of this Agreement
(including the reasonable compensation and the expenses and disbursements of
its agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence, bad faith or willful misconduct;
(c) to indemnify the Book-Entry Depositary and its officers, directors,
employees and agents for, and to hold it and them harmless against, any loss,
liability or expense incurred without negligence, wilful misconduct or bad
faith on its or their part, arising out of or in connection with the acceptance
or administration of this Agreement and its duties hereunder, including the
costs and expenses of defending itself against or investigating any claim of
liability in connection with the exercise or performance of any of its powers
or duties hereunder; and
(d) that the Book-Entry Depositary's liability shall be limited to direct
money damages, and that in no event shall the Book-Entry Depositary be liable
for special, consequential or indirect money damages, regardless of the form of
action and whether or not such damages were foreseeable.
Without limiting the generality of the foregoing, the Book-Entry
Depositary shall have no duty or responsibility for, and shall not be deemed to
have been negligent with respect to, and the Company shall indemnify and hold
harmless the Book-Entry Depositary against, any claim that such disclosure with
respect to the Global Notes or the CDIs, or such registration, if any, of the
same or of the arrangement created hereby, as is required by applicable federal
<PAGE> 14
13
and state securities laws, was not made. The obligations of the Company under
this Section 3.06 to compensate and indemnify the Book-Entry Depositary and to
pay or reimburse the Book-Entry Depositary for expenses, disbursements and
advances shall survive the payment of the Notes, the resignation or removal of
the Book-Entry Depositary and the satisfaction, discharge or other termination
of this Agreement.
SECTION 3.07. Book-Entry Depositary Required; Eligibility. At all times
when there is a Book-Entry Depositary hereunder, such Book-Entry Depositary
shall be an Authorized Agent. Such Authorized Agent shall have its principal
place of business in the Borough of Manhattan, the City of New York, if there
be such an Authorized Agent in such location willing to act upon reasonable and
customary terms and conditions. If such Authorized Agent or its parent,
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforementioned supervising or examining authority, then
for the purposes of this Section 3.07, the combined capital and surplus of
such Authorized Agent shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. The
Book-Entry Depositary shall at all times be the financial institution that
acts as the Trustee under the Indenture, unless the Company and the Trustee
shall have received an Opinion of Counsel that the same Person is precluded by
law from acting in both such capacities. Any Book-Entry Depositary appointed
hereunder which is not the Trustee shall be acceptable to the Trustee. If at
any time the Book-Entry Depositary shall cease to be eligible in accordance
with the provisions of this Section 3.07 or resigns or is removed as Trustee
under the Indenture, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article Three.
SECTION 3.08. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article Three shall become
effective until (i) the acceptance of appointment by the successor Book-Entry
Depositary in accordance with the applicable requirements of Section 3.09
hereof or (ii) the issuance of Definitive Registered Notes in accordance with
Section 2.04 hereof.
(b) The Book-Entry Depositary may resign by giving written notice thereof
to the Company, the Trustee and the Depository, in accordance with Section 4.01
and Section 4.02, 60 days prior to the effective date of such resignation. The
Book-Entry Depositary may be removed at any time upon 90 days' notice by filing
with it of an instrument in writing signed on behalf of the Company and
specifying such removal and the date when it is intended to become effective.
(c) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Company, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Company) acceptable
to the Trustee and shall comply with the applicable requirements of Section
3.09 hereof.
<PAGE> 15
14
(d) The Company shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the
Depository in accordance with Section 4.02 hereof. Each notice shall include
the name of the successor Book-Entry Depositary and the address of its
Corporate Trust Office. If the Company fails to give notice within ten days
after acceptance of appointment by the successor Book-Entry Depositary, the
successor Book-Entry Depositary shall cause such notice to be given at the
expense of the Company.
SECTION 3.09. Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Book-Entry Depositary, such successor
Book-Entry Depositary so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Book-Entry Depositary an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Book-Entry Depositary shall become effective and such successor Book-Entry
Depositary, without any further act, deed or conveyance, shall become vested
with all the rights, powers, agencies and duties of the retiring Book-Entry
Depositary, with like effect as if originally named as Book-Entry Depositary
hereunder; but, on the request of the Company or the successor Book-Entry
Depositary, such retiring Book-Entry Depositary shall, upon payment of all
amounts due and payable to it pursuant to Section 3.06 hereof, execute and
deliver an instrument transferring to such successor Book-Entry Depositary all
the rights and powers of the retiring Book-Entry Depositary and shall duly
assign, transfer and deliver to such successor Book-Entry Depositary all
property and money held by such retiring Book-Entry Depositary hereunder and
shall deliver the Global Notes to the successor.
(b) Upon request of any successor Book-Entry Depositary, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Book-Entry Depositary all such rights, powers and
agencies referred to in Section 3.09(a).
(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book-Entry Depositary shall be
eligible under this Article Three.
SECTION 3.10. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Book-Entry Depositary may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Book-Entry Depositary
shall be a party, or any corporation succeeding to or purchasing or otherwise
acquiring all or substantially all the agency business of the Book-Entry
Depositary, shall be the successor of the Book-Entry Depositary hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation shall be otherwise
eligible under this Article Three.
<PAGE> 16
15
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
SECTION 4.01. Notices to Book-Entry Depositary or Company. Any request,
demand, authorization, direction, notice, consent, or waiver, or other document
provided or permitted by this Agreement to be made upon, given or furnished to,
or filed with:
(a) the Book-Entry Depositary shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if made, given,
furnished or filed in writing and delivered, telecopied and received, or
mailed and received by first-class postage prepaid, to the Book-Entry
Depositary at telecopier number (+1-212) 250-6439 or at its Corporate
Trust Office, Attention: Corporate Trust Administration Department,
Structured Finance Group, or at any other telecopier number or address
previously furnished in writing by the Book-Entry Depositary to the
Depository, the Trustee and the Company; or
(b) the Company shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if made, given, furnished or
filed in writing and delivered, telecopied and received, or mailed and
received by first-class postage prepaid, to AerCo Limited, Attention:
Chief Financial Officer at telecopier number (+353-61) 36-0113, or at its
address c/o GPA Administrative Services Limited, GPA House, Shannon,
Ireland, or at any other telecopier number or address previously
furnished in writing to the Book-Entry Depositary by the Company.
SECTION 4.02. Notice to Depository and Owners; Waiver. Where this
Agreement provides for notice to the Depository or owners of Book-Entry
Interests of any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided or as provided in the Letter of
Representations) if in writing and mailed, first-class postage prepaid, to the
Depository at the address notified to the Book-Entry Depositary, in each case
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. Where this Agreement provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by the
Depository shall be filed with the Book-Entry Depositary, but such filing shall
not be a condition precedent to the validity of any such action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give notice by mail, then such
notification as shall be made with the approval of the Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
SECTION 4.03. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
<PAGE> 17
16
SECTION 4.04. Successors and Assigns. All covenants and agreements in this
Agreement by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 4.05. Separability Clause. In case any provision in this Agreement
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof and thereof shall
not in any way be affected or impaired thereby.
SECTION 4.06. Benefits of Agreement. Nothing in this Agreement, the Notes,
or the Indenture, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and the Depository and the owners
from time to time of the Book-Entry Interests as, intended third party
beneficiaries hereof, any benefits or any legal or equitable right, remedy or
claim under this Agreement.
SECTION 4.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 4.08. Jurisdiction. By the execution and delivery of this
Agreement, the Company (a) acknowledges that it has, by separate written
instrument, irrevocably designated and appointed Corporation Service Company,
375 Hudson Street, New York, NY 10014-3660 as its authorized agent upon which
process may be serviced in any suit or proceeding by the Book-Entry Depositary
arising out of this Agreement that may be instituted in any Federal or State
court in the Borough of Manhattan, the City of New York, and acknowledges that
Corporation Service Company has accepted such designation, (b) submits to the
jurisdiction of any such court in any such suit or proceeding, and waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding or any claim of inconvenient forum and (c) agrees that service of
process upon Corporation Service Company and written notice of such service to
it (mailed or delivered to its Chief Financial Officer at its principal office
c/o GPA Administrative Services Limited, GPA House, Shannon, Ireland) shall be
deemed in every respect effective service of process upon it in any such suit or
proceeding. The Company further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of Corporation Service
Company in full force and effect so long as this Agreement shall be in full
force and effect and so long as any of the Global Notes shall be outstanding.
If for the purposes of obtaining judgment in any court it is necessary to
convert a sum due hereunder into any currency other than United States dollars,
the parties hereto agree, to the fullest extent that they may effectively do
so, that the rate of exchange used shall be the rate at which in accordance
with normal banking procedures one could purchase United States dollars with
such other currency in The City of New York on the business day preceding that
on which final judgment is given. The obligations of the Company in respect of
any sum due from it shall, notwithstanding any judgment in a currency other
than United States dollars, not be discharged until the first business day,
following receipt of any sum adjudged to be so due
<PAGE> 18
17
in such other currency, on which (and only to the extent that) the recipient
may in accordance with normal banking procedures purchase United States dollars
with such other currency; if the United States dollars so purchased are less
than the sum originally due to such person hereunder, the Company agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
person against such loss. If the United States dollars so purchased are
greater than the sum originally due to such person hereunder, such person
agrees to pay to the Company (but without duplication) an amount equal to the
excess of the dollars so purchased over the sum originally due to such person
hereunder.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
or otherwise) with respect to itself or its property, hereby irrevocably waives
such immunity in respect of its respective obligations under this Agreement to
the fullest extent permitted by law.
SECTION 4.09. Counterparts. This Agreement may be executed in any number
of counterparts by the parties hereto on separate counterparts, each of which,
when so executed and delivered, shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 4.10. Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times during normal business hours at the Corporate
Trust Office of the Book-Entry Depositary for inspection by any owner of
Book-Entry Interests.
SECTION 4.11. Termination. This Agreement shall terminate and cease to be
of further effect when (a) the Indenture shall have been satisfied and
discharged pursuant to the provisions thereof or Definitive Registered Notes
have been issued and all Global Notes shall have been canceled in accordance
with the provisions of Section 2.04 or 2.05 hereof, (b) the Company has paid or
caused to be paid all sums payable hereunder by the Company and (c) the Company
has delivered to the Book-Entry Depositary an Officers' Certificate and an
Opinion of Counsel, stating that all conditions precedent herein provided
relating to the termination of this Agreement have been complied with.
SECTION 4.12. Amendments. The Company and the Book-Entry Depositary may
amend this Agreement without the consent of the Depository or the owners of
Book-Entry Interests:
(a) to cure any ambiguity, omissions, defect or inconsistency;
(b) to evidence the succession of another person to the Company
(when a similar amendment with respect to the Indenture is being
executed) and the assumption by any such successor of the covenants of
the Company herein;
<PAGE> 19
18
(c) to add to the covenants and agreements of the Book-Entry
Depositary or the Company;
(d) to evidence or effectuate the assignment of the Book-Entry
Depositary's rights and duties to a qualified successor, as provided
herein; or
(e) to comply with any requirements of the Securities and Exchange
Commission or the TIA.
No amendment that materially adversely affects the Depository may be made
to this Agreement without the consent of the Depository. No amendment other
than those amendments specified above may be made to this Agreement unless the
Book-Entry Depositary shall first have received the consent of the owners of a
majority in outstanding principal amount of Book-Entry Interests on any date of
any vote of such owners (voting as a single class), to such amendment in
accordance with the procedures set out in Section 2.09 hereof. Notwithstanding
the immediately preceding sentence, any amendment which constitutes a Basic
Terms Modification shall only be made upon the consent of every owner of
Book-Entry Interests whose rights are so affected.
SECTION 4.13. Book-Entry Depositary To Sign Amendments. The Book-Entry
Depositary shall sign any amendment authorized pursuant to Section 4.12 if the
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Book-Entry Depositary. If it does, the Book-Entry Depositary
may but need not sign it. In signing such amendment the Book-Entry Depositary
shall be entitled to receive indemnity, in addition to the indemnity provided
under Section 3.06(c) hereof, reasonably satisfactory to it and to receive, and
shall be fully protected in relying upon, an Officers' Certificate (which need
only cover the matters set forth in clause (a) below) and an Opinion of Counsel
stating that:
(a) such amendment is authorized or permitted by this Agreement;
(b) the Company has all necessary corporate power and authority to
execute and deliver the amendment and that the execution, delivery and
performance of such amendment have been duly authorized by all necessary
corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under
any of the terms, conditions or provisions of (i) this Agreement, (ii)
the Memorandum and Articles of Association of the Company, or (iii) any
law or regulation applicable to the Company; and
(d) such amendment has been duly and validly executed and delivered
by the Company, and this Agreement together with such amendment
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
<PAGE> 20
19
insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles.
<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
AERCO LIMITED
By /s/ Frederick W. Bradley, Jr.
--------------------------------
Name: Frederick W. Bradley, Jr.
Title: Director
BANKERS TRUST COMPANY as
Book-Entry Depositary
By /s/ Craig M. Kantor
--------------------------------
Name: Craig M. Kantor
Title: Vice President
<PAGE> 1
Exhibit 21.1
Subsidiaries of AerCo
AerCo Ireland Limited
AerCo Ireland II Limited
AerCoUSA Inc.
AerFi Belgium N.V.
Aircraft Lease Portfolio Securitization 94-1 Limited
ALPS 94-1 (Belgium) N.V.
Pergola Limited
<PAGE> 1
[AIRCRAFT LOGO]
Exhibit 23.2
CONSENT OF APPRAISER
We consent to the use of our reports included herein and the references to
our firm in the AerCo Limited Registration Statement on Form F-4 (file
no. 333- ) to be filed with the Securities and Exchange Commission.
Dated: November , 1998
AIRCRAFT INFORMATION SERVICES, INC.
/S/ John D. McNicol
BY: _______________________________________________
Name: John D. McNicol
Title: Vice President - Appraisals & Forecasts
Headquarters, 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 714-582-8888 FAX 714-582-8887 E-MAIL: [email protected]
<PAGE> 1
EXHIBIT 23.3
BK ASSOCIATES, INC.
CONSENT OF APPRAISER
We consent to the use of our reports included herein and the references to
our firm in the AerCo Limited Registration Statement on Form F-4 (file no.
333-____) to be filed with the Securities and Exchange Commission.
Dated: November ___, 1998
BK ASSOCIATES, INC.
BY: /s/John F. Kitz
_______________________
Name: John F. Kitz
Title: President
<PAGE> 1
[AIRCLAIMS LOGO]
EXHIBIT 23.4
CONSENT OF APPRAISER
We consent to the use of our reports included herein and the references to our
firm in the AerCo Limited Registration Statement on Form F-4 (file no. 333-____)
to be filed with the Securities and Exchange Commission.
Dated: November , 1998
Airclaims Limited
/s/ L. D. Weal
By:---------------------------------------
Name: L. D. Weal
Title: Chief Analyst
<PAGE> 1
Exhibit 23.5
ARTHUR ANDERSEN
INDEPENDENT AUDITORS' CONSENT
____________________
Jersey
To the Board of Directors
Of AerCo Limited (the "company")
As independent public accountants, we hereby consent to the use of our reports
dated December 2, 1997 included in the Prospectus, which is part of this
Registration Statement, and to all the references to our firm included in or
made a part of this Registration Statement on Form F-4 (file no. 333- ) of
AerCo Limited.
/s/ Arthur Andersen
Arthur Andersen
Chartered Accountants
St Helier, Jersey
November 9, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
AERCO LIMITED
OFFER TO EXCHANGE NOTES DUE JULY 15, 2023
FOR ANY AND ALL OUTSTANDING NOTES DUE JULY 15, 2023
PURSUANT TO THE PROSPECTUS DATED --
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON -- ,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To: Bankers Trust Company
If by Mail, Hand or Overnight Courier:
Bankers Trust Company
Four Albany Street
Mail Stop 5091
New York, New York 10006
Attention: Structured Finance Group
or
If by Facsimile:
+1 212 250 6439
Confirm by Telephone:
+ 1 212 250 6549
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned acknowledges receipt and reviewed the Prospectus dated
-- (the "Prospectus"), of AerCo Limited ("AerCo "), and this letter of
transmittal (the "Letter"), which together constitute AerCo's offer (the
"Exchange Offer") to exchange $1,000 in principal amount of each of four
subclasses of Notes due July 15, 2023 (the "New Notes") for each $1,000 in
principal amount of each of the four subclasses of issued and outstanding Notes
due July 15, 2023 (the "Old Notes"). Capitalized terms used but not defined
herein have the meanings given to them in the Prospectus.
For each Old Note accepted for exchange and not validly withdrawn, the
holder of such Old Note will receive a New Note having a principal amount at
maturity equal to that of the surrendered Old Note. If the Exchange Offer is not
consummated by April 12, 1999, interest will accrue from and including --
1998 and will be payable in cash monthly in arrears on the 15th day of each
month, at a rate per annum equal to 0.50% per annum over the rate then
applicable to each subclass of Old Notes (the "Additional Interest"). Upon the
consummation of the Exchange Offer after April 12, 1999 1998, the Additional
Interest payable on the Old Notes will cease to accrue from the date of such
consummation and all accrued and unpaid Additional Interest as of the
consummation of the Exchange Offer shall be paid promptly thereafter to the
holders of record of the Old Notes immediately prior to the time of such
occurrence. Following the consummation of the Exchange Offer the interest terms
of the Old Notes that are not exchanged shall revert to the original terms set
forth in the Notes as described on the cover page of the Offering Memorandum
dated June 23, 1998 with respect to the Old Notes. Holders of Old Notes accepted
for exchange will be deemed to have waived the right
1
<PAGE> 2
to receive any other payments or accrued interest on the Old Notes. AerCo
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance of any Old Notes, by giving oral or written notice of such extension
to the Exchange Agent and notice of such extension to the holders as described
in the next sentence, in which event the term "Expiration Date" shall mean the
latest time and date to which the Exchange Offer is extended. AerCo shall notify
the holders of the Old Notes of any extension by means of a press release or
other public announcement prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date. Notwithstanding the
foregoing, pursuant to the Registration Rights Agreement, AerCo has agreed to
keep the Exchange Offer open for not less than 20 business days commencing from
the date notice thereof is mailed to the holders of the Old Notes (or longer if
required by applicable law).
Either this Letter or an Agent's Message is to be completed by a holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) in order to tender
Old Notes. All deliveries of Old Notes must be made by book-entry transfer to
the account maintained by the Exchange Agent at The Depositary Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under "The Exchange Offer -- Book-Entry Transfer". Holders of Old
Notes who are unable to deliver confirmation of the book-entry tender of their
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation") or all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures". See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the subclass(es) of Old Notes to which this Letter relates. If
the space provided below is inadequate, the principal amount at maturity of such
subclass of Old Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------------------------------------
Aggregate Principal
Subclass Amount Principal Amount
Name(s) and Address(es) of Holder(s) of Old Notes at Maturity at Maturity
(Please fill in, if blank) Tendered of Old Note(s) Tendered*
- --------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------------------------------------
* Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes
represented by the Old Notes indicated in column 1. See instruction 2. Old Notes tendered hereby must be
in denominations of principal amount at maturity of $1,000 and any integral multiple thereof. See
Instruction 1.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
The Depository Trust Company
Account Number Transaction Code Number
By crediting the Old Notes to the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's Automated Tender Offer program ("ATOP") and by complying with
applicable ATOP procedures with respect to the Exchange Offer, including
transmitting a computer-generated message (an "Agent's Message") to the Exchange
Agent in which the holder of the Old Notes acknowledges and agrees to be bound
by the terms of this Letter, the participant in the Book-Entry Transfer Facility
confirms on behalf of itself and the beneficial owners of such Old Notes all
provisions of this Letter applicable to it and such beneficial owners as fully
as if it had completed the information required herein and executed and
transmitted this Letter of the Exchange Agent.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Holder(s)
Name of Institution which guaranteed delivery
The Depositary Trust Company
Account Number Transaction Code Number
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
You are entitled to receive as many copies as you may reasonably request
and if you need more than 10 copies, please so indicate by a notation below.
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to AerCo the aggregate principal amount at maturity
of each subclass of Old Notes indicated above. Subject to, and effective upon,
the acceptance for exchange of the Old Notes tendered hereby, the undersigned
hereby sells, assigns and transfers to, or upon the order of, AerCo all right,
title and interest in and to such Old Notes as are being tendered hereby. Each
participant in the Book-Entry Transfer Facility transmitting by means of the
Book-Entry Transfer Facility a computer-generated message forming part of a
Book-Entry Confirmation, on behalf of itself and the beneficial owner of the Old
Notes tendered hereby, acknowledges receipt of the Prospectus and this Letter
and agrees to be bound by the terms and conditions of the Exchange Offer as set
forth in the Prospectus and this Letter.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that AerCo will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by AerCo. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact with full power of substitution, for purposes of
delivering this Letter and the Old Notes to AerCo. The Power of Attorney granted
in this paragraph shall be deemed irrevocably from and after the Expiration Date
and coupled with an interest.
The undersigned also acknowledges that this Exchange Offer is being made by
AerCo in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than a broker-dealer, as set forth below,
or any such holder that is an "affiliate" of AerCo within the meaning of Rule
405 under the Securities Act of 1933, as amended (the "Securities Act")),
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution (within the meaning of the Securities
Act) of such New Notes. By
tendering, each holder of Old Notes represents to AerCo that (i) the New Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is such holder, (ii) neither the holder of Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes, (iii) if the holder is not a broker-dealer or is
a broker-dealer but will not receive New Notes for its own account in exchange
for Old Notes, neither the holder nor any such other person is engaged in or
intends to participate in a distribution of such New Notes and (iv) neither the
holder nor any such other person is an "affiliate" of AerCo within the meaning
of Rule 405 under the Securities Act. By tendering each holder of Old Notes that
is a broker-dealer (whether or not it is also an "affiliate" of AerCo) that will
receive New Notes for its own account pursuant to the Exchange Offer, represents
that the Old Notes to be exchanged for the New Notes were acquired by it as a
result of market-making activities or other trading activities, and acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such New Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that in reliance on an interpretation by the staff of the SEC, a
broker-dealer may fulfill his prospectus delivery requirements with respect to
the New Notes (other than a resale of an unsold allotment from the original sale
of the Old Notes) with the Prospectus which constitutes part of this Exchange
Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by AerCo to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the
4
<PAGE> 5
undersigned. The tender may be withdrawn only in accordance with the procedure
set forth in "The Exchange Offer -- Withdrawal Rights" section of the
Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please credit the account indicated above maintained at the
Book-Entry Transfer Facility.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if New Notes and/or if Old Notes delivered by book-entry
transfer which are not accepted for exchange are to be credited to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)
------------------------------------------------------------------------------
(Please Type or Print)
Address
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(Zip Code)
------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
[ ] Credit New Notes and/or unexchanged Old Notes to the Book-Entry Transfer
Facility account set forth below.
------------------------------------------------------------------------------
(Book-Entry Transfer Facility Account Number)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE
(TOGETHER WITH A BOOK-ENTRY CONFIRMATION AND ANY OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE EXPIRATION DATE.
5
<PAGE> 6
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
Dated: , 1998
X , 1998
X , 1998
Signature(s) of
Owner Date
Area Code and Telephone Number:
If a holder is tendering any Old Notes, this Letter must be signed by the
person in whose name such Old Notes are registered on the security position
listing maintained by DTC or by any person(s) authorized to become holder(s)
by documents transmitted herewith. If the signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See instruction 3.
Name(s):
------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
Address:
------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
and Eligible Institution:
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name and Firm)
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR
THE NOTES DUE JULY 15, 2023 IN EXCHANGE FOR THE
NOTES DUE JULY 15, 2023 OF MSAF
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY
PROCEDURES. Either this Letter or an Agent's Message is to be completed by
holders (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) in order to tender
Old Notes. All tenders must be made pursuant to the procedures for delivery by
book-entry transfer set forth in the Prospectus under "The Exchange Offer --
Book-Entry Transfer". Book-Entry Confirmation, as well as either (i) a properly
completed and duly executed Letter (or manually signed facsimile hereof) and all
other documents required by this Letter or (ii) an Agent's Message, must be
received by the Exchange Agent on or prior to the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Old Notes tendered hereby must be in denominations of principal amount at
maturity of $1,000 and any integral multiple thereof.
Noteholders who cannot deliver all required documents to the Exchange Agent
on or prior to the Expiration Date, or who cannot complete the procedure for
book-entry transfer on a timely basis, may tender their Old Notes pursuant to
the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer -- Guaranteed Delivery Procedures". Pursuant to such procedures,
(i) such tender must be made through an Eligible Institution, (ii) on or prior
to the Expiration Date, the Exchange Agent must receive from such Eligible
Institution either a properly completed and duly executed Letter (or a facsimile
thereof) or a properly transmitted Agent's Message and Notice of Guaranteed
Delivery, substantially in the form provided by AerCo (by telegram, telex
facsimile transmission, mail or hand delivery), setting forth the name and
address of such holder of Old Notes and the amount of each subclass of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice Of Guaranteed Delivery, a Book-Entry Confirmation, and
all other documents required by the Letter will be deposited by the Eligible
Institution with the Exchange Agent, and (iii) Book-Entry Confirmation and all
other documents required by this Letter, are received by the Exchange Agent,
within five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
documents required by this Letter is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If required documents are sent by mail, it is
suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City
time, on or prior to the Expiration Date. No Letters should be sent to AerCo.
See the Prospectus under "The Exchange Offer".
2. TENDER BY HOLDER. Any beneficial owner of Old Notes who wishes to
tender should arrange with The Depository Trust Company ("DTC"), a participant
whose name appears on a security position maintained by DTC or the owner of the
Old Notes to execute and deliver this Letter or an Agent's Message on his or her
behalf.
3. SIGNATURES OF THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter is signed by the DTC participant whose name appears
on a security position maintained by DTC, the signature must correspond exactly
with such participant's name as it appears on a security position maintained by
DTC listing such participant as the owner of the Old Notes, without any change
whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
7
<PAGE> 8
When this Letter is signed by the holders of the Old Notes specified herein
and tendered hereby, no separate bond powers are required. If, however, the New
Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the holder, then separate bond powers are required. Signatures
on such bond powers must be guaranteed by an Eligible Institution.
If this Letter or any bond powers are signed by the trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by AerCo, proper evidence satisfactory
to MSAF of their authority to so act must be submitted.
Signatures on Bond Powers required by this Instruction 3 must be guaranteed
by a firm which is a member of a Registered National Securities Exchange or a
member of The National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an eligible institution
if: (i) this Letter is signed by any participant in DTC whose name appears on a
security position listing maintained by DTC as the owner of the Old Notes and
such person has not completed the box entitled "Special Issuance Instructions"
on this Letter, or (ii) the old notes are tendered for the account of an
eligible institution.
4. SPECIAL ISSUANCE INSTRUCTION. Tendering holders of Old Notes should
indicate in the box the DTC account to which New Notes issued pursuant to the
Exchange Offer and/or substitute Old Notes not exchanged are to be issued, if
different from the DTC account of the person signing this Letter. The employer
identification or social security number of the person named must also be
indicated. If no such instructions are given, such New Notes and/or Old Notes
not exchanged will be credited to the DTC account of the person signing this
Letter.
5. TRANSFER TAXES. AerCo will pay all transfer taxes, if any, applicable
to the transfer of Old Notes to it or its order pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer of
Old Notes to AerCo or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the holder or any other person) will
be payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
6. WAIVER OF CONDITIONS. AerCo reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither AerCo, the Exchange Agent nor any other person is obligated to give
notice of any defect or irregularity with respect to any tender of Old Notes nor
shall any of them incur any liability for failure to give any such notice.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter, may be directed to the Exchange Agent, at the
address and telephone and facsimile numbers indicated above.
9. INCORPORATION OF LETTER AND TRANSMITTAL. This Letter shall be deemed to
be incorporated in and acknowledged and accepted by any tender through the
Book-Entry Transfer Facility's ATOP procedures by any participant in the
Book-Entry Transfer Facility on behalf of itself and the beneficial owners of
any Old Notes so tendered.
8
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF NOTES DUE JULY 15, 2023
IN EXCHANGE FOR NOTES DUE JULY 15, 2023
OF
AERCO LIMITED
As set forth in the Prospectus dated -- , 1998 (the "Prospectus") of
AerCo Limited ("AerCo") and in the accompanying Letter of Transmittal and
instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept AerCo's Exchange Offer
(the "Exchange Offer") to exchange all five subclasses of its outstanding Notes
due March 15, 2023 (the "Old Notes") for each subclass of its Notes due July 15,
2023 which have been registered under the Securities Act of 1933, as amended, if
the Letter of Transmittal or any other documents required thereby cannot be
delivered to the Exchange Agent, or the procedure for book-entry transfer cannot
be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as
defined in the Prospectus). This form may be delivered by an Eligible
Institution by hand or transmitted by facsimile transmission, overnight courier
or mail to the Exchange Agent as set forth below. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON --
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M. ON THE LAST BUSINESS DAY PRIOR TO THE EXPIRATION
DATE
Delivery to: Bankers Trust Company, as Exchange Agent
If by Mail, Hand or Overnight Courier:
Bankers Trust Company
Four Albany Street
Mail Stop 5091
New York, New York 10006
or
If by Facsimile:
+1 212 250 6439
Confirm by Telephone:
+1 212 250 6549
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA A FACSIMILE,
OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not be used to guarantee signatures.
If a signature on the Letter of Transmittal to be used to tender Old Notes is
required to be guaranteed by an "Eligible Institution" under the instructions
thereto, such signature guarantee must appear in the applicable space provided
in the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to AerCo, upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, (amount of Old Notes) Subclass Old Notes
pursuant to the guaranteed delivery procedures set forth in Instruction 1 of the
Letter of Transmittal.
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time, on the last business
day prior to the Expiration Date. Tenders of Old Notes may also be withdrawn if
the Exchange Offer is terminated without any such Old Notes being purchased
thereunder or as otherwise provided in the Prospectus.
All authority thereto conferred or agreed to be conferred by Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW
Principal Amount and Subclass of Old Notes Tendered
Name(s) of Holder(s)
Please Print or Type
Address
Area Code and Telephone No.
Signature(s)
Dated:
The Depository Trust Company
Account No.
2
<PAGE> 3
This Notice of Guaranteed Delivery must be signed by (i) the Holder(s) of Old
Notes exactly as its (their) name(s) appear on a security position listing
maintained by DTC as the owner of Old Notes or (ii) by person(s) authorized to
become Holder(s) by documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or a
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES) OF PERSON SIGNING ABOVE
Name(s)
Capacity
Address(es)
3
<PAGE> 4
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby (a) represents that the above named person(s) "own(s)"
the Old Note tendered hereby within the meaning of Rule 14e-4 under the
Exchange Act, (b) represents that such tender of Old Notes complies with Rule
14e-4 under the Exchange Act and (c) guarantees that delivery to the Exchange
Agent of a Depositary Trust Company, pursuant to the procedures for book-entry
transfer set forth in the Prospectus, with delivery of either a properly
completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signatures and any other documents
required by the Letter of Transmittal or an Agent's Message, will be received
by the Exchange Agent within five New York Stock Exchange trading days after
the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL OR AGENT'S MESSAGE AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE
AGENT WITHIN THE TIME PERIOD SET FORTH THEREIN AND THAT FAILURE TO DO SO COULD
RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED.
<TABLE>
<S> <C>
Name of Firm
Authorized Signature
Address Name
Please Print or Type
Title
Zip Code
Area Code and Telephone Number
Dated , 1998
</TABLE>
4
<PAGE> 1
EXHIBIT 99.3
OFFER TO EXCHANGE
Notes due July 15, 2023
for Any and All Outstanding
Notes due July 15, 2023
of
AERCO LIMITED
To The Depository Trust Company Participants:
We are enclosing herewith the materials listed below relating to the offer
by AerCo Limited ("AerCo") to exchange five subclasses of its Notes due July 15,
2023 (the "New Notes"), pursuant to an offering registered under the Securities
Act of 1933, as amended (the "Securities Act"), for a like principal amount of
each subclass of its issued and outstanding Notes due July 15, 2023 (the "Old
Notes") upon the terms and subject to the conditions set forth in MSAF's
Prospectus, dated -- , and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated -- ;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Book-Entry Transfer Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's instruction
with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON -- , UNLESS
EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
To participate in the Exchange Offer, a beneficial holder must cause a DTC
Participant to tender such holder's Old Notes to Bankers Trust Company (the
"Exchange Agent") account maintained at the Depository Trust Company ("DTC") for
the benefit of the Exchange Agent through DTC's Automated Tender Offer Program
("ATOP"), including transmission of a computer-generated message that
acknowledges and agrees to be bound by the terms of the Letter of Transmittal.
By complying with DTC's ATOP procedures with respect to the Exchange Offer, the
DTC Participant confirms on behalf of itself and the beneficial owners of
tendered Old Notes all provisions of the Letter of Transmittal applicable to it
and such beneficial owners as fully as if it completed, executed and returned
the Letter of Transmittal to the Exchange Agent.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to AerCo that (i) the New Notes acquired in the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is such holder, (ii) neither the holder of
the Old Notes nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Notes, (iii) if the
holder is not a broker-dealer or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, neither the holder nor any
such other person is engaged in or intends to participate in a distribution of
the New Notes and (iv) neither the holder nor any such other person is an
"affiliate" of AerCo within the meaning of Rule 405 under the Securities Act of
1933, as amended. If the tendering holder is a broker-dealer that will receive
New Notes for its own account pursuant to the Exchange Offer, you will represent
on behalf of such broker-dealer that the Old Notes to be exchanged for the New
Notes were acquired by it as a result of market-making activities or other
trading
<PAGE> 2
activities, and acknowledge on behalf of such broker-dealer that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The enclosed Instruction to the Book-Entry Transfer Participant from Owner
contains an authorization by the beneficial owners of the Old Notes for you to
make the foregoing representations.
AerCo will not pay any fee or commission to any broker or dealer or to any
other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. MSAF will
pay or cause to be paid any transfer taxes payable on the transfer of Old Notes
to it, except as otherwise provided in Instruction 5 of the enclosed Letter of
Transmittal.
Additional copies of the enclosed material may be obtained from Bankers
Trust Company, Four Albany Street, Mail Stop 5091, New York, New York 10006.
Very truly yours,
AERCO LIMITED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF MORGAN STANLEY AIRCRAFT FINANCE OR BANKERS TRUST COMPANY OR AUTHORIZE
YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH
THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
<PAGE> 1
EXHIBIT 99.4
OFFER TO EXCHANGE
Notes due July 15, 2023
for Any and All Outstanding
Notes due July 15, 2023
of
AERCO LIMITED
To Our Clients:
We are enclosing herewith a Prospectus dated -- , of AerCo Limited
("AerCo") and a related Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by AerCo to exchange five subclasses of
its Notes due July 15, 2023 (the "New Notes"), pursuant to an offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of each of the five subclasses of its issued and
outstanding Notes due July 15, 2023 (the "Old Notes") upon the terms and subject
to the conditions set forth in the Exchange Offer.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON -- , UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the participants in the book-entry transfer facility of Old Notes
held by us for your account. A tender of such Old Notes can be made only by us
as the participant in the book-entry transfer facility and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Old Notes held by us for your account.
We request instruction as to whether you wish to tender any or all of any
subclass of Old Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations contained in the Letter of Transmittal
that are to be made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to AerCo that (i) the New Notes acquired in the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, (ii) the holder of the Old Notes has no arrangement or understanding
with any person to participate in the distribution of such New Notes, (iii) if
the holder is not a broker-dealer or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, the holder is not engaged
in and does not intend to participate in a distribution of the New Notes and
(iv) the holder is not an "affiliate" of AerCo within the meaning of Rule 405
under the Securities Act. If the tendering holder is a broker-dealer (whether or
not it is also an "affiliate" of AerCo) that will receive New Notes for its own
account pursuant to the Exchange Offer, we will represent on behalf of such
broker-dealer that the Old Notes to be exchanged for the New Notes were acquired
by it as a result of marketing-making activities or other trading activities,
and acknowledge on behalf of such broker-dealer that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
<PAGE> 2
INSTRUCTION
TO BOOK-ENTRY TRANSFER PARTICIPANT
FROM OWNER OF
AERCO LIMITED
NOTES DUE JULY 15, 2023
To Participant of the
Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
-- , 1998 (the "Prospectus") of AerCo Limited ("AerCo"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that together
constitute MSAF's offer (the "Exchange Offer"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the book-entry transfer facility participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Old Notes held by you for the account of the undersigned.
The aggregate face amount of each subclass of Old Notes held by you for the
account of the undersigned is (fill in amount):
$ of the Subclass Notes due July 15, 2023
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] to TENDER the following subclass of Old Notes held by you for the
account of the undersigned (insert principal amount of Old Notes to
be tendered, (if any):
$ of the Subclass Notes due July 15, 2023
[ ] NOT to tender any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the undersigned, (ii) the undersigned has no
arrangement or understanding with any person to participate in the distribution
of such New Notes, (iii) if the undersigned is not a broker-dealer, or is a
broker-dealer but will not receive New Notes for its own account in exchange for
Old Notes, the undersigned is not engaged in and does not intend to participate
in the distribution of such New notes and (iv) the undersigned is not an
"affiliate" of AerCo within the meaning of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"). If the undersigned is a broker-dealer
(whether or not it is also an "affiliate" of AerCo) that will receive New Notes
for its own account pursuant to the Exchange Offer, it represents that such Old
Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 3
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Taxpayer identification or Social Security Number:
Date:
<PAGE> 1
EXHIBIT 99.5
[AIS.LOGO]
06 March 1998
Ms. Siobhan Connolly
Aircraft Lease Portfolio Securitization
ALPS 94-1
GPA Group plc
GPA House
Shannon, Co Clare, Ireland
Subject: Adjusted Base Market, Adjusted Current Market and Zero Time Base
Value Opinion as of 01 March 1998 for the ALPS 94-1 fleet
AISI File number: A8S016BVO
Reference: (a) GPA Courier Letter, 25 February 1998
Dear Ms Connolly:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to offer our opinion to GPA Group plc of the 01 March 1998 adjusted
base market, adjusted current market and zero time base values of the ALPS 94-1
fleet as identified in Table I (the 'Aircraft').
1. METHODOLOGY AND DEFINITIONS
The historical standard term of reference for commercial aircraft value has
been 'half-life fair market value' of an 'average' aircraft. However, 'fair
market value' could mean a fair value in the given market or a value in a
hypothetical 'fair' or balanced market, and the two definitions are not
equivalent. Recently, the term 'base value' has been created to describe the
theoretical balanced market condition and to avoid the potentially misleading
term 'fair market value' which has now become synonymous with the term 'current
market value' or a 'fair' value in the actual current market. AISI value
definitions are consistent with those of the International Society of Transport
Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that
organization and employs an ISTAT Certified Senior Aircraft Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing and
informed buyer and seller, neither under compulsion to buy or sell, for a single
unit cash transaction with no hidden value or liability, and with supply and
demand of the sale item roughly in balance. Base values are typically given for
aircraft in 'new' condition, 'average half-life' condition, or in a specifically
described condition unique to a single aircraft at a specific time. An 'average'
aircraft is an operable airworthy aircraft in average physical condition and
with average accumulated flight hours and cycles, with clear title and standard
unrestricted certificate of airworthiness, and registered in an authority which
does not represent a penalty to aircraft
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 714-582-8888 FAX: 714-582-8887 E-MAIL: [email protected]
<PAGE> 2
[logo]
06 March 1998
AISI File No. A8S016BVO
Page - 2 -
value or liquidity, with no damage history and with inventory configuration and
level of modification which is normal for its intended use and age. AISI assumes
average condition unless otherwise specified in this report. 'Half-life'
condition assumes that every component or maintenance service which has a
prescribed interval that determines its service life, overhaul interval or
interval between maintenance services, is at a condition which is one-half of
the total interval. It should be noted that AISI and ISTAT value definitions
apply to a transaction involving a single aircraft, and that transactions
involving more than one aircraft are often executed at considerable and highly
variable discounts to a single aircraft price, for a variety of reasons relating
to an individual buyer or seller.
AISI defines a 'current market value' or 'fair market value' as that value which
reflects the real market conditions, whether at, above or below the base value
conditions. Assumption of a single unit sale and definitions of aircraft
condition, buyer/seller qualifications and type of transaction remain unchanged
from that of base value. Current market value takes into consideration the
status of the economy in which the aircraft is used, the status of supply and
demand for the particular aircraft type, the value of recent transactions and
the opinions of informed buyers and sellers. Current market value assumes that
there is no short term time constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
AISI determines an 'adjusted market value' by determining the value of known
deviations from half-life condition, which may be better or worse than half-life
condition, and to account for better or worse than average physical condition,
and the inclusion of additional equipment, or absence of standard equipment. Our
opinion of the adjusted base and current market value of the Aircraft is derived
from information and specifications supplied by GPA Group plc. No physical
inspection of the Aircraft or their essential records was made by AISI for the
purposes of this report.
2. VALUATION
Adjustments from half life have been applied based on the current maintenance
status of the Aircraft as indicated in the Aircraft General Specification sheets
supplied to AISI and in accordance with standard AISI methods. Adjustments are
calculated only where there is sufficient information to do so, or where
reasonable assumptions can be made.
<PAGE> 3
[LOGO]
06 March 1998
AISI File No. A8S016BVO
Page -3-
With regard to airframe and gear maintenance, if no time between check/overhaul
(TBO) or time since check/overhaul (TSO) information was provided, and if the
total hours/cycles of the airframe do not exceed the TBO limits then the total
hours/cycles of the airframe were assumed to be the TSO. This was typical of
newer aircraft. If no information was provided and if the TSO could not be
calculated, then half life was assumed.
With regard to the engines, due to the lack of information provided, all engines
are considered to be in half life condition.
All hours and cycle information provided for airframe, C Check, D Check, gear
and engines have been projected from the Aircraft General Specification sheet
dates to 01 March 1998 based on a daily utilization factor calculated for each
aircraft.
It is our considered opinion that the adjusted base market, adjusted current
market and zero time base market values of the Aircraft as of 01 March 1998 are
as follows in Table 1 subject to the assumptions, definitions, and disclaimers
herein.
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment however, it should be noted that principals of
AISI have interests in a U.S. air carrier not associated with the subject
appraisal aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good faith.
Such conclusions and opinions are judgments that reflect conditions and values
which are current at the time of this report. The values and conditions reported
upon are subject to any subsequent change. AISI shall not be liable to any party
for damages arising out of reliance or alleged reliance on this report, or for
any parties action or failure to act as a result of reliance or alleged reliance
on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
[SIGNATURE]
Fred E. Bearden
President
FEB/JMC/jm
<PAGE> 4
Table 1 -- AISI File A8SO16BVO -- as of 01 March 1998
AIRCRAFT PORTFOLIO -- ALPS 94-1
<TABLE>
<CAPTION>
01 March 1998
Adjusted O1 March 1998 01 March 1998
Current Adjusted Zero Time
Serial Date of MTOW Market Value Base Value Base Value
No Lessee Aircraft Number Manufacture Engine (Lbs.) Million US$ Million US$ Million US$
<C> <S> <S> <S> <S> <S> <S> <S> <S> <S>
1 Off Lease A300B4-200 240 May-83 CF6-50C2 363,760 $12.60 $12.60 $15.38
2 Airtours A320-200 299 Apr-92 CFM56-5A3 169,753 $31.59 $31.74 $34.31
3 Airtours A320-200 362 Nov-92 V2500-A1 169,753 $31.06 $31.21 $33.71
4 Monarch
Airlines A320-200 391 Feb-93 CFM56-5A3 169,753 $33.51 $33.84 $36.17
5 Canadian A320-200 403 Dec-93 CFM56-5A1 166,466 $32.55 $32.88 $35.44
6 Portugalia F100 11258 Dec-89 TAY650-15 98,000 $12.27 $14.00 $15.73
7 Portugalia F100 11342 Aug-91 TAY650-15 98,000 $14.05 $15.78 $17.78
8 TAM F100 11351 Sep-91 TAY650-15 98,000 $14.63 $16.36 $17.78
9 Philippine
Airlines B737-300 24465 Aug-89 CFM56-3B1 124,500 $23.62 $22.58 $24.46
10 Philippine
Airlines B737-300 24677 Mar-90 CFM56-3B1 124,500 $23.77 $22.64 $25.25
11 Aer Lingus B737-400 24685 May-90 CFM56-3C1 150,000 $27.37 $26.59 $29.06
12 Turk Hava
Yollari B737-400 24904 Feb-91 CFM56-3C1 150,000 $27.88 $27.09 $29.91
13 Sun Express B737-300 24908 Mar-91 CFM56-3C1 138,500 $25.54 $24.33 $27.01
14 Malev B737-300 24909 Apr-91 CFM56-3C1 135,000 $25.32 $24.11 $26.87
15 Lan Chile
Airlines B767-300ER 24947 Mar-91 PW4060 407,000 $61.40 $67.20 $71.19
16 Spanair B767-300ER 24999 Feb-91 PW4060 407,000 $61.16 $66.96 $71.19
17 Asiana
Airlines B737-400 25764 Jul-92 CFM56-3C1 138,000 $28.89 $28.09 $30.40
18 Asiana
Airlines B737-400 25765 Jul-92 CFM56-3C1 138,000 $28.66 $27.86 $30.40
19 Lan Chile
Airlines B767-300ER 25864 Apr-92 CF6-BDC2BF6 407,000 $65.43 $71.24 $74.75
20 Air Pacific B737-500 26067 Jun-92 CFM56-3C1 133,500 $23.01 $21.51 $24.17
21 Yunnan B737-300 26068 Jun-92 CFM56-3C1 135,000 $26.37 $25.07 $27.76
22 Avianca B757-200ER 26152 Aug-92 RB211-535E4 230,000 $43.03 $25.41 $48.18
23 China
Southwest B757-200ER 26153 Aug-92 RB211-535EA 240,000 $43.78 $46.16 $48.78
24 Air 2000 B757-200ER 26158 Feb-93 RB211-535EA 250,000 $45.65 $48.13 $51.28
25 Spanair MD-83 49627 Apr-89 JT8D-219 160,000 $20.25 $23.02 $25.52
26 Spanair MD-83 49790 Oct-89 JT8D-219 160,000 $20.26 $23.03 $25.52
27 Far Eastern
Air Tran MD-83 49952 Dec-91 JT8D-219 160,000 $21.58 $24.46 $27.23
------- ------- -------
Totals: $825.23 $853.89 $925.23
======= ======= =======
</TABLE>
<PAGE> 5
[AIS.LOGO]
GPA GROUP PLC
GPA HOUSE
SHANNON CO CLARE
IRELAND
BASE AND CURRENT MARKET VALUE OPINION
9 AIRCRAFT GPA FLEET
AS OF 01 MARCH 1998
AISI FILE NO.; A8S017BVO
06 MARCH 1998
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 714-582-8886 FAX: 714-582-8887 E-MAIL: [email protected]
<PAGE> 6
[AIS.LOGO]
06 March 1998
GPA Group plc
GPA House
Shannon Co Clare
Ireland
Subject: Half Life and Adjusted Base and Current Market Value Opinion - 9
Aircraft.
AISI File number: A8S017BVO
Dear Sirs:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to offer our opinion to GPA Group plc of the half life and adjusted base
and current market values of the Fleet of 9 Aircraft as identified in Table 1
(the 'Aircraft').
1. METHODOLOGY AND DEFINITIONS
The historical standard term of reference for commercial aircraft value has
been 'half-life fair market value' of an 'average' aircraft. However, 'fair
market value' could mean a fair value in the given market or a value in a
hypothetical 'fair' or balanced market, and the two definitions are not
equivalent. Recently, the term 'base value' has been created to describe the
theoretical balanced market condition and to avoid the potentially misleading
term 'fair market value' which has now become synonymous with the term 'current
market value' or a 'fair' value in the actual current market. AISI value
definitions are consistent with those of the International Society of Transport
Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that
organization and employs an ISTAT Certified Senior Aircraft Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing and
informed buyer and seller, neither under compulsion to buy or sell, for a single
unit cash transaction with no hidden value or liability, and with supply and
demand of the sale item roughly in balance. Base values are typically given for
aircraft in 'new' condition, 'average half-life' condition, or in a specifically
described condition unique to a single aircraft at a specific time. An 'average'
aircraft is an operable airworthy aircraft in average physical condition and
with average accumulated flight hours and cycles, with clear title and standard
unrestricted certificate of airworthiness, and registered in an authority which
does not represent a penalty to aircraft value or liquidity, with no damage
history and with inventory configuration and level of modification which is
normal for its intended use and age. AISI assumes average condition unless
otherwise specified in this report. 'Half-life' condition assumes that every
component or maintenance service which has a prescribed interval that determines
its service life, overhaul interval or interval between maintenance services, is
at a condition which is one-half of the
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 714-582-8886 FAX: 714-582-8887 E-MAIL: [email protected]
<PAGE> 7
[LOGO]
06 March 1998
AISI File No. A8S017BVO
Page - 2 -
total interval. It should be noted that AISI and ISTAT value definitions
apply to a transaction involving a single aircraft, and that transactions
involving more than one aircraft are often executed at considerable and
highly variable discounts to a single aircraft price, for a variety of
reasons relating to an individual buyer or seller.
AISI defines a 'current market value' or 'fair market value' as that value
which reflects the real market conditions, whether at, above or below the
base value conditions. Assumption of a single unit sale and definitions of
aircraft condition, buyer/seller qualifications and type of transaction
remain unchanged from that of base value. Current market value takes into
consideration the status of the economy in which the aircraft is used, the
status of supply and demand for the particular aircraft type, the value of
recent transactions and the opinions of informed buyers and sellers. Current
market value assumes that there is no short term time constraint to buy or
sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future
value considerations, or to consider how actual market values vary from
theoretical base values. Base values are less volatile than current market
values and tend to diminish regularly with time. Base values are normally
inappropriate to determine near term values. AISI encourages the use of
current market values to consider the probable near term value of an
aircraft.
AISI determines an 'adjusted market value' by determining the value of known
deviations from half-life condition, which may be better or worse than
half-life condition, and to account for better or worse than average
physical condition, and the inclusion of additional equipment, or absence of
standard equipment. Our opinion of the adjusted base values of the Aircraft
are derived from information and specifications supplied by GPA Group plc.
No physical inspection of the Aircraft or their essential records was made
by AISI for the purposes of this report.
2. VALUATION
Adjustments from half life have been applied based on the current
maintenance status of the Aircraft as indicated in the Aircraft General
Specification sheets supplied to AISI and in accordance with standard AISI
methods. Adjustments are calculated only where there is sufficient
information to do so, or where reasonable assumptions can be made.
With regard to airframe and gear maintenance, if no time between
check/overhaul (TBO) or time since check/overhaul (TSO) information was
provided, and if the total hours/cycles of the airframe do not exceed the
TBO limits then the total hours/cycles of the airframe were assumed to be
the TSO. This was typical of newer aircraft. If no information was provided
and if the TSO could not be calculated, then half life was assumed.
<PAGE> 8
[LOGO]
06 March, 1998
AISI File No. A8S017BVO
Page - 3 -
With regard to the engines, due to the lack of information provided, all
engines are considered to be in half life condition.
All hours and cycle information provided for airframe, C Check, D Check, gear
and engines have been projected from the Aircraft General Specification sheet
dates to 01 March 1998 based on a daily utilization factor calculated for each
aircraft.
It is our considered opinion that the half life and adjusted base and
current market values of the Aircraft are as follows in Table I subject to
the assumptions, definitions, and disclaimers herein.
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good
faith. Such conclusions and opinions are judgements that reflect conditions and
values which are current at the time of this report. The values and conditions
reported upon are subject to any subsequent change. AISI shall not be liable to
any party for damages arising out of reliance or alleged reliance on this
report, or for any parties action or failure to act as a result or reliance or
alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
[LOGO]
Fred E. Bearden
President
FB/JDM/jm
<PAGE> 9
[LOGO]
Table I - AISI File A8SO17BV0
as of 01 March 1998
FLEET VALUATION - GPA FLEET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Half Life Half Life Adjusted Adjusted
Date of Base Value Current Market Value Base Value Current Market
Serial Manufacture 1998 1998 1998 1998
No Aircraft Number (MM/DD/YY) MTOW Engine US Dollars US Dollars US Dollars US Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 A320-200 85 02/22/90 162,000 CFM56-5A1 28,230,000 28,410,000 28,400,000 28,580,000
- ------------------------------------------------------------------------------------------------------------------------------------
2 B737-400 23868 10/11/88 142,500 CFM56-3C1 24,760,000 25,410,000 25,080,000 25,730,000
- ------------------------------------------------------------------------------------------------------------------------------------
3 B737-400 23979 01/01/89 142,500 CFM56-3C1 25,560,000 26,270,000 25,930,000 26,640,000
- ------------------------------------------------------------------------------------------------------------------------------------
4 B737-400 26066 06/19/92 150,000 CFM56-3C1 28,460,000 29,260,000 28,180,000 28,980,000
- ------------------------------------------------------------------------------------------------------------------------------------
5 B747-200B 22496 10/01/81 800,000 IT9D-7Q 30,980,000 28,000,000 30,520,000 27,540,000
- ------------------------------------------------------------------------------------------------------------------------------------
6 DC8-71F 46040 05/14/69 328,000 CFM56-2C1 15,890,000 15,890,000 15,890,000 15,890,000
- ------------------------------------------------------------------------------------------------------------------------------------
7 DC8-71F 46064 04/01/69 328,000 CFM56-2C1 15,890,000 15,890,000 15,950,000 15,950,000
- ------------------------------------------------------------------------------------------------------------------------------------
8 F100 11341 08/01/91 98,000 TAY650-15 15,250,000 14,450,000 15,480,000 14,680,000
- ------------------------------------------------------------------------------------------------------------------------------------
9 F100 11350 04/01/92 98,000 TAY650-15 16,100,000 15,600,000 16,300,000 15,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------
Totals: $201,120,000 $199,180,000 $201,730,000 $199,790,000
---------------------------------------------------------------------
</TABLE>
Page 1 of 1
<PAGE> 1
Exhibit 99.6
BK ASSOCIATES, INC.
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 u Fax (516) 365-6287
March 10, 1998
Ms. Siobhan Connolly
GPA Group plc
Shannon, County Clare
Ireland
Dear Siobhan:
In response to your request, BK Associates, Inc. is pleased to provide an
update on our opinion regarding the current maintenance adjusted Current Market
Value (CMV) and Base Value (BV) as well as the zero-time BV as of March 1, 1998
of the aircraft (Aircraft) in the Aircraft Lease Portfolio Securitization (ALPS
94-1) program (Portfolio). The Portfolio comprises 27 aircraft and our opinion
on their current values is tabulated in the attached Figure 1. A similar
appraisal was provided about nine months ago and this letter represents an
update to that appraisal. Much of the discussion that follows consists of
explanation for changes in the market and values since that time.
Where appropriate data were available, the CMV and BV include an adjustment to
account for current maintenance status with respect to airframe checks, engine
heavy shop visits and landing gear overhaul. Where data were not available or
too old to be considered reliable, it was assumed that aircraft (or engine) is
at half-time between major maintenance events. The zero-time BVs represents
values for Aircraft that are fresh from airframe and engine overhauls.
It should be understood that BK Associates has neither inspected the Aircraft
nor their maintenance records, but has relied upon the information provided by
you and in the BK Associates database which includes data on some of the
Aircraft that was obtained for previous appraisals we have conducted on the
Aircraft. The assumptions have been made that all Airworthiness Directives
have been complied with; accident damage has not been incurred that would
affect market values; and maintenance has been accomplished in accordance with
a civil airworthiness authority's approved maintenance program and accepted
industry standards. Deviations from these assumptions can change significantly
our opinion regarding the Aircrafts' values.
<PAGE> 2
Ms. Siobhan Connolly
March 10, 1998
Page 2
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of base value, to which BK Associates subscribes, base value is the
Appraiser's opinion of the underlying economic value of an aircraft in an open,
unrestricted, stable market environment with a reasonable balance of supply and
demand, and assumes full consideration of its "highest and best use". An
aircraft's Base Value is founded in the historical trend of values and in the
projection of value trends and presumes an arm's length, cash transaction
between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available for marketing,
which BK Associates considers to be 12 to 18 months.
The definition of Current Market Value is similar. The quoted current market
value is the appraiser's opinion of the most likely trading price that may be
generated for an aircraft under the market circumstances that are perceived to
exist at the time in question.
As the definition suggests, Base Value is determined from historic and future
value trends and is not influenced by current market conditions. It is often
determined as a function of the original cost of the aircraft, technical
characteristics of competing aircraft, and development of new models. Thus, it
should not be surprising that most of the Base Values given in Figure 1 are
largely unchanged from the forecast values given in the original ALPS 94-1
appraisal but adjusted for the actual rate of inflation.
For most of the aircraft in the Portfolio, there are relatively minor increases
or decreases in the values. These are partly the result of the passage of time
and further aging of the aircraft, significant changes in the price of new or
replacement aircraft which affect base value models or changes in the
maintenance status. Regarding maintenance status, some significant changes in
the adjusted values can be attributed to engine status. In the past, engine
status, other than total time and cycles, was rarely available and engines were
often assumed to be at half-time. For this appraisal you were able to provide
time since shop visit on most of the engines and, typically, it was quite high
- - in many cases between 10,000 and 20,000 hours. While this is testimony to
the reliability of today's engines, it does indicate that considerably less
than half-time remains and value deductions must be assumed.
Current values are normally based on comparison to recent sales of comparable
aircraft. However, there have been few comparable sales, if any, during the
past year, for which the price was divulged beyond the parties to the
transaction. Since the last appraisal, most of the reported transactions were
for new deliveries. There were several, however, that were
<PAGE> 3
Ms. Siobhan Connolly
March 10, 1998
Page 3
for aircraft comparable to the Aircraft in the Portfolio. Two B737-400s made
in 1992 were reported sold for $27.35 and $28.2 million, respectively. A
B737-300 was sold for $22.65 million. A 1990 B757 (non-ER) was reported sold
for $35 million. Several 1988 MD83s were reported sold for $18.5 to $19.95
million.
In the absence of recent sales, alternative methodologies must be used to
determine CMV. One such methodology is to assess current market conditions and
relate the current value to the base value. Analysis of long term historic
value trends suggest what the value of an aircraft should be based on its age,
original price and competitive specifications in a balanced market. Analysis
of current market conditions then suggests the difference between CMV and BV.
For most of the aircraft types, we believe the market is in reasonable balance
between supply and demand. Thus, for most of the Aircraft, the adjusted CMV is
equal to the adjusted BV in Figure 1. The A300 and F100 are exceptions. The
A300, while increasingly popular as a candidate for conversion to freighter, is
still in a longer term depression that cannot be explained as a current supply
and demand problem. Its values have to continue to weaken and, in fact, its
lower values are largely the reason for its popularity as a freighter. We
believe its CMV is 10 percent less than the base value. For the F100, the
perception of difficulties from the cessation of production lead us to conclude
the CMV is about five percent below the base value, despite there being few
publicly advertised as being for sale or lease.
On the other hand, demand for MD83s is quite strong now and based on the tight
market and supported by some recent transactions we are aware of, we have
concluded the CMV is slightly above the base values.
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It
is not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal,
the addressee agrees that BK
<PAGE> 4
Ms. Siobhan Connolly
March 10, 1998
Page 4
Associates, Inc. shall bear no such responsibility or legal liability. This
appraisal is prepared for the use of the addressee and shall not be provided to
other parties without the express consent of the addressee.
Sincerely yours,
BK ASSOCIATES, INC.
John F. Keitz
President
ISTAT Certified Senior Appraiser
JFK/kf
Attachment
<PAGE> 5
<TABLE>
Figure 1
ALPS94-1 VALUES
Adjusted Adjusted ZeroTime
AIRCRAFT MFGR. OPERATOR CMV($ mils.) BV ($ mils.) BV ($ mils.)
TYPE S/N DATE 3/1/98 3/1/98 3/1/98
<S> <C> <C> <C> <C> <C> <C>
A300B4-200 240 Mar-83 off-lease $15.14 $17.41 $17.76
A320-212 299 Apr-92 Airtours Int'l $32.00 $32.00 $34.05
A320-212 362 Feb-93 Airtours Int'l $32.50 $32.50 $33.95
A320-212 391 Feb-93 Monarch Airl $33.00 $33.00 $35.35
A320-211 403 Dec-93 Canadian Int'l $31.46 $31.46 $34.65
F100 11258 Dec-89 Portugalia $13.78 $14.50 $14.68
F100 11342 Nov-91 Portugalia $15.68 $16.50 $16.68
F100 11351 Sep-91 TAM $15.68 $16.50 $16.68
B737-3Y0 24465 Aug-89 Philippine Airl $22.44 $22.44 $23.97
B737-3Y0 24677 Jan-90 Philippine Airl $22.66 $22.66 $24.82
B737-3Y0 24908 Mar-91 Sun Express $25.70 $25.70 $27.97
B737-3Y0 24909 Apr-91 Malev $25.46 $25.46 $27.97
B737-3Y0 26068 Jun-92 Yunnan $27.48 $27.48 $29.62
B737-4Y0 24685 May-90 Aer Lingus $26.62 $26.62 $28.72
B737-4Y0 24904 Feb-91 T H Y $27.52 $27.52 $29.72
B737-4Y0 25764 May-92 Asiana Airl $29.29 $29.29 $30.97
B737-4Y0 25765 Jul-92 Asiana Airl $29.94 $29.94 $31.72
B737-5Y0 26067 May-92 Air Pacific $20.80 $21.12 $23.47
B767-3Y0ER 24947 Mar-91 Lan Chile $61.00 $61.00 $62.75
B767-3Y0ER 24999 Feb-91 Spanair $61.50 $61.50 $62.75
B767-375ER 25864 Apr-92 Lan Chile $61.88 $61.88 $65.03
B757-2Y0ER 26152 Aug-92 Avianca $42.83 $42.83 $45.39
B757-2Y0ER 26153 Aug-92 China SW. $43.31 $43.31 $45.79
B757-2Y0ER 26158 Mar-93 Air 2000 $43.44 $43.44 $46.94
MD83 49627 Apr-89 Spanair $24.12 $23.76 $24.52
MD83 49790 Oct-89 Spanair $22.69 $22.35 $25.22
MD83 49952 Dec-91 Far East. $25.69 $25.31 $27.32
</TABLE>
<PAGE> 6
BK ASSOCIATES, INC.
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 u Fax (516) 365-6287
March 10, 1998
Ms. Siobhan Connolly
GPA Group plc
Shannon, County Clare
Ireland
Dear Siobhan:
In response to your request, BK Associates, Inc. is pleased to present our
opinion on the current values as of March 1, 1998 on nine of the aircraft in
the GPA Portfolio (Aircraft). The aircraft include various types or models of
narrow- and wide-body jets as well as turboprop commuter aircraft. The
aircraft are identified below by aircraft type, date of manufacture, serial
number, and engine model.
<TABLE>
<CAPTION>
Serial
Type Number Year Engine
--------- ------ ---- ---------
<S> <C> <C> <C>
A320-211 85 1990 CFM56-5A1
B737-4YO 23868 1988 CFM56-3C1
B737-4YO 23979 1989 CFM56-3C1
B737-4YO 26066 1992 CFM56-3C1
DC8-71F 46040 1969 CFM56-2C1
DC8-71F 46064 1969 CFM56-2C1
F100 11341 1991 TAY 650
F100 11350 1992 TAY 650
B747-283B 22496 1981 JT9D-7Q
</TABLE>
These Aircraft were included in another appraisal of the entire GPA Portfolio
as of January 31, 1998. This letter represents an update of that appraisal.
The current values have been reviewed to reflect any changes in the market
since then.
It should be understood that the aircraft have not been inspected for this
appraisal and their current condition and status relative to major maintenance
events was not known in some cases. GPA provided BK Associates with data on
the specifications and current maintenance status for each aircraft. These
data were used to adjust values to account for current maintenance status.
<PAGE> 7
Ms. Siobhan Connolly
March 10, 1998
Page 2
Based upon our familiarity with airline transport aircraft, our knowledge of
their capabilities and the uses to which they are put, our knowledge of the
marketing and leasing of new or used aircraft, and our familiarity with
aircraft generally, it is our opinion that the current values for the Aircraft
expressed in millions of dollars are as follows:
<TABLE>
<CAPTION>
Serial Year of BASE VALUE CURRENT MKT VALUE
Type Number Mfgr. 1/2 Time Mt.Adj. 1/2 Time Mt.Adj.
--------- ------ ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
A320-211 85 1990 25.950 25.950 25.950 25.950
B737-4YO 23868 1988 24.400 25.031 24.400 25.031
B737-4YO 23979 1989 24.650 25.340 24.650 25.340
B737-4YO 26066 1992 29.850 29.850 29.850 29.850
DC8-71F 46040 1969 14.450 14.450 15.760 15.760
DC8-71F 46064 1969 14.450 14.450 15.760 15.760
F100 11341 1991 16.500 16.500 15.345 15.345
F100 11350 1992 16.768 17.000 15.594 15.826
B747-283B 22496 1981 37.190 37.100 34.587 34.497
</TABLE>
After reviewing events that have occurred, we concluded there was no
significant change in the market since January that would affect current
values. The values are slightly lower to reflect the passage of time.
No new specification or maintenance status data have been provided. We assumed
the Aircraft have each accumulated an additional 200 to 250 hours per month for
purposes of determining time remaining to maintenance events.
Four values are given for each aircraft. Base Values (BV) and Current Market
Values (CMV) are included both assuming half-time between major maintenance
events and allowing for the current maintenance status. These are identified
as either "1/2-time" or "Mt.Adj.".
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of Base Value, to which BK Associates subscribes, base value is the
Appraiser's opinion of the underlying economic value of an aircraft in an open,
unrestricted, stable market environment with a reasonable balance of supply and
demand, and assumes full consideration of its "highest and best use". An
aircraft's Base Value is founded in the historical trend of values and in the
projection of value trends and presumes an arm's
<PAGE> 8
Ms. Siobhan Connolly
March 10, 1998
Page 3
length, cash transaction between willing, able and knowledgeable parties,
acting prudently, with an absence of duress and with a reasonable period of
time available for marketing.
The Current Market Value is similar to the Base Value. It is the appraiser's
opinion of the most likely trading price that may be generated for an aircraft
under the market circumstances that are perceived to exist at the time in
question. It is assumed the aircraft is sold for cash or equivalent
consideration and that the seller has an adequate amount of time for effective
exposure to prospective buyers, which BK Associates considers to be 12 to 18
months.
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It
is not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal,
the addressee agrees that BK Associates, Inc. shall bear no such responsibility
or legal liability. This appraisal is prepared for the use of the addressee
and shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
John F. Keitz
President
ISTAT Certified Senior Appraiser
JFK/kf
<PAGE> 1
Exhibit 99.7
AIRCLAIMS [LOGO]
Our Ref: 98256A/EP/kw
GPA Group Plc. 7th April, 1998
GPA House,
Shannon,
Ireland
Attention: Ms. Siobhan Connolly
Dear Sirs,
- ALPS 94-1 PORTFOLIO-
BASE VALUE AND CURRENT MARKET VALUATION
AS PER 1ST MARCH, 1998
Further to the instructions of Ms. Siobhan Connolly, GPA Group Plc, we are
pleased to be able to provide our opinion of the value of each aircraft in the
portfolio of Aircraft Lease Portfolio Securitization 94-1 (ALPS 94-1), under
Base and Current market Value scenarios. The Aircraft, each of which is
subject to a net operating lease, are as indicated in the attached table (ref.
GPA/98256/ALPS94-1/CMV/BV).
Our valuation is based on fleet details as provided by Ms. Connolly on February
25th 1998, providing the most recent utilisation information available in
respect of the 27 aircraft and their respective engines, supplemented with
maintenance and specification data obtained or received on previous occasions
from GAP Group and GE Capital Aviation Services (GECAS).
The point of valuation is 1st March, 1998.
As requested by GPA Group Plc, we have provided our value opinion under a Base
Value scenario. Airclaims believes it to be very important that value
definitions are understood by all parties and that such values are always
considered in conjunction with their definitions.
BASE VALUE (to ISTAT Definition)
The Base Value presented below is based on the definition as outlined by the
International Society of Transport Aircraft Trading (ISTAT). ISTAT's definition
of Base Value equates in principle to the previously used appraisal term, Fair
Market Value.
[LOGOS] Airclaims Limited
Cardinal Point, Newall Road, Heathrow Airport, London TW6 2AS
Telephone (44) 181 897 1066 Facsimile (44) 181 897 0300 Telex 934679
http://www.airclaims.co.uk
Registered Head Office as above. Registered in England No. 710284.
VAT Reg. No. 224 1906 87
<PAGE> 2
[LOGO]
The ISTAT definition is as follows:
A Base Value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest
and best use".
An aircraft's Base Value is founded in the historical trend of values and in
the projection of value trends and presumes an arm's length, cash transaction
between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available for marketing.
In this instance, the Base Value of each aircraft assumes its physical condition
is average for an aircraft of its type and age, but has been adjusted to
reflect a) the actual utilisation and given maintenance status of airframe,
engines and undercarriage where possible (the 'Adjusted Base Value') and b)
under the assumption that each aircraft is fresh from major overhaul on
airframe, engines and undercarriage ('Zero Time' Base Value), as well as c)
assuming overall 'half-life' maintenance condition.
The Base Value also assumes that each Aircraft is under a maintenance programme
of international airworthiness standards approved by a civil aviation
authority, with all airworthiness directives (ADs) and manufacturers service
bulletins (SBs) performed in compliance with air carrier rules and regulations.
CURRENT MARKET VALUE
In Airclaims' considered opinion the CURRENT MARKET VALUE represents that which
the aircraft could best achieve under current (i.e. today's) market conditions.
Under this scenario each value is intended to reflect what might be expected
from the result of an 'arms length, single sale' transaction conducted in an
orderly manner (for which we consider a period of up to 12 months to come to
fruition to be reasonable) between a 'willing buyer and willing seller'. The
value assumes that each aircraft is free of lease or charge, and free of any
onerous restrictions in respect of its ownership and title documentation.
As part of our valuation process, we have taken into account recent market
activity covering open market, financial and lessor sales, the perceived demand
for the types, their current market acceptability and availability, and have
considered the views of informed industry sources.
Further to the above we have also taken account of the data available to us
regarding the specification of the subject aircraft, and their accumulated
airframe hours and cycles. We have also assumed that the aircraft are in good
condition with all Airworthiness Directives (ADs) and significant Service
Bulletins (SBs) complied with.
<PAGE> 3
[LOGO]
In this instance, the Current Market Value of each aircraft assumes its physical
condition is average for an aircraft of its type and age, but has been adjusted
to reflect the actual utilisation and given maintenance status of airframe,
engines and undercarriage where possible (the 'Adjusted Current Market Value')
and b) under the assumption that each aircraft is in overall 'half-life'
maintenance condition (Current Market 'Half-Life' Value).
The Current Market Value also assumes that each Aircraft is under a maintenance
programme of international airworthiness standards approved by a civil aviation
authority, with all airworthiness directives (ADs) and manufacturers service
bulletins (SBs) performed in compliance with air carrier rules and regulations.
Whilst the tabulated values provided under this assignment are given as single
figures, it must be borne in mind that the determination of such values involves
a multiplicity of variables, and that some variation in perceived values must be
expected due to, for example, any potential inaccuracies in the data provided.
In this case we consider that a tolerance of +/-4% may reasonably apply to the
aforementioned calculated values.
Please note that valuations given by Airclaims are valid only as at the date of
issue. Subsequent to that date there may be alterations in the world aviation
market, or in the status and physical condition of the subject aircraft or other
general factors that may affect Airclaims' value opinion.
I trust the foregoing is satisfactory and to your requirements.
Yours sincerely,
[LOGO]
EDWARD PIENIAZEK
Director, Consultancy & Information Services
Encl.
<PAGE> 4
AIRCLAIMS LTD
[LOGO]
BASE AND CURRENT MARKET VALUE OF ALPS 94-1 PORTFOLIO calculated as at
1st MARCH 1998
<TABLE>
- -- ----------- -------- -------- ----- ------------------- ---- -------- -------- ------ ---------
BUILD AIRFRAME
TYPE ENG. MTOW(lb) DATE OPERATOR HSN REGN HOURS CYCLES AS AT
- -- ----------- -------- -------- ----- ------------------- ---- -------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0
1 A300B4-200 CF6-50C2 363,760 Feb-83 PHILIPPINE AIRLINES 240 EI-CEB 30,452 17,452 25-Jan-98
2 A320-200 CFM56-5A3 169,753 Jan-92 PREMIAIR 299 GJDFW 20,534 7,437 31-Jan-98
3 A320-200 V2500-A1 169,754 Nov-92 AIRTOURS INT'L 362 G-YJBM 20,658 7,428 31-Jan-98
4 A320-200 CFM56-5A3 169,754 Dec-92 MONARCH AIRLINES 391 G-MONW 18,971 7,327 31-Jan-98
5 A320-200 CFM56-5A1 166,446 Jan-93 CANADIAN 403 C-FNVU 14,987 5,611 31-Jan-98
6 B737-300 CFM56-3B1 124,500 Jul-89 PHILIPPINE AIRLINES 24465 EI-BZF 17,486 21,245 06-Feb-98
7 B737-300 CFM56-3B1 124,500 Feb-90 PHILIPPINE AIRLINES 24677 EI-BZJ 16,668 20,074 29-Jan-98
8 B737-300 CFM56-3C1(22K) 131,500 Feb-91 SUN EXPRESS 24908 TC-SUP 24,915 11,179 31-Jan-98
9 B737-300 CFM56-3C1(20K) 135,000 Feb-91 MALEV 24909 HA-LED 17,615 10,623 31-Jan-98
10 B737-300 CFM56-3C1(20X) 135,000 May-92 YUNNAH 26088 8-2539 17,908 12,019 31-Jan-98
11 B737-400 CFM56-3C1(21.5K) 150,000 Apr-90 TRANSBRASIL 24685 PT-TOB 26,167 12,565 31-Jan-98
12 B737-400 CFM56-3C1(23.5K) 150,000 Jan-91 THY 24904 TC-JOE 18,706 10,058 31-Jan-98
13 B737-400 CFM56-3C1(22K) 142,500 May-92 ASIANA AIRLINES 25764 HL7227 11,533 16,748 31-Jan-98
14 B737-400 CFM56-3C1(22K) 142,500 Jun-92 ASIANA AIRLINES 25765 HL7228 11,268 16,394 31-Jan-98
15 B737-500 CFM56-3C1(20K) 133,500 May-92 AIR PACIFIC 26067 DQ-FJB 18,135 8,721 16-Feb-98
16 B757-200 RB211-535E4-37 250,000 Jul-92 AVIANCA 26152 EI-CEY 17,897 7,217 31-Jan-98
17 B757-200 RB211-535E4-37 240,000 Jul-92 CHINA SOUTHWEST 26153 B-2831 12,044 6,836 31-Sep-97
18 B757-200 RB211-535E4-37 230,000 Jan-93 AIR 2000 25158 G-000X 28,454 6,257 31-Jan-98
19 B767-300ER PW4060 407,000 Jan-91 LAN CHILE AIRLINES 24947 CC-CEY 31,918 7,975 31-Jan-98
20 B767-300ER PW4060 407,000 Jan-91 SPANAIR 24999 EC-FCU 30,792 7,126 31-Jan-98
21 B767-300ER CF6-80C2-B6F 408,000 Mar-92 LAN CHILE AIRLINES 25864 CC-CRH 12,138 5,808 31-Jan-98
22 F100 TAY650-15 98,000 Nov-89 PORTUGALIA 11258 CS-TPF 13,723 15,008 31-Jan-98
23 F100 TAY650-15 98,000 Jun-91 PORTUGALIA 11342 CS-TPE 12,066 11,653 31-Jan-98
24 F100 TAY650-15 98,000 Sep-91 TAM 11351 PT-MRF 14,252 14,835 31-Jan-98
25 MD-83 JT8D-219 160,000 Mar-89 SPANAIR 49627 EC-FXY 31,671 15,153 31-Jan-98
26 MD-83 JT8D-219 160,000 Oct-89 SPANAIR 49790 EC-FZC 29,407 14,134 31-Jan-98
27 MD-83 JT8D-219 160,000 Oct-91 F.E.A.T. 49952 B-28023 20,889 12,585 31-Jan-98
</TABLE>
<TABLE>
- -- --------------------- -------------------- ---------- ------
BASE VALUE CURRENT MARKET VALUE ZERO TOTAL
TIME MAINT
ADJUSTED HALF LIFE ADJUSTED HALF LIFE BASE VALUE ADJ.
- -- -------- --------- -------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1 $ 9.91m $ 9.00m $10.69m $ 9.75m $10.96m $0.34m
2 $30.13m $30.79m $32.33m $32.99m $32.03m -$0.66m
3 $30.67m $31.69m $33.87m $33.89m $32.93m -$0.82m
4 $31.81m $31.98m $34.41m $34.14m $33.18m -$0.13m
5 $30.91m $32.02m $34.31m $34.42m $33.26m -$0.11m
6 $20.84m $20.05m $21.49m $20.70m $21.41m -$0.79m
7 $20.53m $21.15m $21.03m $21.65m $22.51m -$0.62m
8 $23.07m $23.86m $23.39m $24.18m $25.22m -$0.79m
9 $32.90m $23.72m $23.22m $24.01m $25.08m -$0.82m
10 $24.50m $25.05m $24.84m $25.39m $26.41m -$0.55m
11 $23.92m $24.77m $25.17m $26.02m $26.23m -$0.85m
12 $24.68m $25.52m $25.78m $26.62m $26.98m -$0.84m
13 $24.68m $25.44m $25.68m $26.44m $26.90m -$0.76m
14 $24.70m $25.44m $25.70m $26.44m $26.90m -$0.74m
15 $20.91m $21.79m $21.31m $22.19m $23.85m -$0.88m
16 $38.88m $37.55m $37.80m $38.55m $40.08m -$0.75m
17 $37.65m $38.13m $38.65m $39.13m $40.66m -$0.48m
18 $37.72m $38.75m $38.82m $39.85m $41.28m -$1.03m
19 $59.21m $59.77m $60.51m $61.07m $61.95m -$0.56m
20 $60.93m $59.87m $62.23m $61.17m $62.05m -$1.06m
21 $63.91m $63.62m $65.41m $65.12m $65.80m -$0.29m
22 $14.12m $14.47m $13.67m $14.02m $15.54m -$0.35m
23 $16.75m $16.32m $16.65m $16.22m $17.39m -$0.43m
24 $16.08m $16.32m $15.98m $16.22m $17.39m -$0.24m
25 $17.07m $17.39m $16.73m $19.05m $18.96m -$0.32m
26 $17.08m $17.64m $16.74m $15.50m $19.41m -$0.76m
27 $16.99m $19.90m $20.54m $21.45m $21.47m -$0.91m
$761.74m $772.16m $789.79m $800.21m $815.08m _$10.42m
</TABLE>
GPA/98256/ALPS94-1/CMV/BV 27/03/1998
<PAGE> 5
AIRCLAIMS [LOGO]
Our Ref: 98256Supp/EP/kw
GPA Group Plc. 7th April, 1998
GPA House,
Shannon,
Ireland
Attention: Siobhan Connolly
Dear Sirs,
- NINE GPA AIRCRAFT -
BASE VALUE AND CURRENT MARKET VALUATION
AS PER 1ST MARCH 1998
Further to the instructions of Ms. Siobhan Connolly, GPA Group Plc, we are
pleased to be able to provide our opinion of the value of nine GPA aircraft,
under Base and Current market Value scenarios. The aircraft, each of which is
subject to a net operating lease, are as indicated in the attached table
(ref: 98256Supp/GPA0398/BV/CMV).
Our valuation is based on fleet details as provided by Ms. Connolly on March
5th, 1998, supplemented with maintenance and specification data obtained or
received on previous occasions from GPA Group and GE Capital Aviation Services
(GECAS).
The point of valuation is 1st March, 1998.
As requested by GECAS, we have provided our value opinion under a Base Value
scenario. Airclaims believes it to be very important that value definitions are
understood by all parties and that such values are always considered in
conjunction with their definitions.
BASE VALUE (to ISTAT Definition)
The Base Value presented below is based on the definition as outlined by the
International Society of Transport Aircraft Trading (ISTAT). ISTAT's definition
of Base Value equates in principle to the previously used appraisal term, Fair
Market Value.
AIRCLAIMS LIMITED
Cardinal Point, Newall Road, Heathrow Airport, London TW6 2AS
[LOGO] Telephone (44) 181 897 1066 Facsimile (44) 181 897 0300 Telex 934679
http://www.airclaims.co.uk
Registered Head Office as above, Registered in England No. 710284
VAT Reg. No. 224 1906 87
<PAGE> 6
[LOGO]
The ISTAT definition is as follows:
A Base Value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest and
best use".
An aircraft's Base Value is founded in the historical trend of values and in the
projection of value trends and presumes an arm's length, cash transaction
between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available for marketing.
In this instance, the Base Value of each aircraft assumes its physical condition
is average for an aircraft of its type and age, but has been adjusted to reflect
a) the actual utilisation and given maintenance status of airframe, engines and
undercarriage where possible (the 'Adjusted Base Value') and b) under the
assumption that each aircraft is in overall 'half-life' maintenance condition
(Base 'Half-Life' Value).
The Base Value also assumes that each Aircraft is under a maintenance programme
of international airworthiness standards approved by a civil aviation authority,
with all airworthiness directives (ADs) and manufacturers service bulletins
(SBs) performed in compliance with air carrier rules and regulations.
CURRENT MARKET VALUE
In Airclaims' considered opinion the CURRENT MARKET VALUE represents that which
the aircraft could best achieve under current (i.e. today's) market conditions.
Under this scenario each value is intended to reflect what might be expected
from the result of an 'arms length, single sale' transaction conducted in an
orderly manner (for which we consider a period of up to 12 months to come to
fruition to be reasonable) between a 'willing buyer and willing seller'. The
value assumes that each aircraft is free of lease or charge, and free of any
onerous restrictions in respect of its ownership and title documentation.
As part of our valuation process, we have taken into account recent market
activity covering open market, financial and lessor sales, the perceived demand
for the types, their current market acceptability and availability, and have
considered the views of informed industry sources.
Further to the above we have also taken account of the data available to us
regarding the specification of the subject aircraft, and their accumulated
airframe hours and cycles. We have also assumed that the aircraft are in good
condition with all Airworthiness Directives (ADs) and significant Service
Bulletins (SBs) complied with.
<PAGE> 7
[LOGO]
In this instance, the Current Market Value of each aircraft assumes its
physical condition is average for an aircraft of its type and age, but has
been adjusted to reflect the actual utilisation and given maintenance status
of airframe, engines and undercarriage where possible (the 'Adjusted Current
Market Value') and b) under the assumption that each aircraft is in overall
'half-life' maintenance condition (Current Market 'Half-Life' Value).
The Current Market Value also assumes that each Aircraft is under a
maintenance programme of international airworthiness standards approved by a
civil aviation authority, with all airworthiness directives (ADs) and
manufacturers service bulletins (SBs) performed in compliance with air
carrier rules and regulations.
Whilst the tabulated values provided under this assignment are given as
single figures, it must be borne in mind that the determination of such
values involves a multiplicity of variables, and that some variation in
perceived values must be expected due to, for example, any potential
inaccuracies in the data provided. In this case we consider that a tolerance
of +/-4% may reasonably apply to the aforementioned calculated values.
Please note that valuations given by Airclaims are valid only as at the date
of issue. Subsequent to that date there may be alterations in the world
aviation market, or in the status and physical condition of the subject
aircraft or other general factors that may affect Airclaims' value opinion.
I trust the foregoing is satisfactory and to your requirements.
Yours sincerely,
Edward Pieniazek
Edward Pieniazek
Director, Consultancy & Information Services
Encl.
<PAGE> 8
AIRCLAIMS LTD. [LOGO]
BASE VALUES of select aircraft from the GPA GROUP PORTFOLIO
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<CAPTION>
Specification/Values as at 1st March 1998
____________________________________________________________________________________________________________
BUILD MTOW AIRFRAME
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0
1 A320-200 CFM56-5A1 85 F-GVJZ Oct-89 AIR FRANCE 149,914 14,913 16,004 31-Oct-97
2 B737-400 CFM56-3C1 23868 G-OBMF Sep-88 BRITISH MIDLAND 142,500 22,319 24,317 30-Sep-97
3 B737-400 CFM56-3C1 23979 TC-AFJ Dec-88 PEGASUS AIRLINES 142,500 21,925 10,982 30-Sep-97
4 B737-400 CFM56-3C1 26066 TC-JDZ May-92 THY-TURKISH 150,000 15,444 7,998 30-Sep-97
5 DC-8-71F(M) CFM56-2C1 46064 N823BX May-69 A.T.I. 328,000 76,979 30,826 31-Oct-97
6 DC-8-71F(M) CFM56-2C1 46040 N872SJ 69 S.A.T. 328,000 69,346 27,077 31-Oct-97
7 FOKKER 100 TAY650 11341 PT-MRX Jun-91 TAM 98,000 7,126 7,539 31-Dec-96
8 FOKKER 100 TAY650 11350 PT-MQB Aug-91 TAM 98,000 11,471 12,791 26-Jun-97
9 B747-200B JT9D-7Q 22496 EI-BZA Aug-81 PHILIPPINE AIRLINES 799,280 49,796 10,514 28-Feb-97
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<TABLE>
<CAPTION>
BASE VALUES MARKET VALUES
_____________________________________________
ADJ H-L ADJ H-L
BV BV CMV CMV
_____________________________________________
<S> <C> <C> <C>
$25.98m $26.47m $27.10m $27.55m
$22.53m $21.98m $23.79m $23.24m
$22.73m $22.28m $23.99m $23.54m
$26.40m $26.70m $27.00m $27.30m
$17.66m $17.13m $15.63m $15.10m
$17.65m $17.13m $15.61m $15.10m
$16.51m $16.48m $15.55m $15.52m
$16.83m $16.58m $15.87m $15.62m
$26.19m $27.49m $24.70m $26.00m
- -------- -------- -------- --------
$192.47m $192.24m $189.24m $189.01m
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