<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AIRCRAFT FINANCE TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6159 51-6512392
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
1100 NORTH MARKET STREET
RODNEY SQUARE NORTH
WILMINGTON, DELAWARE 19890
(302) 651-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CORPORATION SERVICE COMPANY
2 WORLD TRADE CENTER
SUITE 8746
NEW YORK, NEW YORK 10048
(800) 221-0770
ATTENTION: JOHN PELLETIER
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
ELLIOT GEWIRTZ, ESQ. MICHAEL LEDYARD, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY LLP MORRIS, JAMES, HITCHENS & WILLIAMS
ONE CHASE MANHATTAN PLAZA 222 DELAWARE AVENUE
NEW YORK, NEW YORK 10005 WILMINGTON, DELAWARE 19899
(212) 530-5474 (302) 888-6917
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 Floating Rate Asset Backed Notes,
Series 1999-1............................. $512,500,000 100% $512,500,000 $142,475
Class A-2 Floating Rate Asset Backed Notes,
Series 1999-1............................. $400,000,000 100% $400,000,000 $111,200
Class B Floating Rate Asset Backed Notes,
Series 1999-1............................. $126,500,000 100% $126,500,000 $ 35,167
Class C Fixed Rate Asset Backed Notes,
Series 1999-1............................. $106,000,000 100% 106,000,000 $ 29,468
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(f) under the Securities Act of 1933 solely
for purposes of calculating the registration fee.
------------------------
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 MAY BE CHANGED. AIRCRAFT
FINANCE TRUST MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION RELATING TO THESE SECURITIES
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION
JULY 2, 1999
$1,145,000,000
AIRCRAFT FINANCE TRUST
OFFER TO EXCHANGE
CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
AND CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1
FOR ANY AND ALL OUTSTANDING CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES
1999-1,
CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS B FLOATING RATE ASSET BACKED NOTES,
SERIES 1999-1 AND CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1
-------------------------
SUMMARY OF THE EXCHANGE OFFER
This Prospectus and the accompanying letter of transmittal relate to the
proposed offer by Aircraft Finance Trust to exchange up to $1,145,000,000
aggregate principal amount of new Class A-1 Floating Rate Asset Backed Notes,
Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series 1999-1, Class
B Floating Rate Asset Backed Notes, Series 1999-1 and Class C Fixed Rate Asset
Backed Notes, Series 1999-1 (the "Exchange Notes"), which will be freely
transferable, for any and all outstanding Class A-1 Floating Rate Asset Backed
Notes, Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series 1999-1,
Class B Floating Rate Asset Backed Notes, Series 1999-1 and Class C Fixed Rate
Asset Backed Notes, Series 1999-1 issued in a private offering on May 5, 1999
(the "Restricted Notes"), which have transfer restrictions.
- The Exchange Offer expires 5:00 p.m., New York City time, on
, 1999, unless extended.
- The terms of the Exchange Notes are substantially identical to the terms
of the Restricted Notes, except that the Exchange Notes will be freely
transferable and issued free of covenants regarding exchange and
registration rights.
- All Restricted Notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of Restricted Notes may be withdrawn at any time prior to
expiration of the Exchange Offer.
- Aircraft Finance will not receive any proceeds from the Exchange Offer.
- The exchange of Restricted Notes for Exchange Notes should not be a
taxable event for United States Federal income tax purposes.
- Holders of Restricted Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Restricted Notes not
exchanged in the Exchange Offer will remain outstanding and be entitled
to the benefits of the Indenture, but except under certain circumstances
will have no further exchange or registration rights.
- Aircraft Finance's "affiliates" (within the meaning of the Securities
Act) may not participate in the Exchange Offer.
- All broker-dealers must comply with the registration and prospectus
delivery requirements of the Securities Act. See "Plan of Distribution"
beginning on page .
- The Restricted Notes were listed on the Luxembourg Stock Exchange on May
5, 1999. Aircraft Finance has applied to list the Exchange Notes on the
Luxembourg Stock Exchange.
-------------------------
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
AIRCRAFT FINANCE MAY AMEND OR SUPPLEMENT THIS PROSPECTUS FROM TIME TO TIME BY
FILING AMENDMENTS OR SUPPLEMENTS AS REQUIRED. PLEASE READ THIS ENTIRE PROSPECTUS
(AND ACCOMPANYING LETTER OF TRANSMITTAL AND RELATED DOCUMENTS) AND ANY
AMENDMENTS OR SUPPLEMENTS CAREFULLY BEFORE MAKING YOUR INVESTMENT DECISION.
-------------------------
Aircraft Finance's principal executive offices are located at
1100 North Market Street, Rodney Square North,
Wilmington, Delaware 19890.
Its telephone number is (302) 651-1000.
The date of this Prospectus is .
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More
Information................... iii
Forward-Looking Statements...... iv
Summary......................... 1
Risk Factors.................... 14
The Parties..................... 27
Use of Proceeds of the Exchange
Notes......................... 30
The Exchange Offer.............. 30
The Initial Aircraft and Initial
Leases........................ 42
The Commercial Aircraft
Industry...................... 59
Management of Aircraft
Finance....................... 71
Capitalization.................. 79
Selected Consolidated Financial
Data.......................... 80
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................... 81
Note Payment Assumptions........ 83
Description of the Notes........ 95
Reports to Noteholders.......... 139
Book-Entry Registration, Global
Clearance and Settlement...... 142
Plan of Distribution............ 146
U.S. Federal Income Tax
Consequences.................. 147
ERISA Considerations............ 152
Legal Matters................... 153
Luxembourg Listing and General
Information................... 153
Experts......................... 154
Index to Financial Statements... F-1
</TABLE>
ii
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
Aircraft Finance is not currently subject to the information reporting
requirements of the Securities Exchange Act of 1934. Aircraft Finance will
become subject to these requirements upon the effectiveness of the Registration
Statement on Form S-4 filed by Aircraft Finance under the Securities Act with
respect to the Exchange Notes and in accordance with the Exchange Act will file
reports, proxy statements and other information with the Securities and Exchange
Commission. Any reports and other information filed by Aircraft Finance with the
SEC may be inspected and copied at the public reference facilities maintained by
the SEC 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 SEC 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. The SEC maintains a web site (http://www.sec.gov) that contains
the Registration Statement of which this Prospectus is a part and will contain
future reports and other information filed by Aircraft Finance.
This Prospectus does not contain all the information set forth in the
Registration Statement and its exhibits and schedules, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. For
further information with respect to Aircraft Finance and the Exchange Notes,
please read the Registration Statement and the exhibits and schedules filed with
it. They are on file at the offices of the SEC and may be obtained upon payment
of the fee prescribed by the SEC or may be examined without charge at the
offices of the SEC. Statements contained in this Prospectus as to the contents
of any documents are not necessarily complete, and, in each such instance, are
qualified in all respects by reference to the applicable documents filed with
the SEC.
The Restricted Notes were listed on the Luxembourg Stock Exchange on May 5,
1999, and the Exchange Notes will be listed upon issuance, subject only to
notice of issuance. The constitutive documents of Aircraft Finance 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 they will be available for inspection
and where these documents will be obtainable upon request. Copies of this
Prospectus and the reports to the holders of the Notes referred to under
"Reports to Noteholders" are available at the office of the listing agent in
Luxembourg: Kredietbank S.A. Luxembourgeoise, 43, Boulevard Royal, L-2955
Luxembourg. Financial information regarding Aircraft Finance will be included in
Aircraft Finance's quarterly reports on Form 10-Q and annual reports on Form
10-K and will be available at the office of the listing agent in Luxembourg
after the respective reports are filed with the SEC.
iii
<PAGE> 5
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
the securities laws. All statements regarding Aircraft Finance's expected
financial position, business and financing plans are forward-looking statements.
Forward-looking statements also include representations of Aircraft Finance's
expectations or beliefs concerning future events that involve risks and
uncertainties, including those associated with:
(1) the aircraft;
(2) the leases for the aircraft;
(3) the lessees of the aircraft;
(4) the prospects of re-leasing or disposing of the aircraft;
(5) lessee concentrations;
(6) any future acquisition of aircraft;
(7) Aircraft Finance's ability to pay interest, principal and premium on
the Notes; and
(8) risks relating to tax withholding.
The expectations reflected in those forward-looking statements may prove to
be incorrect. Important factors that could cause actual results to differ
materially from those expectations have been disclosed by Aircraft Finance in
this Prospectus under "Risk Factors" ("cautionary statements"). All subsequent
written and oral forward-looking statements attributable to Aircraft Finance or
persons acting on its behalf are expressly qualified by the cautionary
statements included in this Prospectus.
iv
<PAGE> 6
SUMMARY
This summary highlights selected information from this Prospectus and does
not contain all the information that is important to you. Please read the entire
Prospectus and pay special attention to the "Risk Factors" section of this
Prospectus, beginning on page 14, for more complete information about Aircraft
Finance, the Notes and the Exchange Offer and before participating in the
Exchange Offer.
AIRCRAFT FINANCE TRUST
Aircraft Finance was formed on April 13, 1999 as a Delaware business trust.
Aircraft Finance currently has two subsidiaries. One subsidiary is a Delaware
business trust and the other is an Irish corporation. The authorized business of
Aircraft Finance and its present and future subsidiaries is limited to buying,
owning, leasing or selling aircraft. Two wholly-owned subsidiaries of UniCapital
Corporation own all the beneficial interest of Aircraft Finance.
On May 5, 1999, Aircraft Finance issued approximately $1,209 million of its
Initial Notes, consisting of $512.5 million of its Initial Class A-1 Notes, $400
million of its Initial Class A-2 Notes, $126.5 million of its Initial Class B
Notes, $106 million of its Initial Class C Notes and $64 million of its Initial
Class D Notes. Aircraft Finance used the proceeds from the sale of the Initial
Notes and from the sale of its beneficial interest to pay the aircraft purchase
price referred to below, to fund cash reserves and to pay transaction expenses.
Aircraft Finance is authorized to issue additional Notes to acquire additional
aircraft. UniCapital has announced that it intends to sell additional aircraft
to Aircraft Finance during the next twelve months. The timing of any such sales
and whether or not any sale may occur at all are not certain, however.
On May 5, 1999, Aircraft Finance and its subsidiaries agreed with GE
Capital to purchase 36 aircraft from GE Capital and certain of its affiliates
under a master aircraft purchase agreement and paid the full purchase price of
approximately $1,196 million for all of those initial aircraft. The master
aircraft purchase agreement calls for the sellers to deliver all of the initial
aircraft or a substitute aircraft meeting the criteria specified in that
agreement no later than December 1, 1999. If any initial aircraft is
significantly damaged or is destroyed before delivery, the sellers may elect
either to pay over any insurance proceeds or to deliver a substitute aircraft to
Aircraft Finance and its subsidiaries. If an initial aircraft or a substitute
aircraft is not timely delivered for any other reason, GE Capital is required to
refund a portion of the purchase price. As of June 30, 1999, twenty of the
initial aircraft have been delivered.
As of December 31, 1998, the 36 initial aircraft had an aggregate initial
appraised value of approximately $1,323 million. This appraised value is the
average of three base value appraisals that Aircraft Finance obtained from
Aircraft Information Services, Inc., BK Associates, Inc. and Morten Beyer &
Agnew, Inc. Those appraisals were done on a desktop basis without physical
inspection of the aircraft and are subject to qualifications set forth in the
appraisals. The appraisals are attached as Appendix 9 to this Prospectus. None
of the appraisals attributed any value to the leases, the maintenance reserves,
the security deposits or any other collateral related to the initial 36
aircraft.
All of the initial 36 aircraft are currently leased to 23 lessees based in
13 countries. Each of those leases is an operating lease. Delivery of any
initial aircraft is to include the lessor's rights under the related lease.
Pending delivery, the sellers paid Aircraft Finance an amount equal to all
security deposits under the leases as of May 5, 1999 and are in general
1
<PAGE> 7
required to pay Aircraft Finance an amount equal to all rents, maintenance
reserves and other payments made under the leases after May 5, 1999. Except in
the case of two leases, Aircraft Finance must accept delivery of an initial
aircraft even if the related lessee is not current on its payment obligations.
As of April 1, 1999, the initial aircraft leased to each of nine lessees
accounted for more than 5% of the initial appraised value of all of the initial
aircraft, or approximately 53.8% in aggregate. No lessee's leased aircraft
accounted for more than 8% of the initial appraised value of the initial 36
aircraft.
GE Capital Aviation Services, Limited, or GECAS, has agreed to act as the
servicer for the initial 36 aircraft and any additional aircraft acquired by
Aircraft Finance and its subsidiaries. Under a servicing agreement with Aircraft
Finance, GECAS has agreed to collect rents and other amounts due from lessees,
to monitor the maintenance, insurance and other obligations under the aircraft
leases, to enforce rights against the lessees, to remarket aircraft for re-lease
or sale and to perform other specified aircraft-related services. Affiliates of
UniCapital may in the future provide similar services for aircraft acquired by
Aircraft Finance from affiliates of UniCapital.
SELECTED FEATURES OF THE EXCHANGE NOTES AND THE INITIAL CLASS D NOTES
The following table summarizes selected terms and attributes of the
Exchange Notes. You should not view the ratings of the Notes as a recommendation
to buy, sell or hold the Notes. The ratings only address the likelihood of the
timely payment of interest at the rate specified on the cover page of this
Prospectus and the ultimate payment of principal on those Notes. The ratings do
not address other payments on the Notes or the effect of any withholding tax on
the Notes.
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D
NOTES NOTES NOTES NOTES NOTES
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Aggregate Principal
Amount............. $512,500,000 $400,000,000 $126,500,000 $106,000,000 $64,000,000
Ratings:
Moody's............ Aa2 Aa2 A2 Baa2 Ba2
Standard &
Poor's........... AA AA A BBB BB
Interest Rate........ LIBOR + 0.48% LIBOR + 0.50% LIBOR + 1.15% 8.00% 11.00%
Expected Weighted
Average Life
(Years)............ 5.0 4.9 10.0 10.4 11.0
Expected Final
Payment Date....... May 15, 2004 June 15, 2008 May 15, 2016 July 15, 2016 August 15, 2016
Final Maturity
Date............... May 15, 2024 May 15, 2024 May 15, 2024 May 15, 2024 May 15, 2024
</TABLE>
The outstanding Notes are not, and the Exchange Notes will not be,
obligations of, or guaranteed by, GE Capital, GECAS, UniCapital or any of their
affiliates. The Exchange Notes are not being offered for sale by any of them.
The Class D Notes are not part of the Exchange Offer.
2
<PAGE> 8
SUMMARY OF TERMS OF THE EXCHANGE NOTES AND INITIAL CLASS D NOTES
The Exchange Notes.............. Aircraft Finance will issue the Exchange
Notes under the Trust Indenture dated as of
May 5, 1999 between it, ReSource/Phoenix,
Inc., as the administrative agent, and
Bankers Trust Company. The Exchange Offer
applies to the Restricted Notes. The
Exchange Offer does not apply to the Initial
Class D Notes.
Payment Dates................... The 15th day of each month or, if that date
is not a business day in New York, New York,
London, England and, with respect to any
action to be taken there, Luxembourg, the
next day that is a business day.
Interest........................ Aircraft Finance must pay interest on the
Exchange Notes at the respective rate per
annum set forth on the cover page to this
Prospectus. Interest is payable monthly on
each Payment Date. The Initial Class D Notes
bear interest at 11.00%.
Calculation of Interest......... Interest based on LIBOR will be calculated
on the basis of a year of 360 days and the
actual number of days elapsed. Interest at a
fixed rate will be calculated on the basis
of a year of 360 days and of twelve 30-day
months.
Maturity Step-Up Interest....... If any Class A-1 Note is not paid in full on
or before its Expected Final Payment Date of
May 15, 2004, interest for that Class A-1
Note will accrue a rate equal to the
existing margin over LIBOR plus 0.50% per
annum. Payments of interest at the increased
rate have a lower payment priority than
regular interest payments and will not be
rated.
Additional Interest............. Accrued interest and premium on any Note
that is not paid when due will bear interest
at the then current interest rate for that
Note.
Expected Principal Payments..... Aircraft Finance determined the expected
principal payments of the Notes based on
assumptions regarding primarily:
(1) the timing and amount of payments under
current leases and future leases;
(2) the terms of future leases;
(3) Aircraft Finance's ability to refinance
the Class A-1 Notes; and
(4) the amount of operating costs incurred
in the ordinary course of Aircraft
Finance's business.
3
<PAGE> 9
It is unlikely that actual experience will
correspond to those assumptions. The timing
and amount of the principal payments on any
Note may, therefore, vary from the expected
principal payments.
Sale Premium.................... If any aircraft is sold prior to the May
2010 Payment Date other than by the security
trustee in exercising its remedies, Aircraft
Finance will calculate and, if there are
funds to pay, will distribute a Sale Premium
to the holders of the Class C Notes and the
Class D Notes. For the calculation of the
Sale Premium and its payment priority,
please see "Description of the
Notes -- Premium Date" and "Description of
the Notes -- Priority of Payments".
Optional Redemption of the
Notes........................... Aircraft Finance may at any time redeem any
class or subclass of Notes by giving
specified required notices and depositing
the necessary funds with the security
trustee. A redemption prior to acceleration
of the Notes may be of the whole or any part
of any class or subclass of Notes. A
redemption after acceleration of the Notes
upon default may only be of the whole of all
the Notes. Aircraft Finance may redeem Notes
only from funds other than its and its
subsidiaries' operating cash flow, but it
may use the proceeds of Notes issued to
refinance the redeemed Notes.
Except in a redemption to avoid material
taxes or after acceleration, Aircraft
Finance must pay a premium when it redeems
any Notes. Redemption payments are not
subject to the order of payment priorities
described in this summary.
Refinancing Notes and Additional
Notes......................... Aircraft Finance may redeem outstanding
Notes by issuing refinancing Notes under the
trust indenture governing the Exchange
Notes. Refinancing Notes need not be of the
same class or subclass as the Notes they
refinance and may be issued in any
subclasses of Class A, Class B, Class C and
Class D Notes. Aircraft Finance also has the
right to finance the acquisition of
additional aircraft in part through the
issuance of additional Notes under that
trust indenture and additional beneficial
interests. The additional Notes may be
issued in any subclasses of Class A, Class
B, Class C and Class D. Any subclass of
refinancing Notes or additional Notes will
have the same payment priority as other
Notes of the class to which those
4
<PAGE> 10
Notes belong but will never have a payment
priority higher than that of the Class A
Notes.
Sources of Payments on the
Notes........................... The only sources of payment for the Notes
and the other obligations of Aircraft
Finance and its subsidiaries consist of
(1) payments from the leasing of aircraft
owned or to be acquired by them;
(2) sales and insurance proceeds;
(3) any payments received from GE Capital as
a refund of the purchase price for
aircraft that are not delivered or
substituted for, in respect of the
performance of the two leases to VARIG
and the re-lease of one aircraft to TWA;
(4) amounts drawn under any credit support
facilities;
(5) net payments under any swap or other
hedging agreements;
(6) amounts on deposit in the accounts held
by the security trustee and related
investment earnings; and
(7) net cash proceeds received from the sale
of any Refinancing Notes.
Aircraft Finance will make payments on the
Notes only after the payment of certain
expenses.
Security for the Notes.......... The Notes are direct obligations of Aircraft
Finance. Noteholders will not have any lien
or similar interest in any of the aircraft.
Aircraft Finance and its subsidiaries will
grant to the security trustee for the
benefit of the holders of the Notes and the
other secured parties a security interest
in:
(1) the ownership interests in the
subsidiaries of Aircraft Finance;
(2) the aircraft leases;
(3) any cash or other assets contained in
the accounts held by the security
trustee; and
(4) rights under the servicing agreement
with GECAS and other service, credit
support and hedge agreements.
Cash Reserves................... Cash reserves as of the date of this
Prospectus are approximately $52 million,
exclusive of security deposits and
maintenance reserves under aircraft
5
<PAGE> 11
leases. Cash reserves provide a source of
liquidity to pay ongoing expenses, amounts
due under senior swap agreements and
interest on the Notes. If cash reserves fall
below $33 million, Aircraft Finance may
continue to pay ongoing expenses, senior
swap amounts and interest on the Class A
Notes but may not make any payments having a
lower payment priority until the reserves
have been replenished to that amount.
Similar cash reserve levels have been set as
to the Class B Notes, the Class C Notes or
the Class D Notes. The reserve levels will
reduce as principal is paid and may be
reduced by Aircraft Finance if Note ratings
are unaffected.
Operating Covenants............. Aircraft Finance may not enter into any
future lease unless it is in compliance with
geographic and other concentration limits.
This restriction does not apply to renewals,
extensions or restructurings of existing
leases. Aircraft Finance may enter into a
future lease not meeting these requirements
if the rating agencies confirm that they
will not lower, qualify or withdraw their
ratings of any Notes as a result.
Tax Withholding................. Aircraft Finance is not obligated to make
any additional payments on the Notes to
offset any withholding or deduction from
payments on the Notes required under
applicable law. If any withholding or
deduction is required as to payments on the
Notes and Aircraft Finance does not redeem
the Notes, the net amount of interest
received by the holders of the Notes will be
reduced by the amount of such withholding or
deduction.
6
<PAGE> 12
THE INITIAL AIRCRAFT AND INITIAL LESSEES
The following pie charts summarize Aircraft Finance's exposure, as of April
1, 1999*, to the types of the initial aircraft, to the ages of the initial
aircraft, to the regions and countries in which the initial aircraft are
habitually based and to the various lessees, all as if all of the initial
aircraft had been delivered. All percentages have been calculated as a
percentage of the initial appraised value of the initial aircraft referred to
earlier in this summary section of this Prospectus. All of the initial aircraft
are in compliance with Stage 3 noise restrictions.
EXPOSURE TO TYPE OF INITIAL AIRCRAFT
[EXPOSURE TO TYPE OF INITIAL AIRCRAFT PIE CHART]
EXPOSURE TO YEAR OF INITIAL AIRCRAFT MANUFACTURE
[EXPOSURE TO YEAR OF INITIAL AIRCRAFT MANUFACTURE PIE CHART]
As of April 1, 1999, the weighted average age from manufacture is approximately
4.7 years.
- -------------------------
* The B767-300ER aircraft (MSN 25403), currently on lease to Air Madagascar, is
assumed to have been re-leased to TWA. The agreement between GE Capital and
Aircraft Finance requires the re-lease to TWA before that aircraft is
delivered.
7
<PAGE> 13
EXPOSURE TO REGION IN WHICH INITIAL AIRCRAFT ARE BASED
[EXPOSURE TO REGION IN WHICH INITIAL AIRCRAFT BASED PIE CHART]
EXPOSURE TO COUNTRIES IN WHICH INITIAL AIRCRAFT ARE BASED
[EXPOSURE TO COUNTRIES IN WHICH INITIAL AIRCRAFT ARE BASED PIE CHART]
Total Number of Countries: 13
8
<PAGE> 14
EXPOSURE TO INDIVIDUAL INITIAL LESSEES
[EXPOSURE TO INDIVIDUAL INITIAL LESSEES PIE CHART]
Total Number of Lessees: 23
- -------------------------
(1) The aircraft is currently on lease to Air Madagascar, but due to be
redelivered on July 7, 1999.
9
<PAGE> 15
OVERVIEW OF PRIORITY OF PAYMENTS
The following list summarizes the order of priority of payments on the
Notes and other obligations of Aircraft Finance out of all funds received by
Aircraft Finance and its subsidiaries other than security deposits and funds
required by any lease to be segregated and funds to be used to redeem the Notes.
For definitions of the terms used below and further information about the
priority of payments and changes in the order of priorities upon acceleration of
the Notes, please see "Description of the Notes -- Priority of Payments".
- Regularly occurring and other ongoing expenses, including fees and
indemnities to service providers and trustees
- Class A Notes Interest Amount and payments under swaps that are not
subordinated
- Payments to providers of any credit facilities or to cash collateral
accounts designated as primary
- Top-up to the Senior Note Blockage Amount reserve level
- Class A Notes Minimum Principal
- Class B Notes Interest Amount
- Payments to providers of any credit facilities or to cash collateral
accounts designated as secondary
- Top-up to the Mezzanine Note Blockage Amount reserve level
- Class B Notes Minimum Principal
- Class C Notes Interest Amount
- Payments to providers of any credit facilities or to cash collateral
accounts designated as tertiary
- Top-up to the Junior Note Blockage Amount reserve level
- Class A Notes Supplemental Principal
- Class B Notes Supplemental Principal
- Class C Notes Minimum Principal
- Class D Notes Interest Amount
- Payments to providers of any credit facilities or to cash collateral
accounts designated as the most subordinate
- Top-up to the Subordinate Note Blockage Amount reserve level
- Class D Notes Minimum Principal
- Anticipated expenses other than for modifications of aircraft and
refinancings
- Maturity Step-Up Interest and Additional Interest
- Class A Notes Scheduled Principal
- Class B Notes Scheduled Principal
- Class C Notes Scheduled Principal
- Class D Notes Scheduled Principal
- Reimbursement of any cure payments as to the Notes made by the holders of
the beneficial interest in Aircraft Finance
- Sale Premium on Class C and Class D Notes resulting from aircraft sales
- Expenses related to modifications of aircraft and refinancings
- Class A Notes Outstanding Principal
- Class B Notes Outstanding Principal
- Class C Notes Outstanding Principal
- Class D Notes Outstanding Principal
- Payments under swaps that are subordinated
- Additional Servicing Fees
- Remainder to Aircraft Finance for distribution to the holders of its
beneficial interests
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<PAGE> 16
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer.............. Aircraft Finance is offering to exchange up
to $1,145 million aggregate principal amount
of Exchange Notes for an equal aggregate
principal amount of Restricted Notes. The
form and terms of the Exchange Notes are
substantially the same as the form and terms
of the Restricted Notes, except that the
Exchange Notes have been or will be
registered under the Securities Act and will
not bear legends restricting their transfer.
Registration Rights Agreement... You have rights to exchange your Restricted
Notes for Exchange Notes, and the Exchange
Offer is intended to satisfy those rights.
After the Exchange Offer is complete, you
will no longer be entitled to any exchange
or registration rights with respect to your
Restricted Notes unless you do not receive
freely tradeable Exchange Notes in the
Exchange Offer or you are ineligible to
participate in the Exchange Offer.
Resales of the Exchange Notes... Aircraft Finance believes that the Exchange
Notes may be resold by you without
compliance with the registration and
prospectus delivery provisions of the
Securities Act if:
(1) you are acquiring the Exchange Notes in
the ordinary course of your business;
(2) you are not participating, do not intend
to participate and have no arrangement
or understanding with any person to
participate, in a distribution of the
Exchange Notes;
(3) you are not an affiliate of Aircraft
Finance; and
(4) you are not an initial purchaser who
acquired Restricted Notes directly from
Aircraft Finance in the initial
offering.
If you do not meet those conditions, you may
incur liability under the Securities Act if
you transfer any Exchange Note without
delivering a prospectus meeting the
requirements of the Securities Act. Aircraft
Finance does not assume or indemnify you
against that liability.
Each broker-dealer that receives Exchange
Notes for its own account in exchange for
Restricted Notes, where Restricted Notes
were acquired by that broker-dealer as a
result of market-making activities or other
trading activities, must acknowledge that it
will deliver a prospectus in connection
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<PAGE> 17
with any resale of Exchange Notes. A broker-
dealer may use this Prospectus for an offer
to resell or to otherwise transfer the
Exchange Notes.
Expiration Date................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless Aircraft Finance decides to extend
the Exchange Offer.
Conditions to the Exchange
Offer........................... The only conditions to completing the
Exchange Offer are that the Exchange Offer
not violate applicable law or any applicable
interpretation of the staff of the SEC, that
no action or proceeding is instituted with
respect to the Exchange Offer, that no law,
rule or regulation is adopted that Aircraft
Finance expects would impair its ability to
proceed with the Exchange Offer and that
Aircraft Finance obtains all necessary
governmental approval for the Exchange
Offer.
Procedures for Tendering
Restricted Notes................ The Restricted Notes were issued as global
securities in fully registered form. Beneficial interests in the Restricted
Notes held by direct or indirect
participants in The Depository Trust Company
through depositary interests are shown on
records maintained in book-entry form by DTC
with respect to its participants. Transfers
can be made only on those records. If you
are a holder of a Restricted Note held in
the form of a book-entry interest and you
wish to tender your Restricted Note under
the Exchange Offer, you must transmit
through a financial institution that is a
participant in DTC's book-entry transfer
facility system on or prior to the
expiration of the Exchange Offer a
computer-generated message transmitted by
means of DTC's Automated Tender Offer
Program system together with a part of a
confirmation of book-entry transfer in which
you acknowledge and agree to be bound by the
terms of the letter of transmittal.
Special Procedures for
Beneficial Owners............... If you are the beneficial owner of
Restricted Notes that are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee and you wish
to tender your Restricted Notes, you should
promptly contact the person in whose name
your Restricted Notes are registered and
instruct that person to tender on your
behalf.
Guaranteed Delivery
Procedures...................... If you wish to tender your Restricted Notes
and cannot complete the procedure for
book-entry
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<PAGE> 18
transfer on a timely basis, you may still
tender your Restricted Notes in accordance
with the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed
Delivery Procedures".
Acceptance of Restricted Notes
and Delivery of Exchange
Notes......................... Unless the conditions to the Exchange Offer
are not met or tendered Notes are properly
withdrawn, Aircraft Finance will accept any
and all Restricted Notes that are properly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the expiration
date.
Withdrawal...................... You may withdraw the tender of your
Restricted Notes at any time prior to 5:00
p.m., New York City time, on the expiration
date. Aircraft Finance will return to you
any Restricted Notes not accepted for
exchange for any reason without expense to
you as soon as practicable after withdrawal.
Exchange Agent.................. Bankers Trust Company is serving as the
Exchange Agent for the Exchange Offer.
Federal Income Tax
Consequences.................... The exchange of the Restricted Notes in the
Exchange Offer will not be a taxable event
for federal income tax purposes.
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<PAGE> 19
RISK FACTORS
Please consider carefully the risks described below before making a
decision to accept the Exchange Notes. The risks identified below are not the
only risks facing Aircraft Finance. Other risks the existence or importance of
which Aircraft Finance is currently unaware also may impair its ability to pay
the interest, principal and premium on the Notes on a timely basis or in full.
RISKS RELATING TO CASH FLOWS
THE SOURCES FOR PAYMENTS ON THE NOTES ARE LIMITED
The sole sources of payment for the Exchange Notes, the Class D Notes and
the other obligations of Aircraft Finance and its subsidiaries are funds derived
from the aircraft owned or to be acquired by them -- rents, deposits,
maintenance reserves and other payments under existing leases and any future
leases, insurance proceeds, sales proceeds and any payments by GE Capital as to
undelivered or substituted aircraft and certain initial leases -- liquidity
reserves funded out the proceeds of the Initial Notes or that may be funded out
of the proceeds of any future Notes or beneficial interests or provided through
any future credit facilities, net payments under swap or other hedging
agreements, investment earnings and net proceeds from the sale of any Notes
issued to refinance other Notes. It is unlikely that Aircraft Finance would be
able to obtain any alternate source of funds if any of those sources of funds
are insufficient to pay the Notes and other obligations.
THE ASSUMPTIONS USED TO DETERMINE EXPECTED NOTE PAYMENTS MAY NOT MATCH
ACTUAL EXPERIENCE
Aircraft Finance and its advisors derived the expected amount and timing of
repayment of the Exchange Notes and the Initial Class D Notes described in this
Prospectus based on various assumptions that are set out under "Note Payment
Assumptions". For many reasons, it is unlikely that Aircraft Finance's
experience will be consistent with those assumptions. The amount and timing of
Aircraft Finance's collections may vary significantly from those assumed to the
extent Aircraft Finance faces any material difficulties in making timely and
complete recoveries under existing leases, in re-leasing aircraft on attractive
terms and, if it can re-lease, in making timely and complete recoveries on those
leases. Likewise, the costs of maintaining the aircraft, insurance recoveries
for damaged or destroyed aircraft and the prices at which aircraft can be sold
are also unpredictable. Accordingly, payments may not be made on the Notes at
the times assumed, and Aircraft Finance cannot assure you that it will be able
to repay the Exchange Notes and its other Notes in full.
THE CASH FLOW FROM THE AIRCRAFT OWNED BY THE AIRCRAFT FINANCE GROUP IS
NOT FULLY WITHIN ITS CONTROL
Cash flow from the aircraft owned by the Aircraft Finance
group -- principally lease rentals and proceeds from the sale of aircraft -- is
significantly affected by Aircraft Finance's ability to collect payments under
leases, to manage the cost of owning the aircraft and to replace cash flows from
terminating leases by re-leasing or selling aircraft at favorable terms. All of
these factors are subject to external economic conditions and the performance by
lessees and service providers that are not within the control of Aircraft
Finance.
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<PAGE> 20
CHANGES IN THE COMPOSITION OF THE AIRCRAFT PORTFOLIO MAY AFFECT CASH FLOW
The assumptions regarding the expected cash flow of Aircraft Finance are
subject not only to a variety of economic factors, some of which have been
discussed in this Prospectus, but also to any substantial change in the
composition of the aircraft portfolio from that initially contemplated. Any
substantial changes in that composition could significantly change expected cash
flows and the nature and degree of risks affecting cash flow. Four principal
factors could affect the fleet composition.
(1) THE EXERCISE OF PURCHASE OPTIONS BY LESSEES. The exercise of a
lessee purchase option may result in sales proceeds lower than target sales
prices of the aircraft if payments on the Notes have not been made as
assumed. Two lessees with respect to three of the initial aircraft,
representing 11.3% of the aggregate initial appraised value, have unexpired
options to purchase aircraft. The assumptions described under "Note Payment
Assumptions" assume that those options will not be exercised.
(2) THE NON-DELIVERY OF INITIAL AIRCRAFT. As of June 30, 1999,
Aircraft Finance has taken delivery of twenty of the 36 initial aircraft.
GE Capital is required to refund a portion of the purchase price in the
event any of the remaining initial aircraft or substitute aircraft are not
delivered by December 1999.
(3) THE LOSS OF AIRCRAFT THROUGH CASUALTY OR GOVERNMENTAL TAKING. The
proceeds of insurance and taking awards may not be sufficient to compensate
for the loss of the revenue of the affected aircraft.
(4) THE PURCHASE OF ADDITIONAL AIRCRAFT. UniCapital has announced its
intention to sell additional aircraft to Aircraft Finance during the next
twelve months, and Aircraft Finance may acquire other aircraft in the
future. Although any additional aircraft may add to the cash flow of
Aircraft Finance and their acquisition is subject to confirmation by the
rating agencies rating the Notes that they will not lower, qualify or
withdraw any rating on the Notes as a result and other requirements of the
indenture governing the Notes, Aircraft Finance cannot predict the effect
of any additional aircraft on its cash flows and ability to repay the
Notes.
AIRCRAFT FINANCE IS EXPOSED TO INTEREST RATE RISK
Interest rate exposure arises to the extent that Aircraft Finance's fixed
and floating rate obligations under the Notes do not correlate to either or both
of the mix of fixed and floating rate rental payments for different periods and
the timing of those payments. Although Aircraft Finance will attempt to hedge
that exposure as described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations", it cannot assure you that it will be
effective in implementing its hedging goals. In addition, the premature
termination of any lease may result in Aircraft Finance incurring swap breakage
costs under its agreements with swap providers.
RISKS RELATING TO COLLECTIONS UNDER LEASES
AN AIRCRAFT LESSEE MAY FACE CREDIT PROBLEMS AND DEFAULT
The ability of each aircraft lessee to perform its obligations under its
lease with an Aircraft Finance subsidiary will depend not only on the managerial
skills of its employees but also on general economic conditions in the country
or region in which it operates as well as competition, fare levels, passenger
demand, and operating costs. Some of Aircraft Finance's existing lessees are in
a weak financial position, and this is likely to be the case
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<PAGE> 21
with future aircraft lessees as well. As the aircraft approach the end of their
realizable useful life, it is likely that the aircraft will be leased to less
creditworthy lessees. In a portfolio of the size of Aircraft Finance's, you
should expect that some number of aircraft lessees at some time may be slow in
paying or to pay in full.
As of June 22, 1999, several lessees of initial aircraft were late in the
payment of rent, maintenance reserves and other amounts, though a default notice
had been issued to only one lessee. As of June 22, 1999, the amount outstanding
(including default interest) for two aircraft on lease to Viacao Aerea
Rio-Grandense, S.A. or VARIG, was approximately $3.3 million (approximately
$760,000 of which would be due and owing to Aircraft Finance upon the delivery
of such aircraft), the amount outstanding (including default interest) for one
aircraft on lease to Transbrasil S.A. Linhas Aereas or Transbrasil, was
approximately $2.65 million (approximately $500,000 of which would be due and
owing to Aircraft Finance upon the delivery of such aircraft) and the amount
outstanding (including default interest) for two aircraft on lease to Istanbul
Hava Yollari A.S., was approximately $2.05 million (approximately $1.35 million
of which would be due and owing to Aircraft Finance upon the delivery of such
aircraft).
As of June 22, 1999, the weighted average number of days past due was 65
days for the leases to VARIG and 93 for all the leases in default. Aircraft
Finance is not, however, required to take delivery of the two aircraft leased to
VARIG unless all payment defaults are cured. If Aircraft Finance does take
delivery of the VARIG aircraft, the two reserves of $3.375 million each provided
by GE Capital will continue to be available.
Transbrasil's lease has been restructured to reduce monthly lease payments
to 50% of current levels for June, July and August, 1999, and thereafter to
increase to an amount sufficient to pay all past due amounts over a twenty-four
month period.
Aircraft Finance cannot assure you that default levels will not increase
over time, particularly if the currently favorable economic conditions do not
continue.
A LESSEE'S PERFORMANCE WILL BE AFFECTED BY LOCAL ECONOMIC CONDITIONS
The commercial aviation industry throughout the world generally is highly
sensitive to general economic conditions. Because a substantial portion of
business and, especially, leisure airline travel is discretionary, the industry
has tended to suffer during economic downturns. In addition, local economic and
political conditions can influence the performance of a lessee located in a
particular region. The effect of those local conditions on Aircraft Finance will
be more or less intense depending on the concentration of the number of its
lessees in that region.
EUROPEAN CONCENTRATION. As of April 1, 1999, lessees based in Europe
accounted for aircraft having 59.6% of the aggregate initial appraised value,
with 54.3% based in "developed" European markets and 5.3% based in "emerging"
European markets. Commercial airlines in Europe face, and can be expected to
continue to face, increased competitive pressures, in part as a result of the
deregulation of the airline industry by the EU. European countries generally
have relatively strict environmental regulations that can restrict operational
flexibility and decrease aircraft productivity. The effect of these restrictions
is illustrated by the noise curfews and environmental slot controls for some of
the larger European airports, as well as higher landing fees. Meeting these
tougher standards could significantly increase aircraft operating costs of
Aircraft Finance's aircraft.
ASIA PACIFIC REGION CONCENTRATION. As of April 1, 1999, lessees based in
the Asia Pacific region, including China and India, accounted for aircraft
having about 9.4% of the
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<PAGE> 22
aggregate initial appraised value. Trading conditions in the civil aviation
industry in Asia have been adversely affected by the severe economic and
financial difficulties experienced recently in the region. The economies of
Indonesia, Thailand, Japan, Korea and Malaysia have experienced particularly
acute difficulties resulting in many business failures, and in many cases
significant depreciation of local currencies and downgrades of sovereign and
corporate credit ratings. The regional economic downturn has undermined business
confidence, reduced demand for air travel and has adversely impacted the results
of operations of Aircraft Finance's lessees in the region. Several airlines in
the region, including certain of those lessees, have recently announced their
intention to reschedule their aircraft purchase obligations, eliminate some
routes and reduce employees. The downturn in Asia is likely to be exacerbated by
the large number of aircraft currently on order by Asian airlines. The
recessionary conditions that are now expected to prevail in large parts of the
region for a significant period of time may also have a significant adverse
impact on global aircraft demand.
LATIN AMERICAN CONCENTRATION. As of April 1, 1999, lessees based in Latin
America accounted for aircraft having 8.1% of the initial appraised value.
Although certain countries in Latin America have experienced in the past several
years increased political stability, overall increased economic growth, lower
inflation rates and revitalized economies, the progress has not been regionwide
and may not be maintained or furthered.
For example, in 1994, Mexico experienced lower capital inflows, a large
current account deficit leading to diminishing foreign exchange reserves, a
devaluation of the peso and dampened investor confidence. Those circumstances
resulted in lower levels of foreign investment in Latin America in general. More
recently, Brazil has experienced significant downturns in its financial markets,
and, as a result, on January 13, 1999, Brazil devalued its currency. Continued
weakness in Brazil can affect not only leases with Brazilian lessees (accounting
for 8.1% of the aggregate initial appraised value) but, more importantly, could
spread throughout Latin America and other "emerging" economies and affect other
lessees of Aircraft Finance.
NORTH AMERICAN CONCENTRATION. As of April 1, 1999, lessees based in North
America accounted for aircraft having 22.9% of the aggregate initial appraised
value. Over the last decade, a number of the major North American passenger
airlines have filed Chapter 11 bankruptcy proceedings and several major U.S.
airlines have ceased operations altogether. Two lessees of aircraft to be
delivered to Aircraft Finance have recently emerged from bankruptcy proceedings.
While airline profitability in the region has improved since its cyclical low in
the 1990-1992 period, increasing competition from low-cost air carriers and an
inability to reduce labor and other costs to sustainable levels continues to put
pressure on North American airline margins. Further bankruptcy or similar
proceedings by low-cost or other North American carriers may adversely affect
the ability of North American lessees to make timely and full rental payments.
LEASE DEFAULTS WILL RESULT IN HIGHER COSTS
Although Aircraft Finance has the right to repossess aircraft and to
exercise remedies upon a lease default, it may incur significant costs in the
process. Those costs include legal and other expenses of court or other
governmental proceedings, particularly if the lessee is contesting the
proceeding or is in bankruptcy, to obtain possession and/or re-registration of
the aircraft and flight and export permissions. Delays resulting from any such
proceedings would also increase the period of time during which the relevant
aircraft are not productively under lease. Moreover, Aircraft Finance may incur
substantial maintenance or
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<PAGE> 23
repair costs that a defaulting lessee has failed to pay and may need to pay off
liens and governmental charges on the aircraft to obtain clear possession and to
re-market the aircraft effectively. Any such cost or delays may adversely affect
the amounts available to pay to the holders of the Notes.
A LESSEE'S PERFORMANCE MAY BE AFFECTED BY "YEAR 2000" ISSUES
Although Aircraft Finance believes that ReSource/Phoenix's and GECAS's
directly controlled information systems will not be impaired materially by Year
2000 computer issues, it cannot forecast the ability of its lessees and others
adequately to address those issues. The scope of the global Year 2000 effort
encompasses many thousands of applications and computer programs, products and
services, facilities and facilities-related equipment, suppliers and customers.
Business operations are also dependent on the Year 2000 readiness of utilities,
communications companies, transportation providers and other providers of
infrastructure services. In such an environment, there may be instances of
failure that could cause disruptions in the servicer's business processes or
that could affect a lessee's ability to pay amounts owed to Aircraft Finance.
Aircraft Finance cannot estimate the likelihood and effects of those kinds of
failures.
RISKS RELATING TO THE OPERATION OF AIRCRAFT
AIRCRAFT FINANCE MAY HAVE TO PAY MAINTENANCE COSTS OR FUND MAINTENANCE
RESERVES
Any failure of an aircraft to be maintained or modified properly in
accordance with manufacturer's requirements or airworthiness directives and
other governmental requirements, including those relating to noise and emissions
standards, can impair the safety of the aircraft, result in grounding or
penalties and affect the ability to re-lease or to sell the aircraft. The costs
of maintenance can be substantial and may have a higher payment priority than
that of the Notes. In many cases, the lessee is required to provide for
maintenance or modifications. Lessees could, however, fail to pay those costs,
and the burden would fall on Aircraft Finance. In addition, Aircraft Finance or
its subsidiary as the lessor is, in some instances, required to bear a portion
of the maintenance costs, and the pressure of competition may require it to bear
an increasing portion of those costs in the future. Although Aircraft Finance
established a cash reserve of $52 million on May 5, 1999, any significant
variations in the costs required to be paid directly by Aircraft Finance may
materially impair the ability of Aircraft Finance to make payments on the Notes.
AIRCRAFT FINANCE MAY INCUR OTHER OPERATING COSTS
As in the case of maintenance costs, Aircraft Finance may incur other
operational costs upon a lessee default or where the terms of the lease require
it to pay a portion of those costs. Those costs include:
(1) the costs of casualty, liability and political risk insurance and
the liability costs or losses when insurance coverage has not been or
cannot be obtained as required or is insufficient in amount or scope;
(2) the costs of licensing, exporting or importing an aircraft,
airport taxes, customs duties, air navigation charges and similar
governmental or quasi-governmental impositions, which can be substantial;
and
(3) penalties and costs associated with the failure of lessees to keep
the aircraft registered under all appropriate local requirements.
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<PAGE> 24
The failure to pay some of these costs can result in liens on the aircraft,
and the failure to register can result in a loss of insurance. These matters can
prevent the re-lease, sale or other use of the aircraft until the problem is
cured.
RISKS RELATING TO RE-LEASING AND SALE OF THE AIRCRAFT
AIRCRAFT FINANCE WILL NEED TO RE-LEASE OR SELL AIRCRAFT TO MAINTAIN CASH FLOW
The number and types of the initial aircraft that Aircraft Finance must
place with lessees through December 31, 2003 is presented in the table below.
That table shows the years in which the leases for those aircraft are
contractually scheduled to expire, including expirations of anticipated leases
that are currently represented by existing letters of intent. The table
illustrates that the leases for 20 of the initial aircraft, representing
approximately 51.2% of the aggregate initial appraised value, are scheduled to
expire or permit early termination as early as December 31, 2003. The table
assumes that, except as indicated, no lease terminates prematurely, no
substitute aircraft are delivered, no aircraft are sold and no additional
aircraft are purchased. More aircraft will need to be re-leased to the extent
leases terminate prematurely.
AIRCRAFT FINANCE LEASE PLACEMENT REQUIREMENT AT APRIL 1, 1999
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------
AIRCRAFT TYPE 1999 2000 2001 2002 2003
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
B737-300................................... -- -- 1 3 --
B737-400................................... -- -- -- 2 --
B767-200ER................................. -- 2* -- -- --
B767-300ER................................. 1 -- 1** --
A310-300................................... -- -- -- -- 1
A320-200................................... 1*** -- -- -- 2+
DC-10-30................................... -- -- -- 2 --
MD-83...................................... -- 1** 2++ 1
---- -- --- --- --
Total...................................... 2 2 2 10 4
</TABLE>
- -------------------------
* Under certain circumstances the leases of these two aircraft could terminate
as early as 2000.
** Assuming an early termination option is exercised.
*** Subject to a letter of intent for a new 5-year lease.
+ The servicer is currently in discussions with the lessee of these two
aircraft to permit early termination for the related leases in 2000.
++ Includes an aircraft for which an early termination option is assumed to be
exercised.
AIRCRAFT FINANCE MAY NOT BE ABLE TO RE-LEASE OR SELL AIRCRAFT AT FAVORABLE TERMS
The servicer has agreed to seek to re-lease aircraft serviced by it as they
become available upon the termination of any lease. The servicer has not assured
Aircraft Finance, and Aircraft Finance cannot assure you, that Aircraft Finance
will be able to re-lease aircraft on a timely basis, with equally favorable
rental rates and otherwise on lease terms
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<PAGE> 25
that will allow Aircraft Finance to make payments in full on the Notes. Aircraft
Finance's ability to obtain timely and favorable lease terms or to sell aircraft
at attractive prices may be adversely affected by unpredictable changes in
general economic conditions, passenger demand and the competitive strength of
the airline industry generally. The availability of commercial jet aircraft for
lease or sale has periodically experienced cycles of oversupply and undersupply,
resulting in sharp decreases and increases in aircraft values and lease rates.
Among other factors that could influence lease terms and sales prices are the
following:
(1) cyclical changes in interest rates and the availability of credit;
(2) fluctuations in the cost of fuels and other materials, labor
costs, costs associated with changing governmental regulations and air
traffic control constraints;
(3) manufacturer production levels, particularly increased production
of new aircraft, as announced by Boeing and Airbus, which makes older, used
models less attractive, especially in Asia where an oversupply is already
perceived to exist;
(4) the cessation or announced cessation of production of particular
aircraft models, such as, after the merger of Boeing and McDonnell Douglas,
the MD-80 of which there are four in Aircraft Finance's initial portfolio,
representing approximately 6.9% of the aggregate initial appraised value of
the portfolio;
(5) the operating history of particular aircraft, the identity of its
operators and legal and regulatory requirements affecting its operation and
transfer or leasing;
(6) changes in aircraft technology, either significant advances by
manufacturers or governmentally mandated modifications, that may render
older models substantially less attractive or may result in modification
costs that reduce net sales prices or rentals; and
(7) competition from aircraft manufacturers, airlines, aircraft
leasing companies, financial institutions, aircraft broker and special
purpose leasing vehicles that may have greater financial resources and
greater legal and financial flexibility to structure and offer more
favorable leasing, pricing or financing alternatives.
The concentration of the types of aircraft held by Aircraft Finance may
amplify some of the factors noted above. The initial aircraft include eight
aircraft types, three of which represent together 69.8% of the aggregate initial
appraised value, with Boeing 737-300s constituting 29.0%, Boeing 767-300ERs
constituting 23.4% and Airbus A320-200s constituting 17.4% of that aggregate
value. Also, narrowbody aircraft constitute 65.4% of the aggregate initial
appraised value.
YOU SHOULD NOT EXPECT THAT ACTUAL AIRCRAFT VALUES WILL NECESSARILY MATCH
APPRAISED VALUES
The appraised base values obtained and to be obtained assume an "open,
unrestricted stable market environment with a reasonable balance of supply and
demand" and other factors common for like appraisals. At any point in the
aircraft leasing cycle, however, there will be imbalances of aircraft supply and
demand and there may be particularly pronounced imbalances for specific aircraft
types. Although some initial aircraft may have market values approximating or
exceeding the appraised values given them, others, such as the older aircraft,
may have market values below, and in some cases significantly below, those
appraised base values. At a cyclical low, the market value of most aircraft
types is likely to be less than, and in some cases significantly less than, the
appraised base values.
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<PAGE> 26
In addition, the appraised base values of the initial aircraft will likely
decline over time due to aging, increasing maintenance expenses and similar
factors. Finally, appraised base values obtained upon delivery of the aircraft
would likely be less than the initial appraised values, which were determined as
of December 31, 1998. Accordingly, you should not place undue reliance on the
indicated appraised values as an accurate depiction of current market or
realizable values at any one point in time.
RISKS RELATING TO AIRCRAFT FINANCE'S RELIANCE ON PERFORMANCE BY OTHERS
AIRCRAFT FINANCE IS PARTICULARLY DEPENDENT ON ADEQUATE PERFORMANCE BY SERVICE
PROVIDERS
Neither Aircraft Finance nor its subsidiaries will have any employees or
executive managers of its own, although each will have a board of trustees or
directors. Instead, Aircraft Finance will rely on contracts with GECAS as the
servicer, ReSource/Phoenix as the administrative agent, Bankers Trust as the
financial advisor, Lehman Brothers as the capital markets advisor and perhaps
other service providers for all asset servicing, executive and administrative
functions. Regarding these arrangements, please note that:
(1) any of these organizations may fail to perform its contractual
obligations adequately;
(2) any of them may exercise contract termination rights;
(3) Aircraft Finance may find it difficult to recover damages for poor
performance in light of contractual limitations;
(4) Aircraft Finance may not be able to terminate the contract itself,
in particular the servicing agreement with GECAS; and
(5) Aircraft Finance may not have the legal right to locate
satisfactory replacements on favorable terms.
Any of these events may materially and adversely affect the operations of
Aircraft Finance and its subsidiaries and, thereby, the ability of Aircraft
Finance to repay the Notes.
GECAS FACES SEVERAL CONFLICTS OF INTEREST AS THE SERVICER FOR AIRCRAFT FINANCE
In addition to acting as the servicer for the aircraft owned by Aircraft
Finance's subsidiaries, GECAS manages aircraft and related assets owned by
Airplanes U.S. Trust and Airplanes Limited, AerFi Group plc (formerly known as
GPA Group plc), GE Capital, affiliates of those entities and others. As of April
1, 1999, GECAS and its affiliates managed 836 aircraft, of which 565 aircraft,
or 68%, were owned by GE Capital and its affiliates. In addition, GE Capital has
in place orders for more than 200 Boeing and Airbus aircraft, and it and its
affiliates are likely to acquire additional new and used aircraft in the future.
Many of these additional aircraft will be managed by GECAS. Moreover, it is also
likely that GECAS will manage additional aircraft owned by others, and it may in
the future sponsor leasing programs with objectives like those of Aircraft
Finance. Finally, GE Capital holds the majority of the most junior class of the
debt of the Airplanes entities, an aircraft leasing group with investment
objectives similar to those of Aircraft Finance. An affiliate of GECAS currently
holds a portion of the Initial Class D Notes.
GECAS will, therefore, from time to time have conflicts of interest in
performing its obligations as the servicer to Aircraft Finance and its
obligations to the other entities
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<PAGE> 27
whose aircraft and other assets it manages or services, in particular the GE
Capital group. These conflicts will arise when Aircraft Finance aircraft are
leased to entities that are also the lessees of other aircraft managed by GECAS,
and decisions affecting some aircraft may be adverse to others. These conflicts
may be particularly acute when a lessee in financial distress needs to return
some of its aircraft. Conflicts will also arise when the aircraft of Aircraft
Finance are being marketed for re-lease or sale at a time when other aircraft
managed by GECAS are similarly being marketed. These circumstances may be
especially sensitive where GE Capital is providing financing for the marketed
aircraft or where GECAS' contractual arrangements have the effect of requiring
preferential treatment for other aircraft. Under the terms of its servicing
agreement with GECAS, Aircraft Finance is not necessarily entitled to be
informed of all conflicts of interest involving the servicer and is limited in
its right to replace the servicer because of conflicts of interest.
AIRCRAFT FINANCE'S CONTRACTUAL RIGHTS TO RECOVER AGAINST THE SERVICER FOR
INADEQUATE PERFORMANCE MAY BE LIMITED
Under the Servicing Agreement, Aircraft Finance may not in many cases have
the right to recover damages for inadequate performance. Moreover, Aircraft
Finance's right to terminate the Servicing Agreement by reason of a failure of
the servicer to perform is limited to those failures to perform that materially
and adversely affect Aircraft Finance and its subsidiaries as a whole.
In addition, the servicer is in particular not contractually responsible
for:
(1) any so-called Year 2000 problems relating to the serviced aircraft
and leases;
(2) the transfer of aircraft, leases or other assets to any person
within the Aircraft Finance group;
(3) the adequacy of the terms of any aircraft lease, including rent
payments, maintenance reserves or security deposits;
(4) the reliability or creditworthiness of any lessee; and
(5) the terms of the Notes and the ability of Aircraft Finance to
comply with the terms of the Notes.
Aircraft Finance has agreed to indemnify the servicer and its affiliates
for broad categories of losses arising out of the performance of services for
the aircraft and leases held by subsidiaries of Aircraft Finance, including Year
2000 problems unless the losses arise from the servicer's gross negligence or
willful misconduct. Aircraft Finance has also agreed to indemnify the servicer
and its affiliates as to losses arising out of the Exchange Offer and the
disclosures in this Prospectus, except disclosures provided by the servicer.
UNICAPITAL FACES CONFLICTS OF INTEREST AS TO AIRCRAFT FINANCE
Two subsidiaries of UniCapital hold all the beneficial interests in
Aircraft Finance and, as such, have appointed one of the three Controlling
Trustees of Aircraft Finance. That Controlling Trustee has the right
unilaterally to approve the acquisition of additional aircraft by Aircraft
Finance to the extent permitted by the indenture governing the Notes. UniCapital
may also act as the servicer for additional aircraft. In 1998, more than 60% of
UniCapital's revenues derived from purchasing, leasing, selling or arranging
financing for aircraft and aircraft equipment, and, as of March 31, 1999, its
fleet consisted of 38 aircraft. UniCapital is likely to acquire additional
aircraft. It is possible, therefore, that UniCapital
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<PAGE> 28
will from time to time have conflicts of interest in performing its obligations
or duties in respect of Aircraft Finance and in managing its own portfolio of
aircraft that are similar to those GECAS faces. In addition, UniCapital will
face conflicts of interest if Aircraft Finance purchases aircraft from
UniCapital or any of its affiliates because any such purchases require the
approval only of the controlling trustee of Aircraft Finance appointed by
wholly-owned subsidiaries of UniCapital. UniCapital holds a small portion of the
Initial Class D Notes.
RISKS RELATING TO THE TERMS OF THE NOTES
YOU WILL NOT HAVE ANY LIEN OR SIMILAR INTEREST IN THE AIRCRAFT
The security trustee will not on your behalf have available the broader
category of protection and enforcement rights upon default that would have been
available had your claims been secured by the aircraft. Although the aircraft
leases and the ownership interest in the Aircraft Finance subsidiaries that own
the aircraft have been or will be pledged to the security trustee for your
benefit, the value of the aircraft is more vulnerable to competing claims and
the ability of the security trustee to sell the aircraft may be more constrained
in the absence of a lien on the aircraft.
YOU WILL NOT BE COMPENSATED FOR WITHHOLDING TAXES
Aircraft Finance is not obligated to make, and it will not make any
additional payments to the holders of the Notes in respect of, any withholding
or deduction required to be made by applicable law with respect to payments on
the Notes. If any withholding or deduction is required, Aircraft Finance will
use reasonable efforts to avoid the applicable requirement and may redeem the
Notes. If any withholding taxes are imposed and Aircraft Finance does not redeem
the Notes, the net amount of interest received by the holders of the Notes will
be reduced by the amount of the taxes.
EACH CLASS OF NOTES HAS A LOWER PAYMENT PRIORITY THAN OTHER CLAIMS AGAINST
AIRCRAFT FINANCE
The fees, costs and expenses of Aircraft Finance and its subsidiaries
incurred in the ordinary course of permitted business activities, including fees
and indemnities to GECAS, ReSource/Phoenix, Bankers Trust, Lehman Brothers,
Wilmington Trust and other trustees of Aircraft Finance, have, with limited
exceptions, a higher payment priority than that of the Class A Notes and each
other class. Likewise, regularly scheduled interest and a minimum specified
amount of principal on the Class A Notes and amounts needed to top-up the first
level of cash reserves (or to reinstate any future credit facilities
substituting for cash reserves) have a higher payment priority than that of the
Class B Notes, the Class C Notes and the Class D Notes and so on through the
order of payment priorities set forth under "Description of the Notes -- Payment
Priorities." Any cash flow shortfall will more directly affect claimants with a
lower payment priority. This effect will be more pronounced after acceleration
of the Notes upon any bankruptcy of Aircraft Finance or other defaults when the
order of payment priorities is changed to favor the senior classes of Notes to a
greater degree.
PRINCIPAL PAYMENTS ON THE CLASS A NOTES MAY BE MADE MORE QUICKLY UPON CHANGES IN
APPRAISED VALUES
The principal payment amounts payable on the Class A Notes will be made
more quickly if the appraisals of the aircraft that Aircraft Finance is to
obtain at least annually
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<PAGE> 29
reflect a decline in aircraft values that is significantly greater than
expected. These accelerated principal payments on the Class A Notes may have the
effect of suspending principal payments on more junior Notes and extending the
weighted average lives of those 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 other factors. Accordingly, Aircraft Finance cannot assure you
that the expected average lives of its more junior Notes will not be materially
extended.
THE JUNIOR CLASSES OF NOTES GENERALLY WILL NOT BE ABLE TO DIRECT THE EXERCISE OF
REMEDIES
Upon default, only the holders of the senior-most class of Notes still
outstanding, determined in alphabetical order, and in limited instances the
provider of any future senior credit facility, will be able to direct the
trustee and the security trustee as to the exercise of remedies against Aircraft
Finance and the collateral. The holders of the other classes of Notes will not
be able to give any direction of that type. In giving directions regarding the
exercise of remedies, the holders of the senior class are entitled to consider
their own interests without regard to the interests of the other classes.
BANKRUPTCY CONSIDERATIONS RELATING TO "TRUE SALE" AND "CONSOLIDATION" ISSUES
If GE Capital or any of its affiliates that sold aircraft to Aircraft
Finance were to become a debtor in a U.S. federal bankruptcy proceeding, any
creditor, the bankruptcy trustee or the debtor itself could request the court to
recharacterize the transfer of aircraft or leases to Aircraft Finance as a
financing by the sellers rather than as a "true sale" to Aircraft Finance. If
such a claim were made, delays in payments on the Notes could result. Should the
bankruptcy court rule in favor of any such claim, the court could include the
assets transferred to Aircraft Finance in the debtor's bankruptcy estate or take
other actions that would be adverse to you and that could result in reductions
in payments on the Notes.
Weil, Gotshal & Manges LLP, as counsel to the sellers of the initial
aircraft, delivered a reasoned opinion to Aircraft Finance on May 5, 1999 to the
effect that, based on various assumptions and qualifications set forth in the
opinion, in a proceeding under the U.S. Bankruptcy Code relating to GE Capital
or any affiliated aircraft seller, a court applying federal bankruptcy law and
properly presented with the facts and exercising reasonable discretion would not
grant an order recharacterizing the transfer of the initial aircraft by any
seller to Aircraft Finance as a financing by any seller and would not include
those aircraft or the related leases in the bankruptcy estate of any seller.
If UniCapital were to become a debtor in a U.S. federal bankruptcy, a
similar request to recharacterize the transfer of two aircraft and related
leases by UniCapital to GE Capital -- prior to their re-sale to Aircraft
Finance -- could be made and similar consequences could ensue. In addition, if
UniCapital were to become a debtor in such a proceeding under the U.S.
Bankruptcy Code, a creditor, bankruptcy trustee or the debtor could request a
court to order that the assets and liabilities of either of Aircraft Finance or
the holders of its beneficial interest should be substantively consolidated with
those of UniCapital. If such a claim were made, delays in payments on the Notes
could result. Should the bankruptcy court rule in favor of any such claim, the
court could substantively consolidate Aircraft Finance or those holders with
UniCapital or otherwise consider them
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<PAGE> 30
to be part of UniCapital's bankruptcy estate or take other actions that would be
adverse to you and that could result in reductions in payments on the Notes.
Milbank, Tweed, Hadley & McCloy LLP delivered a reasoned opinion to
Aircraft Finance on May 5, 1999 to the effect that, based on various assumptions
and qualifications set forth in the opinion, in a proceeding under the U.S.
Bankruptcy Code relating to UniCapital, a court properly presented with the
facts and exercising reasonable discretion and applying current bankruptcy law
principles would not grant an order (1) recharacterizing the transfer of the two
initial aircraft and related leases acquired from UniCapital as a financing by
UniCapital and include those aircraft and leases acquired in UniCapital
bankruptcy estate or (2) substantively consolidating the assets and liabilities
of either of Aircraft Finance or those holders of its beneficial interests with
those of UniCapital.
Both opinions note, however, that there is no case law directly on point,
that a court may decide differently from the views expressed in the opinion and
that the opinion represents only counsel's the best judgment and is not binding
in the courts. Moreover, each opinion states that it depends on the accuracy of
many factual assumptions that the counsel has not independently verified and
notes that different facts could lead a court to reach a different conclusion.
RISKS RELATING TO THE EXCHANGE OFFER
IF YOU DO NOT EXCHANGE NOTES, THE SALE OF YOUR RESTRICTED NOTES WILL CONTINUE TO
BE HIGHLY RESTRICTED
Aircraft Finance issued the Restricted Notes in a private offering exempt
from the registration requirements of the Securities Act. Therefore, holders of
Restricted Notes may not offer or sell Restricted Notes except in compliance
with the registration or qualification requirements of the Securities Act and
applicable state securities laws or pursuant to exceptions from, or in
transactions not subject to, those requirements. Holders of Restricted Notes who
do not exchange their Restricted Notes for Exchange Notes in the Exchange Offer
will continue to be subject to those transfer restrictions after the Exchange
Offer.
In addition, holders of Restricted Notes who do not tender their Restricted
Notes in the Exchange Offer will no longer be entitled to any registration
rights after the Exchange Offer except those holders who are legally precluded
from participating in the Exchange Offer. To the extent that Restricted Notes
are not tendered and accepted in the Exchange Offer, any trading liquidity for
untendered Restricted Notes could be adversely affected.
THERE MAY NOT BE AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES
Although those holders of Exchange Notes who are not Aircraft Finance
"affiliates" under the Securities Act may resell Exchange Notes without
registration under the Securities Act, there is no existing market for the
Exchange Notes. Aircraft Finance cannot assure you as to the liquidity of any
markets that may develop for the Exchange Notes, your ability to sell Exchange
Notes or the prices at which you would be able to sell Exchange Notes. Future
trading prices of the Exchange Notes will depend on many factors, including
prevailing interest rates, Aircraft Finance's operating results, the market for
similar securities and the liquidity of any market that may develop for the
Exchange Notes.
The initial purchasers in the private offering of the Notes have advised
Aircraft Finance that they intend to make a market in the Exchange Notes after
the Exchange
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<PAGE> 31
Offer. They are not, however, obligated to do so, and they may discontinue any
market making at any time without notice. In addition, market-making activity
may be limited during the Exchange Offer.
YOU WILL NEED TO FOLLOW THE EXCHANGE OFFER PROCEDURES CAREFULLY
If you wish to accept the Exchange Offer for your Restricted Notes, you
must deliver the letter of transmittal, together with the Restricted Notes to be
exchanged and any other required documentation, to the Exchange Agent, or effect
a tender of Restricted Notes by book-entry transfer into the Exchange Agent's
account, in each case in compliance with the instructions provided in "The
Exchange Offer" section of this Prospectus and in the letter of transmittal.
The method of delivering Restricted Notes, the letter of transmittal and
all other required documentation is at your election and risk. Although Aircraft
Finance intends to notify tendering holders of any defects or irregularities in
their tenders of Restricted Notes, neither Aircraft Finance, the Exchange Agent
nor any other person is under any duty to notify any holder of defects or
irregularities in the tender of Restricted Notes, and none of them are assuming
any liability for a failure to notify. Tenders of Restricted Notes will not be
deemed to have been properly made until all defects and irregularities have been
cured.
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THE PARTIES
AIRCRAFT FINANCE
Aircraft Finance is a business trust that was established under Delaware
law on April 13, 1999 for the purpose of acquiring the Aircraft either directly
or through companies or trusts owned by it, issuing the Notes and otherwise
carrying out the transaction described in this Prospectus. To that end, on May
5, 1999, Aircraft Finance issued the Notes and entered into the indenture under
which the Notes were issued, a servicing agreement with GECAS, a swap agreement
designed to hedge interest rate exposure and other transaction documents.
Aircraft Finance is owned by UniCapital AFT-I, Inc. and UniCapital AFT-II,
Inc., wholly-owned subsidiaries of UniCapital Corporation, a party unrelated to
the sellers of the aircraft or GECAS. Those subsidiaries were created especially
to hold their respective interests in Aircraft Finance.
Aircraft Finance's registered office is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001 care of Wilmington
Trust Company and its telephone number is 1-302-651-1000.
GECAS
GECAS is providing various services to Aircraft Finance and its
subsidiaries as servicer under the Servicing Agreement. GECAS is an Irish
private limited company headquartered in Shannon, Ireland and as of April 1,
1999 had 103 employees.
GECAS and its affiliates manage one of the world's most significant
portfolios of commercial aircraft. As of April 1, 1999, the portfolio of
aircraft managed by GECAS consisted of 836 aircraft, on lease to more than 157
lessees in 53 countries throughout the world. GE Capital, an affiliate of GECAS,
during the period 1996 to April 1, 1999, has entered into certain contracts for
the purchase of up to 119 Boeing 737 aircraft and 13 Boeing 767 aircraft with
options to acquire additional aircraft of the same type. In addition to these
new order commitments, GE Capital has separately purchased from Boeing 37 new
commercial jet aircraft. Also, during the period 1996 to 1998, GE Capital
entered into contracts for the purchase of up to 94 Airbus A319, A320, A321 and
A340 aircraft, with options for additional aircraft of the same type. In
addition to these new order commitments, GE Capital separately purchased from
Airbus 15 new commercial jet aircraft.
One of GECAS' principal businesses is providing a broad range of financial
products to airlines and aircraft operators and to aircraft owners, lenders and
investors throughout the world. To meet the fleet financing needs of its airline
customers, GECAS and its affiliates offer financing leases, operating leases and
other financial products. In conjunction with this business, GECAS and its
affiliates are responsible for developing, negotiating and consummating
aircraft-related investment opportunities in the aviation industry for GE
Capital, including the acquisition of aircraft for GE Capital. Also, GE Capital
holds the majority of the most junior class of debt in the aircraft asset
securitization vehicles Airplanes U.S. Trust and Airplanes Limited, and may
acquire beneficial interests in other securitization vehicles that own a
portfolio of aircraft assets.
GECAS intends to continue to market a broad range of products, and to
arrange and negotiate the sale of aircraft and related assets from the portfolio
it manages, and to arrange and negotiate securitization transactions involving
aircraft assets.
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GECAS offers a broad range of aircraft management services to aircraft
owners, lenders and investors, including:
(1) collection of rental payments;
(2) arranging and monitoring of aircraft maintenance performed by
others;
(3) limited technical inspection of aircraft;
(4) arranging and monitoring insurance;
(5) arranging for aircraft appraisals;
(6) registration and deregistration of aircraft;
(7) monitoring compliance with lease agreements;
(8) enforcement of lease provisions against lessees;
(9) investigating compliance with applicable airworthiness directives;
and
(10) facilitating delivery and redelivery of aircraft.
The table below lists the different aircraft comprising the portfolio
managed by GECAS as of April 1, 1999, by manufacturer and by whether the
aircraft are owned and managed by GECAS or its affiliates or managed for third
parties.
GECAS MANAGED PORTFOLIO
<TABLE>
<CAPTION>
GE CAPITAL MANAGED FOR AIRCRAFT FINANCE
AIRCRAFT TYPE AND CLASS FLEET(1) THIRD PARTIES(2) TOTAL INITIAL AIRCRAFT
- ----------------------- ---------- ---------------- ----- ----------------
<S> <C> <C> <C> <C>
Airbus A300................ 18 5 23 --
A310..................... 7 -- 7 1
A319..................... 13 -- 13 --
A320..................... 28 16 44 7
A321..................... 2 -- 2 --
Boeing B727................ 18 2 20 --
B737-200................. 51 37 88 --
B737-300/400/500(3)...... 177 46 223 16
B737-700/800............. 28 -- 28 --
B747-100/200/300/400..... 27 1 28 --
B757-200................. 27 3 30 --
B767-200EM............... 1 -- 1 --
B767-200ER............... 5 1 6 2
B767-300ER............... 24 4 28 4
B777-200................. 3 -- 3 --
</TABLE>
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<TABLE>
<CAPTION>
GE CAPITAL MANAGED FOR AIRCRAFT FINANCE
AIRCRAFT TYPE AND CLASS FLEET(1) THIRD PARTIES(2) TOTAL INITIAL AIRCRAFT
- ----------------------- ---------- ---------------- ----- ----------------
<S> <C> <C> <C> <C>
McDonnell Douglas
DC-8..................... 2 19 21 --
DC-9..................... 7 34 41 --
DC-10.................... 9 1 10 2
MD-11.................... 4 5 9 --
MD-82.................... 28 8 36 --
MD-83.................... 16 28 44 4
MD-87.................... -- 1 1 --
MD-88.................... 14 -- 14 --
Fokker F100................ 6 23 29 --
Other Jets................. 13 2 15 --
Turboprops................. 3 35 38 --
--- --- --- --
Total............ 531 271 802 36
--- --- --- --
Body Type:
Widebody................. 99 17 116 9
Narrowbody............... 432 254 686 27
Noise Compliance:(4)
Stage 2.................. 71 53 124 0
Stage 3.................. 460 218 678 36
</TABLE>
- -------------------------
(1) Some of the aircraft included in the GE Capital fleet are owned by joint
ventures or under other arrangements in which unaffiliated parties have
interests.
(2) The third parties are primarily the AerFi Group plc, Airplanes U.S. Trust
and Airplanes Limited and their respective affiliates.
(3) For purposes of this table, 10 Boeing 737 aircraft have been included in the
GE Capital fleet but both AerFi Group plc and/or its affiliates and GE
Capital are parties to the relevant leases.
(4) Turboprop aircraft have been classified as Stage 3 compliant.
UNICAPITAL
UniCapital is the parent of the holders of Aircraft Finance's beneficial
interests. UniCapital may in the future sell aircraft to Aircraft Finance or its
subsidiaries and service those aircraft if the rating agencies rating the Notes
confirm that they will not lower, qualify or withdraw their ratings on the Notes
as a result. UniCapital is headquartered in Miami, Florida and as of March 31,
1999 had 635 employees.
UniCapital is a New York Stock Exchange listed company that, through its
seventeen operating companies, originates, acquires, sells and services
equipment leases and arranges various forms of financings in the equipment
leasing industry. UniCapital's leases and other financing arrangements cover a
broad range of equipment, including aircraft and aircraft equipment, computer
and telecommunications equipment, construction and manufacturing
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<PAGE> 35
equipment, office equipment, tractor trailers, printing equipment, car washes,
petroleum retail equipment and vending machines. In 1998, more than 60% of
UniCapital's revenues were derived from its activities involving purchasing,
leasing, selling or arranging financing with respect to aircraft and aircraft
engines.
As of March 31, 1999, UniCapital owned 38 aircraft, which at such time were
on lease to 19 lessees in eight countries throughout the world. As of March 31,
1999, UniCapital's fleet consisted of two Airbus 320-231 aircraft, six Boeing
727 aircraft, seven Boeing 737-200 aircraft, five Boeing 737-300 aircraft, eight
Boeing 747 aircraft, one Boeing 757-200 aircraft, one Boeing 767-300ER aircraft,
one Lockheed L1011 aircraft, one DC-8 aircraft, five DC-9 aircraft and one MD-83
aircraft.
USE OF PROCEEDS OF THE EXCHANGE NOTES
The Exchange Offer is intended to satisfy a number of Aircraft Finance's
obligations to the initial purchasers of the Restricted Notes. Aircraft Finance
will not receive any proceeds from the issuance of the Exchange Notes offered
under this Prospectus.
In consideration for issuing the Exchange Notes, Aircraft Finance will
receive, in exchange, Restricted Notes in like principal amount. The form and
terms of the Exchange Notes are identical in all material respects to the form
and terms of the Restricted Notes, except as otherwise described under "The
Exchange Offer -- Terms of the Exchange Offer." The Restricted Notes surrendered
in exchange for the Exchange Notes will be retired and cancelled and cannot be
reissued. Accordingly, the issuance of the Exchange Notes will not result in any
increase in Aircraft Finance's outstanding debt.
The net cash proceeds to Aircraft Finance from the offering of the
Restricted Notes (together with $64 million of Class D Notes) was approximately
$1.2 billion after payment of subscription discounts and commissions to the
initial purchasers of the Restricted Notes estimated to be approximately $8.7
million. Aircraft Finance also received approximately $39.1 million from the
purchasers of its beneficial interests. Aircraft Finance used the proceeds (1)
to fund the purchase price for 36 aircraft from GE Capital and its affiliates;
(2) to fund a cash reserve in the amount of $52 million; and (3) to pay or
provide for certain expenses of Aircraft Finance and its subsidiaries.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Aircraft Finance initially sold the Restricted Notes and the initial Class
D Notes in a private offering on May 5, 1999 to Lehman Brothers Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse First Boston
Corporation, referred to as the initial purchasers in this Prospectus, pursuant
to a Purchase Agreement dated April 21, 1999 between it and the Initial
Purchasers. The initial purchasers subsequently resold the Restricted Notes to
qualified institutional buyers in reliance on, and subject to the restrictions
of, Rule 144A under the Securities Act and outside the United States in
accordance with Regulation S under the Securities Act.
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<PAGE> 36
In connection with the private offering of the Restricted Notes, Aircraft
Finance and the Initial Purchasers entered into a registration rights agreement
dated May 5, 1999, in which Aircraft Finance agreed, among other things:
(1) to file with the SEC as soon as practicable, a registration
statement relating to an exchange offer for the Restricted Notes;
(2) to use all commercially reasonable efforts to cause that
registration statement to be declared effective under the Securities Act at
the earliest possible time;
(3) upon the effectiveness of that registration statement, to offer
the holders of the Restricted Notes the opportunity to exchange their
Restricted Notes in the Exchange Offer for a like principal amount of
Exchange Notes;
(4) to keep the Exchange Offer open for not less than 20 business days
(or longer, if required by applicable law) after that registration
statement is declared effective;
(5) to use all commercially reasonable efforts to consummate the
Exchange Offer on the earliest practicable date after that registration
statement has become effective, but in no event later than 30 business days
after effectiveness; and
(6) to use all commercially reasonable efforts to consummate the
Exchange Offer on or before January 28, 2000.
Aircraft Finance also agreed that it would, under certain circumstances:
(1) use its best efforts to file a shelf registration statement
relating to the offer and sale of the Restricted Notes by the holders of
the Restricted Notes;
(2) use its best efforts to cause the shelf registration statement to
be declared effective within 270 days after the obligation to file one
arises; and
(3) use its best efforts to keep the shelf registration statement
effective for at least two years (as may be extended under the registration
rights agreement) or until the Restricted Notes covered by the shelf
registration statement have been sold or until the Restricted Notes become
eligible for resale without volume restrictions pursuant to Rule 144 under
the Securities Act.
The Exchange Offer made by this Prospectus is intended to satisfy your
registration rights under the registration rights agreement. If Aircraft Finance
fails to fulfill its registration and exchange obligations, you, as a holder of
outstanding Restricted Notes, are entitled to receive additional interest, at a
rate of 0.50% per annum as liquidated damages, as and to the extent provided in
the indenture governing the Notes.
Restricted Notes that are not tendered for exchange in the Exchange Offer
will remain outstanding and continue to accrue interest and will be entitled to
the rights and benefits that holders of Restricted Notes have under the
indenture governing the Notes and the registration rights agreement. No holder
of Restricted Notes will be entitled to receive any additional interest as noted
in the prior paragraph on its Restricted Notes, if that holder was, at any time
while the Exchange Offer is pending, eligible to exchange, and did not validly
tender, its Restricted Notes for Exchange Notes in the Exchange Offer.
For a more complete understanding of your registration rights, you should
refer to the registration rights agreement, which is included as Exhibit 4.4 to
the Registration Statement that relates to this Prospectus.
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<PAGE> 37
RESALE OF EXCHANGE NOTES
Based on no-action letters issued by the staff of the SEC in unrelated
transactions, Aircraft Finance believes that you may offer for resale, resell or
otherwise transfer any Exchange Notes issued to you in the Exchange Offer in
exchange for Restricted Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act, if
(1) you are acquiring the Exchange Notes issued in the Exchange Offer
in the ordinary course of your business;
(2) you are not participating, do not intend to participate and have
no arrangement or understanding with any person to participate, in a
distribution of the Exchange Notes;
(3) you are not an "affiliate" of Aircraft Finance (as defined in Rule
405 under the Securities Act); and
(4) you are not an initial purchaser who is holding Exchange Notes you
received in exchange for Restricted Notes acquired directly from Aircraft
Finance in the initial offering.
If you are an "affiliate" of Aircraft Finance or an initial purchaser
described above or if you have any arrangement or understanding with any person
to participate in a distribution of the Exchange Notes
(1) you will not be able to rely on the interpretations of the staff
of the SEC in connection with any offer for resale, resale or other
transfer of Exchange Notes; and
(2) you must comply with the registration and prospectus delivery
requirements of the Securities Act, or have an exemption available to you,
in connection with any offer for resale, resale or other transfer of the
Exchange Notes. This Prospectus may be used for an offer for sale, resale
or other transfer of the Exchange Notes only as specifically set forth in
this Prospectus.
In addition, Aircraft Finance is not making the Exchange Offer to, nor will
it accept surrenders of Restricted Notes from, holders of Restricted Notes in
any state in which the Exchange Offer would not comply with the applicable
securities laws or "blue sky" laws of that state.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Restricted Notes, where Restricted Notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
On the terms and conditions set forth in this Prospectus and in the
accompanying letter of transmittal, Aircraft Finance will accept all Restricted
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date (defined below in "-- Expiration Date; Extensions;
Amendments"). After authentication of the Exchange Notes by the trustee or an
authenticating agent, Aircraft Finance will issue and deliver $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
outstanding Restricted Notes accepted in the Exchange Offer. You may tender some
or all of your Restricted Notes pursuant to the Exchange Offer, but only in
integral multiples of $1,000.
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<PAGE> 38
By tendering Restricted Notes in exchange for Exchange Notes and by
executing the letter of transmittal, you will be representing to Aircraft
Finance that, among other things
(1) any Exchange Notes to be received by you will be acquired in the
ordinary course of your business;
(2) you are not engaging in a distribution nor do you have an
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes; and
(3) you are not an "affiliate" of Aircraft Finance (as defined in Rule
405 under the Securities Act), or, if you are an affiliate, that you will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
IN THE CASE OF A BROKER-DEALER THAT RECEIVES EXCHANGE NOTES FOR ITS OWN
ACCOUNT IN EXCHANGE FOR RESTRICTED NOTES THAT WERE ACQUIRED BY IT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES, THE LETTER OF TRANSMITTAL WILL ALSO
INCLUDE AN ACKNOWLEDGMENT THAT THE BROKER-DEALER WILL DELIVER A COPY OF THIS
PROSPECTUS IN CONNECTION WITH THE RESALE BY IT OF EXCHANGE NOTES RECEIVED
PURSUANT TO THE EXCHANGE OFFER; HOWEVER, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, THE BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" (WITHIN THE MEANING OF THE SECURITIES ACT). SEE "PLAN OF
DISTRIBUTION".
The Exchange Notes will be issued under and entitled to the benefits of the
indenture that governs the Restricted Notes. The form and terms of the Exchange
Notes are identical in all material respects to the form and terms of the
outstanding Restricted Notes, except that
(1) the offering of the Exchange Notes has been registered under the
Securities Act;
(2) the Exchange Notes will not be subject to transfer restrictions;
and
(3) the Exchange Notes will be issued without registration rights.
As of the date of this Prospectus, $1,145,000,000 aggregate principal
amount of the Restricted Notes is outstanding. In connection with the issuance
of the Restricted Notes, Aircraft Finance arranged for the Restricted Notes to
be issued and transferable in book-entry form through the facilities of The
Depository Trust Company, acting as a depositary. The Exchange Notes will also
be issuable and transferable in book-entry form through DTC.
This Prospectus and the accompanying letter of transmittal are initially
being sent to all registered holders of Restricted Notes as of the close of
business on , 1999. There will be no fixed record date for
determining registered holders of Restricted Notes entitled to participate in
the Exchange Offer. The Exchange Offer is not conditioned upon the tender of any
minimum aggregate principal amount of Restricted Notes. The Exchange Offer is,
however, subject to customary conditions, which may be waived by Aircraft
Finance, and to the terms and provisions of the registration rights agreement.
See "-- Conditions to the Exchange Offer."
Aircraft Finance will be deemed to have accepted validly tendered
Restricted Notes when and if it has given oral or written notice to the Exchange
Agent. See "-- Exchange Agent." The Exchange Agent will act as agent for the
tendering holders of Restricted
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<PAGE> 39
Notes for the purpose of receiving Exchange Notes from Aircraft Finance and
delivering Exchange Notes to those holders.
If any tendered Restricted Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth in this
section, certificates for any of the unaccepted Restricted Notes will be
returned, at the expense of Aircraft Finance, to the tendering holder as
promptly as practicable after the Expiration Date.
Holders who tender Restricted Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
Restricted Notes pursuant to the Exchange Offer. Aircraft Finance will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "-- Solicitation of Tenders, Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1999, or the latest date to which Aircraft Finance extends the
Exchange Offer. Aircraft Finance may extend the Exchange Offer at any time and
from time to time, in its sole discretion, by giving oral or written notice to
the Exchange Agent and by timely public announcement.
Aircraft Finance expressly reserves the right, in its sole discretion, to
amend the terms of the Exchange Offer in any manner. Without limiting the
generality of the foregoing, if any of the conditions set forth under
"-- Conditions of the Exchange Offer" has occurred and has not been waived by
Aircraft Finance (if permitted to be waived by it), Aircraft Finance expressly
reserves the right, in its sole discretion, by giving oral or written notice to
the Exchange Agent, to
(1) delay accepting, or refuse to accept, any Restricted Notes not
previously accepted;
(2) extend the Exchange Offer; or
(3) terminate the Exchange Offer.
Any delay in accepting any Restricted Note and any extension, termination or
amendment of the Exchange Offer will be followed as promptly as practicable by
oral or written notice to the registered holders of the Restricted Notes. If
Aircraft Finance amends the Exchange Offer in a manner that it determines to
constitute a material change, Aircraft Finance will promptly disclose the
amendment in a manner reasonably calculated to inform the holders of the
amendment, and Aircraft Finance will extend the Exchange Offer to the extent
required by law.
Without limiting the manner in which it may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, Aircraft Finance is not obligated to publish, advise, or
otherwise communicate any public announcement, other than by making a timely
press release.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue from the last interest payment
date on which interest was paid on the Restricted Notes that are surrendered in
exchange or, if no interest has been paid on the Restricted Notes, from May 5,
1999. The rate of and
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<PAGE> 40
payment date for interest on the Exchange Notes will be the same as that of the
related Restricted Note.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The Restricted Notes were issued as global securities in fully registered
form without interest coupons. Beneficial interests in the global securities
held by direct or indirect participants in DTC are shown on, and transfers of
these interests are effected only through, records maintained in book-entry form
by DTC with respect to its participants.
If you hold your Restricted Notes in the form of book-entry interests and
you wish to tender your Restricted Notes for exchange in the Exchange Offer, you
must transmit to the Exchange Agent on or prior to the Expiration Date either:
(1) a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other documents required by
such letter of transmittal, to the Exchange Agent at the address set forth
on the cover page of the letter of transmittal; or
(2) a computer-generated message, or Agent's Message, transmitted by
means of DTC's Automated Tender Offer Program, or ATOP, system and received
by the Exchange Agent and forming a part of a confirmation of book-entry
transfer, in which you acknowledge and agree to be bound by the terms of
the letter of transmittal.
In addition, in order to deliver Restricted Notes held in the form of
book-entry interests (1) a timely confirmation of book-entry transfer of those
notes into the Exchange Agent's account at DTC pursuant to the procedure for
book-entry transfers described below under "-- Book-Entry Transfer" must be
received by the Exchange Agent prior to the Expiration Date; or (2) you must
comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF RESTRICTED NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND
RISK. INSTEAD OF DELIVERY BY MAIL, AIRCRAFT FINANCE RECOMMENDS THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU
SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR RESTRICTED NOTES TO AIRCRAFT
FINANCE OR THE EXCHANGE AGENT. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY, OR NOMINEE TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
CERTIFICATED RESTRICTED NOTES
Only registered holders of certificated Restricted Notes may tender those
notes in the Exchange Offer. If your Restricted Notes are certificated notes and
you wish to tender those notes for exchange in the Exchange Offer, you must
transmit to the Exchange Agent on or prior to the Expiration Date, a written or
facsimile copy of a properly completed and duly executed letter of transmittal,
including all other required documents, to the address set forth below under
"-- Exchange Agent." In addition, in order to validly tender your certificated
Restricted Notes:
(1) the certificates representing your Restricted Notes must be
received by the Exchange Agent prior to the Expiration Date or
(2) you must comply with the guaranteed delivery procedures described
below.
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<PAGE> 41
PROCEDURES APPLICABLE TO ALL HOLDERS
If you tender a Restricted Note and you do not withdraw the tender prior to
the Expiration Date, you will have made an agreement with Aircraft Finance in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
If your Restricted Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your Restricted Notes, either make appropriate arrangements to
register ownership of the Restricted Notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(1) Restricted Notes tendered in the Exchange Offer are tendered
either
(a) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions"
on the letter of transmittal or
(b) for the account of an eligible institution; and
(2) the box entitled "Special Registration Instructions" on the letter
of transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your
Restricted Notes must be endorsed or accompanied by a properly completed bond
power and signed by you as your name appears on those Restricted Notes.
If the letter of transmittal or any Restricted Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless Aircraft Finance
waives this requirement, in this instance you must submit with the letter of
transmittal proper evidence satisfactory to Aircraft Finance of their authority
to act on your behalf.
In addition, Aircraft Finance reserves the right in its sole discretion to:
(1) purchase or make offers for, or offer registered notes for, any
Restricted Notes that remain outstanding subsequent to the expiration of
the Exchange Offer;
(2) terminate the Exchange Offer; and
(3) to the extent permitted by applicable law, purchase notes in the
open market, in privately negotiated transactions or otherwise.
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<PAGE> 42
The terms of any of these purchases or offers could differ from the terms
of the Exchange Offer.
In all cases, Aircraft Finance will issue registered notes for Restricted
Notes that are accepted for exchange in the Exchange Offer after timely receipt
by the Exchange Agent of certificates for your Restricted Notes or a timely
book-entry confirmation of your Restricted Notes into the Exchange Agent's
account at DTC, a properly completed and duly executed letter of transmittal, or
a computer-generated message instead of the letter of transmittal, and all other
required documents. If any tendered Restricted Notes are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer or if
Restricted Notes are submitted for a greater principal amount than you desire to
exchange, those or substitute Restricted Notes will be returned without expense
to you. In addition, in the case of Restricted Notes tendered by book-entry
transfer into the Exchange Agent's account at DTC pursuant to the book-entry
transfer procedures described below, the unexchanged Restricted Notes will be
credited to your account maintained with DTC, as promptly as practicable after
the expiration or termination of the Exchange Offer.
Aircraft Finance will determine, in its sole discretion, all questions
regarding the validity, form, eligibility (including time of receipt),
acceptance of tendered Restricted Notes and withdrawal of tendered Restricted
Notes, and that determination will be final and binding on all parties. Aircraft
Finance reserves the absolute right to reject any and all Restricted Notes not
properly tendered or to refuse to accept any Restricted Notes that would, in the
opinion of counsel to Aircraft Finance, be unlawful. Aircraft Finance also
reserves the right to waive, in its sole discretion, to waive any defects,
irregularities or conditions of tender as to any particular Restricted Note.
Aircraft Finance's interpretation of the terms and conditions of the Exchange
Offer and the instructions in the letter of transmittal will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Restricted Notes must be cured within such time as
Aircraft Finance may determine. Although Aircraft Finance intends to notify any
affected holder of defects or irregularities in the tender of Restricted Notes,
none of Aircraft Finance, the Exchange Agent, the trustee or any other person
undertakes any liability for any failure to give that notice. Tenders of
Restricted Notes will not be deemed to have been properly made until these
defects or irregularities have been cured or waived.
Any Restricted Notes received by the Exchange Agent that Aircraft Finance
determines are not properly tendered or the tender of which is otherwise
rejected by it and as to which the defects or irregularities have not been cured
or waived by it will be returned by the Exchange Agent to the tendering holder
unless otherwise provided in the letter of transmittal, as soon as practicable
following the Expiration Date.
Aircraft Finance will execute, and the trustee will authenticate and
deliver to the surrendering holder of Restricted Notes, Exchange Notes in the
same aggregate principal amount as the Restricted Notes so surrendered as
promptly as practicable following the Expiration Date whenever any Restricted
Notes are validly tendered for exchange and accepted by Aircraft Finance.
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<PAGE> 43
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your Restricted Notes and your Restricted Notes are
not immediately available or one of the situations described in "-- Book-Entry
Transfer" occurs, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, on the Expiration
Date, the Exchange Agent receives from an eligible institution, a written
or facsimile copy of a properly completed and duly executed letter of
transmittal and notice of guaranteed delivery, substantially in the form
provided by Aircraft Finance; and
(3) the certificates for all certificated Restricted Notes, in proper
form for transfer, or a book-entry confirmation, and all other documents
required by the letter of transmittal, are received by the Exchange Agent
within three NYSE trading days after the date of execution of the notice of
guaranteed delivery.
The notice of guaranteed delivery may be sent by facsimile transmission,
mail or hand delivery. The notice of guaranteed delivery must set forth:
(1) your name and address;
(2) the amount of Restricted Notes you are tendering; and
(3) a statement that your tender is being made by the notice of
guaranteed delivery and that you guarantee that within three New York Stock
Exchange trading days after the execution of the notice of guaranteed
delivery, the eligible institution will deliver the following documents to
the Exchange Agent:
(a) the certificates for all certificated Restricted Notes being
tendered, in proper form for transfer or a book-entry confirmation of
tender;
(b) a written or facsimile copy of the letter of transmittal, or a
book-entry confirmation instead of the letter of transmittal; and
(c) any other documents required by the letter of transmittal.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the book-entry
interests at DTC for purposes of the Exchange Offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the Exchange Agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by causing DTC to transfer the book-entry interests into
the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer.
If (1) you cannot deliver a book-entry confirmation of book-entry delivery
of your book-entry interests into the Exchange Agent's account at DTC; or (2)
you cannot deliver all other documents required by the letter of transmittal to
the Exchange Agent prior to the Expiration Date, then you must tender your
book-entry interests according to the guaranteed delivery procedures discussed
above.
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<PAGE> 44
WITHDRAWAL OF TENDERS
Except as otherwise provided in this Prospectus, you may withdraw tenders
of Restricted Notes at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
For a withdrawal to be effective, the Exchange Agent must receive a written
or facsimile transmission notice of withdrawal at its address set forth below
under "-- Exchange Agent" at any time prior to 5:00 p.m., New York City time, on
the Expiration Date.
In any notice of withdrawal, you must
(1) specify your name in the same manner as when you deposited the
Restricted Notes to be withdrawn;
(2) identify the Restricted Notes to be withdrawn (including the
principal amount of the Restricted Notes of each series, as applicable, and
the name and number of the account at DTC to be credited);
(3) sign electronically in the same manner as your original signature
on the letter of transmittal by which your Restricted Notes were tendered
or be accompanied by documents of transfer sufficient to permit the
registrar to register the transfer of the Restricted Notes into your name;
and
(4) specify the name in which you want any Restricted Notes to be
registered, if not your own.
All questions as to the validity, form and eligibility (including time of
receipt) of any withdrawal notices will be determined by Aircraft Finance in its
sole discretion and its determination will be final and binding on all parties.
Any Restricted Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued in exchange for them unless the Restricted Notes so withdrawn are validly
retendered. Any Restricted Notes that have been tendered but are validly
withdrawn will be returned to the relevant holder without cost to that holder as
soon as practicable after withdrawal. Properly withdrawn Restricted Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Aircraft Finance is not required to accept for exchange, or to exchange
Exchange Notes for, any Restricted Notes, and may terminate or amend the
Exchange Offer before the acceptance of any Restricted Notes, if, in its
judgement, any of the following conditions has occurred or has not been
satisfied:
(1) the Exchange Offer, or the making of any exchange by a holder of
Restricted Notes, violates applicable interpretations of the SEC staff;
(2) any action or proceeding is instituted or threatened in any court
or by or before any governmental body with respect to the Exchange Offer;
(3) there is adopted or enacted any law, rule or regulation that
Aircraft Finance expects to impair its ability to proceed with the Exchange
Offer; or
(4) any governmental approval that Aircraft Finance, in its sole
discretion, deems necessary for the Exchange Offer is not obtained.
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<PAGE> 45
If Aircraft Finance determines to terminate the Exchange Offer for any of
the reasons set forth above, it may (1) refuse to accept any Restricted Notes
and return any Restricted Notes that have been tendered or (2) extend the
Exchange Offer and retain all Restricted Notes tendered prior to the Expiration
Date of the Exchange Offer, subject to the rights of the holders of the tendered
Restricted Notes to withdraw the Restricted Notes. Aircraft Finance may, in its
discretion, waive any rule or condition and proceed with the Exchange Offer. If
Aircraft Finance determines that a waiver constitutes a material change in the
Exchange Offer, Aircraft Finance will promptly disclose that change.
In addition, Aircraft Finance will not accept for exchange any Restricted
Notes tendered, and no Exchange Notes will be issued in exchange for the
Restricted Notes, if at that time any stop order is threatened or in effect with
respect to either the Registration Statement of which this Prospectus is a part
or the qualification of the indenture governing the Note under the Trust
Indenture Act of 1939.
The specified conditions are for the sole benefit of Aircraft Finance, and
it may assert any of the conditions regardless of the circumstances giving rise
to any condition or may waive the condition in whole or in part at any time and
from time to time in its sole discretion. Aircraft Finance's failure at any time
to exercise any of these rights is not to be deemed a waiver of any right, and
each right is an ongoing right that may be asserted at any time and from time to
time.
EXCHANGE AGENT
Bankers Trust, the trustee under the indenture governing the Notes, has
been appointed as the Exchange Agent for the Exchange Offer. In its capacity as
the Exchange Agent, Bankers Trust has no fiduciary duties and will be acting
solely on directions from Aircraft Finance. Requests for assistance and requests
for additional copies of this Prospectus or of the letter of transmittal should
be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail, Overnight Delivery or
Hand Delivery: BT Services Tennessee Incorporated
Corporate Trust and Agency Group 648
Grassmere Park Road Nashville,
Tennessee 37211
Facsimile Transmission: (615) 835-3701
Information or Confirmation by
Telephone: (800) 735-7777
</TABLE>
Delivery to an address or facsimile number other than those listed above
will not constitute a valid delivery.
SOLICITATION OF TENDERS; FEES AND EXPENSES
Aircraft Finance will bear all expenses of soliciting tenders pursuant to
the Exchange Offer. The principal solicitation pursuant to the Exchange Offer is
being made by mail. Additional solicitations may be made by ReSource/Phoenix,
the administrative agent or by Aircraft Finance in person, by telegraph,
telephone or facsimile transmission.
Aircraft Finance has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons
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<PAGE> 46
soliciting acceptances of the Exchange Offer. Aircraft Finance will, however,
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket costs and expenses
and will indemnify the Exchange Agent for all losses and claims incurred by it
as a result of the Exchange Offer. Aircraft Finance will also pay the
administrative agent its ongoing fees and expenses. Aircraft Finance may also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, letters of transmittal and related documents to the beneficial
owners of the Restricted Notes and in handling or forwarding tenders for
exchange.
Aircraft Finance will also pay all other expenses incurred by it in
connection with the Exchange Offer, including accounting and legal fees and
printing costs.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Restricted Notes, as reflected in Aircraft Finance's accounting records on the
date of the exchange. Accordingly, Aircraft Finance will not recognize any gain
or loss for accounting purposes as a result of the consummation of the Exchange
Offer. Aircraft Finance will amortize the expense of the Exchange Offer over the
term of the Exchange Notes.
TRANSFER TAXES
Aircraft Finance will pay any transfer taxes imposed in the United States
that are applicable to the exchange of Restricted Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the mere
exchange of Restricted Notes pursuant to the Exchange Offer, the amount of any
transfer taxes (whether imposed on a registered holder or any other person) will
be payable by the tendering holder. For example, you will be responsible for
transfer taxes, if certificates representing Exchange Notes are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Restricted Notes tendered. If satisfactory evidence of
payment of those taxes or exemption from them is not submitted with the letter
of transmittal, Aircraft Finance will bill the amount of the applicable transfer
taxes directly to the tendering holder. Any holder who is subject to taxes
outside the United States and who is considering tendering Restricted Notes for
exchange should consult its tax advisors as to the particular tax consequences
to it of exchanging Restricted Notes for Exchange Notes.
CONTINUING RESTRICTIONS ON THE TRANSFER OF RESTRICTED NOTES
All Restricted Notes that are not tendered will continue to be subject to
the restrictions on transfer set forth in the indenture governing the Notes.
Accordingly, after the completion of the Exchange Offer, you will be able to
offer for sale, sell or otherwise transfer untendered Restricted Notes only as
follows:
(1) to Aircraft Finance;
(2) pursuant to a registration statement that has been declared
effective under the Securities Act (in that regard, please understand,
however, that Aircraft Finance is no longer obligated to file any further
registration statement for any Restricted Notes);
(3) for so long as the Restricted Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person you reasonably
believe is a qualified
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<PAGE> 47
institutional buyer within the meaning of Rule 144A, that purchases for its
own account or for the account of a qualified institutional buyer to whom
notice is given that the transfer is being made in reliance on the
exemption from the registration requirements of the Securities Act provided
by Rule 144A;
(4) pursuant to offers and sales that occur outside the United States
to foreign persons in transactions complying with the provisions of
Regulation S under the Securities Act;
(5) to an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is an institutional investor
purchasing for its own account or for the account of this type of
accredited investor, in each case in a minimum principal amount of the
Restricted Notes of $250,000; or
(6) pursuant to any other available exemption from the registration
requirements of the Securities Act.
THE INITIAL AIRCRAFT AND INITIAL LEASES
THE MASTER AIRCRAFT PURCHASE AGREEMENT
The following is only a summary. For more specific information you should
review the actual text of the Master Aircraft Purchase Agreement. A copy of this
agreement is included as Exhibit 10.1 to the Registration Statement of which
this Prospectus is a part.
PURCHASE OF THE AIRCRAFT
Aircraft Finance and its subsidiaries are in the process of acquiring title
to 36 Aircraft from GE Capital and its affiliates under the Master Aircraft
Purchase Agreement dated as of May 5, 1999. Two of the aircraft were acquired by
GE Capital affiliates from affiliates of UniCapital, on May 5, 1999.
All of the initial aircraft are to be transferred between May 5, 1999 and
December 1, 1999. On the delivery date of each aircraft, the seller of that
aircraft must represent that it is transferring ownership of the aircraft free
of all encumbrances other than those created by or through the lessee of that
aircraft or the Aircraft Finance group. The seller and the purchaser will also
have to satisfy various other conditions unless the party that benefits from the
condition waives it. In the case of a waiver of a condition for the benefit of a
purchaser, Aircraft Finance must first obtain a confirmation by the rating
agencies rating the Notes that they will not lower, qualify or withdraw their
ratings on the Notes as a result.
In accordance with the Master Aircraft Purchase Agreement, the Aircraft
Finance group paid to the sellers of the aircraft the full purchase price of the
initial aircraft on May 5, 1999. The sellers retained all maintenance reserves
that they then held under the leases of the aircraft but on May 5, 1999
transferred to Aircraft Finance and its subsidiaries all cash security deposits
that they held under the leases and all rents received before then under those
leases for the period starting April 30, 1999. Also on May 5, 1999, the sellers
funded a reserve account for each of the two aircraft leased to VARIG with
$3.375 million, for a total of $6.75 million. Aircraft Finance may draw upon a
VARIG reserve account on or after May 5, 1999 to cover rent payment defaults
under the lease of the related aircraft leased to VARIG. At the time of delivery
of each VARIG aircraft, no payment defaults may exist under the lease of that
aircraft. If rent not paid by VARIG
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when due is later paid by VARIG, that rent will be used to replenish the
applicable VARIG reserve account. The unused portion of each VARIG reserve
account may be returned to the sellers before the expiry of the related lease
under certain circumstances.
SUBSTITUTE AIRCRAFT
If a seller is unable to deliver any of the 36 initial aircraft on or
before December 1, 1999 for any reason, including because a condition precedent
to delivery contained in the Master Aircraft Purchase Agreement is not, other
than the destruction or substantial damaging of the aircraft, met, GE Capital
must use reasonable efforts to designate a substitute aircraft for the
undelivered aircraft before November 1, 1999. If an aircraft is destroyed or
substantially damaged, the sellers may identify a substitute aircraft if they so
choose.
A substitute aircraft must satisfy the following requirements:
(1) it is subject to an operating lease contract containing certain
core lease provisions that are set forth in the indenture governing the
Notes;
(2) delivery of the substitute aircraft will not result in the
weighted average age of all aircraft in the Aircraft Finance group's
portfolio computed as of May 5, 1999 to exceed 4.7 years;
(3) the substitute aircraft is of the same type as the undelivered
aircraft;
(4) delivery does not result in a default relating to the
concentration of types and locations of aircraft under the indenture
governing the Notes; and
(5) the rating agencies rating the Notes have approved that substitute
aircraft.
On the delivery date of a substitute aircraft, adjustment payments may be
made by Aircraft Finance and its subsidiaries to GE Capital and its subsidiaries
or vice-versa to reflect any difference in value between the undelivered
aircraft and the substitute aircraft. Aircraft Finance is then required to repay
promptly to GE Capital any cash security deposits it then holds for the
undelivered aircraft and GE Capital is required to pay promptly to Aircraft
Finance the amount of any cash security deposits GE Capital or the lessor of
that substitute aircraft then holds for that substitute aircraft.
The "purchase price" of an aircraft is 90.43156003256% of the average of
the three base value appraisals of that aircraft on December 31, 1998. The
averages are listed in the last table under the caption "-- Portfolio
Information -- The Initial Aircraft" below.
Under a separate agreement between GE Capital and the holders of Aircraft
Finance's beneficial interests, GE Capital has the right, until September 2,
1999, to designate substitute aircraft for any undelivered aircraft. Without the
consent of those beneficial interest holders (1) GE Capital and the other
sellers may not designate more than ten substitute aircraft, (2) GE Capital may
not designate a substitute aircraft on lease to a foreign-domiciled lessee to
replace an aircraft on lease to a U.S.-domiciled lessee and (3) GE Capital may
only designate substitute aircraft of substantially the same type as any initial
aircraft.
If an aircraft is destroyed or substantially damaged and the seller does
not designate a substitute aircraft in its place, then the seller need not
deliver and the purchaser need not accept delivery of that aircraft. The seller
must, however, turn over insurance and other proceeds of that loss to Aircraft
Finance.
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<PAGE> 49
If any required substitute aircraft is not delivered by December 1, 1999
for any reason, GE Capital is to pay to Aircraft Finance on December 1, 1999 the
value of that aircraft less an adjustment factor relating to usage of any
related maintenance reserves and Aircraft Finance must return any unused
security deposit and, in the case of a VARIG aircraft, amounts in the relevant
VARIG Reserve Account.
Aircraft Finance must return the unused portion of each VARIG Reserve
Account to the sellers two years after the delivery of the related VARIG
aircraft if the lease for that VARIG aircraft is then still in effect and was
past due no more than 60 days on any single rent payment in the second year of
that two-year period. If the release conditions are not satisfied at the end of
that two-year period, the VARIG Reserve Account is to be extended annually until
the lease for that VARIG aircraft is past due on rent payments no more than 60
consecutive days during a one-year extension period. If a lease for a VARIG
aircraft is terminated or ceases to be in the portfolio of the Aircraft Finance
group, the unused portion for that aircraft will be promptly returned to the
sellers.
Under the Master Aircraft Purchase Agreement, the sellers are to make
payments to Aircraft Finance equal to those to be paid by TWA under its lease
for the period between the expiration of the Air Madagascar lease and the
commencement of the TWA lease plus aircraft configuration costs in connection
with that releasing.
CERTAIN PAYMENTS TO AIRCRAFT FINANCE
From May 5, 1999 until the earlier of December 1, 1999 and the delivery
date for an initial aircraft, GE Capital must collect on behalf of the purchaser
all rent or other sums paid by the lessee under the lease of that aircraft. If,
however, an aircraft is destroyed or substantially damaged before it is
delivered and a substitute aircraft has been designated for it, neither GE
Capital nor the seller of the aircraft will have to pay to the purchaser any
loss proceeds received for that aircraft. In addition, GE Capital and the other
sellers have agreed to indemnify Aircraft Finance and its subsidiaries against
losses arising with respect to any aircraft from events prior to its delivery,
and Aircraft Finance and its subsidiaries have agreed to indemnify GE Capital
and the other sellers against losses in respect of any aircraft after its
delivery.
APPRAISERS' REPORT
Three appraisers, Aircraft Information Services, Inc., BK Associates, Inc.
and Morten Beyer & Agnew, Inc., provided appraisals of the value of each of the
initial aircraft as of December 31, 1998. The appraisals assume that initial
aircraft are utilized normally in an open, unrestricted and stable market,
adjusted where necessary to account for the reported maintenance standard of the
aircraft. Values calculated under these assumptions are "base values". Copies of
the appraisals are included in Appendix 9. The appraisals were not based on a
physical inspection of the aircraft. The appraisals explain the methodology used
by the appraisers.
Based on the appraisals, the aggregate of the base values calculated by the
appraisers for the initial aircraft as of December 31, 1998 is $1,322,643,333.
The base values of the initial aircraft as of December 31, 1998 are listed below
by type and class of aircraft. You should not rely upon these base values as a
measure of the market or realizable value of any initial aircraft. In addition,
the base values of the aircraft are expected to decline over time due to the
aging of the aircraft, increasing maintenance expenses and similar factors. The
appraisals listed below were as of December 31, 1998, and the base values of the
44
<PAGE> 50
aircraft, if determined as of May 5, 1999, the date of this Prospectus or on the
delivery dates of the aircraft, would be expected to be lower than the base
values in the appraisals.
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 I, Part II of Annex 16 of 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.
The following table lists the initial 36 aircraft by type of aircraft.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
TYPE OF NUMBER OF APPRAISED VALUE AS OF
MANUFACTURER AIRCRAFT AIRCRAFT BODY TYPE DECEMBER 31, 1998
- ------------ ---------- --------- ---------- ---------------------
<S> <C> <C> <C> <C>
Boeing................ B737-300 11 Narrowbody 29.0%
B737-400 5 Narrowbody 12.1%
B767-200ER 2 Widebody 5.4%
B767-300ER 4 Widebody 23.4%
Airbus................ A310-300 1 Widebody 2.6%
A320-200 7 Narrowbody 17.4%
McDonnell Douglas..... DC-10-30 2 Widebody 3.1%
MD-83 4 Narrowbody 6.9%
-- -----
Total............ 36 100.0%
</TABLE>
45
<PAGE> 51
The following table lists the countries in which the initial 36 aircraft
are based.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
NUMBER OF APPRAISED VALUE AS OF
COUNTRY AIRCRAFT DECEMBER 31, 1998
- ------- --------- ---------------------
<S> <C> <C>
U.K...................................... 7 21.8%
U.S...................................... 6* 16.0%
Italy.................................... 2 8.7%
Brazil................................... 3 8.1%
Canada................................... 3 7.0%
France................................... 2 6.2%
Turkey................................... 2 5.3%
China.................................... 2 5.3%
Ireland.................................. 2 5.2%
Spain.................................... 3 5.0%
Sweden................................... 1 4.8%
India.................................... 2 4.1%
Netherlands.............................. 1 2.6%
-- -----
Total............................... 36 100.0%
</TABLE>
- -------------------------
* Includes the TWA Aircraft.
The following table lists the regions in which the initial 36 aircraft are
based.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
NUMBER OF APPRAISED VALUE AS OF
AIRCRAFT DECEMBER 31, 1998
--------- ---------------------
<S> <C> <C>
Developed Markets
Europe................................ 18 54.3%
North America......................... 9 22.9%
Emerging Markets
Asia.................................. 4 9.4%
Europe and Middle East................ 2 5.3%
Latin America......................... 3 8.1%
-- -----
Total.............................. 36 100.0%
</TABLE>
46
<PAGE> 52
The following table lists the current lessees of the initial 36 aircraft.
<TABLE>
<CAPTION>
% OF CURRENT PORTFOLIO
NUMBER OF BY APPRAISED VALUE AS OF
LESSEE AIRCRAFT DECEMBER 31, 1998
- ------ --------- ------------------------
<S> <C> <C>
Air 2000 Limited....................... 1 6.8%
Air Holland Charter B.V. .............. 1 2.6%
Airtours International Airways
Limited.............................. 2 4.5%
Linie Aerce Italiane S.p.A. ........... 1 6.8%
America West Airlines, Inc............. 1 2.8%
Britannia Airways Limited.............. 1 4.8%
British Airways........................ 1 2.7%
British Midland Airways PLC............ 3 7.8%
Canadian Airlines International
Ltd. ................................ 2 4.3%
China Eastern Airlines Corporation
Limited.............................. 2 5.3%
Continental Airlines, Inc. ............ 2 3.1%
Eurofly S.p.A. ........................ 1 1.9%
Frontier Airlines, Inc. ............... 1 2.7%
Istanbul Hava Yollari A.S. ............ 2 5.3%
Jet Airways (India) Limited............ 2 4.1%
Royal Aviation, Inc.................... 1 2.6%
Spanair S.A............................ 3 5.0%
Societe de Transport Aerien Regional... 2 6.2%
Transbrasil S.A. Linhas Aereas......... 1 2.7%
TransMeridian Airlines, Inc............ 1 2.4%
TWA(1)................................. 1 5.1%
VARIG.................................. 2 5.4%
Virgin Express S.A. N.V. .............. 2 5.2%
-- -----
Total............................. 36 100.0%
</TABLE>
- -------------------------
(1) The aircraft is on lease to Air Madagascar, but is due to be redelivered
from Air Madagacar on July 7, 1999.
47
<PAGE> 53
The following table lists the aircraft by year of aircraft manufacture. The
weighted average age of the initial 36 aircraft as of April 1, 1999 is
approximately 4.7 years.
<TABLE>
<CAPTION>
% OF CURRENT PORTFOLIO
NUMBER OF BY APPRAISED VALUE AS OF
YEAR OF MANUFACTURE AIRCRAFT DECEMBER 31, 1998
- ------------------- --------- ------------------------
<S> <C> <C>
1980................................... 1 1.5%
1982................................... 1 1.7%
1986................................... 1 1.5%
1987................................... 2 5.4%
1988................................... 1 2.6%
1989................................... 1 1.7%
1991................................... 6 15.5%
1992................................... 4 11.0%
1993................................... 1 2.4%
1996................................... 5 13.0%
1997................................... 10 27.4%
1998................................... 1 2.8%
1999................................... 2 13.6%
-- -----
Total............................. 36 100.0%
</TABLE>
The following table lists the initial 36 aircraft by seat category.
Passenger aircraft are assumed to be configured with the number of seats listed
in Appendix 2.
<TABLE>
<CAPTION>
% OF CURRENT PORTFOLIO
NUMBER OF BY APPRAISED VALUE AS OF
SEAT CATEGORY AIRCRAFT TYPES AIRCRAFT DECEMBER 31, 1998
- ------------- -------------------------------- --------- ------------------------
<S> <C> <C> <C>
121-170...... B737-300, B737-400, MD-83 20 48.0%
135-180...... A320-200 7 17.4%
171-240...... A310-300, B767-200ER, B767-300ER 7 31.5%
240+......... DC-10-30 2 3.1%
-- -----
Total... 36 100.0%
</TABLE>
48
<PAGE> 54
Further particulars of the initial 36 aircraft are contained in the table
below:
<TABLE>
<CAPTION>
APPRAISED
VALUE AS OF
DECEMBER 31,
COUNTRY IN WHICH DATE OF 1998
REGION AIRCRAFT IS BASED INITIAL LESSEE TYPE ENGINE TYPE SERIAL NO. MANUFACTURE ($US 000S)
- ------ ----------------- ----------------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe............... France STAR Airlines A320-200 CFM56-5B4 737 9/97 $ 40,893
(Developed)
France STAR Airlines A320-200 CFM56-5B4 749 9/97 40,727
Holland Air Holland B737-300 CFM56-3C1 28559 5/97 34,953
Ireland Virgin Express B737-300 CFM56-3C1 28333 8/96 33,673
(Ireland)
Ireland Virgin Express B737-400 CFM56-3C1 28489 11/96 35,090
(Ireland)
Italy Alitalia B767-300ER CF6-80C2B7F 30008 3/99 89,847
Italy Eurofly S.p.A. MD-83 JT8D-219 53199 3/92 24,873
Spain Spanair S.A. MD-83 JT8D-219 49398 11/86 19,737
Spain Spanair S.A. MD-83 JT8D-219 49791 9/89 22,087
Spain Spanair S.A. MD-83 JT8D-219 53198 4/91 24,183
United Kingdom Air 2000 B767-300ER CF6-80C2B7F 29617 3/99 89,727
United Kingdom Airtours A320-200 CFM56-5A3 221 9/91 30,033
United Kingdom Airtours A320-200 CFM56-5A3 222 10/91 30,053
Sweden Britannia(1) B767-300ER CF6-80C2B6F 25221 7/91 63,563
United Kingdom British Airways B737-300 CFM56-3C1 28548 12/97 35,277
United Kingdom British Midland B737-300 CFM56-3C1 28554 12/96 33,303
United Kingdom British Midland B737-300 CFM56-3C1 28557 3/97 34,893
United Kingdom British Midland B737-300 CFM56-3C1 28558 4/97 34,910
North
America.............. United States America West B737-300 CFM56-3C1 28740 6/98 36,463
(Developed)
United States Continental DC-10-30 CF6-50C2 46584 2/80 19,367
United States Continental DC-10-30 CF6-50C2 48292 2/82 21,873
United States Frontier Airlines B737-300 CFM56-3C1 28563 8/97 35,237
United States TransMeridian A320-200 V2500-A1 373 1/93 31,390
Airlines
United States(2) TWA B767-300ER PW4060 25403 1/92 66,810
Canada Canadian A320-200 CFM56-5A1 210 7/91 28,627
Airlines
Canada Canadian A320-200 CFM56-5A1 231 9/91 28,783
Airlines
Canada Royal Aviation A310-300 CF6-80C2A2 448 2/88 34,773
Asia................. China China Eastern B737-300 CFM56-3C1 28561 6/97 34,893
(Emerging)
China China Eastern B737-300 CFM56-3C1 28562 7/97 35,010
India Jet Airways B737-400 CFM56-3C1 25663 11/92 27,303
India Jet Airways B737-400 CFM56-3C1 25664 11/92 27,130
Europe &
Middle East.......... Turkey Istanbul B737-400 CFM56-3C1 28490 11/96 35,000
Emerging Turkey Istanbul B737-400 CFM56-3C1 28491 11/96 35,027
Latin
America.............. Brazil Transbrasil B737-300 CFM56-3C1 28564 11/97 35,483
(Emerging) Brazil VARIG B767-200ER CF6-80C2B 23805 7/87 35,827
Brazil VARIG B767-200ER CF6-80C2B 23806 7/87 35,823
----------
Total................ $1,322,643
</TABLE>
- -------------------------
(1) Leased to Britannia (United Kingdom) and subleased to Britannia Airways AB
(Sweden).
(2) Currently on lease to Air Madagascar, but due to be redelivered on July 7,
1999.
49
<PAGE> 55
ACQUISITION OF ADDITIONAL AIRCRAFT
Aircraft Finance and its subsidiaries may acquire additional commercial
passenger or freight aircraft from GE Capital, UniCapital and their respective
affiliates. Any rental income and other cash flows from these additional
aircraft will be available to pay Aircraft Finance's obligations, including the
Notes. Any acquisition of additional aircraft and the related issuance of
additional Notes will require confirmation by the rating agencies rating the
Notes that they will not lower, qualify or withdraw their ratings on the Notes
as a result. There is no limit on the total number or value of additional
aircraft that may be acquired or on when additional aircraft may be acquired.
Unless, however, UniCapital and GE Capital agree otherwise, the Equity Trustee
will not approve Aircraft Finance's purchase of any additional aircraft from GE
Capital and its affiliates (1) in excess of an aggregate of $250 million in
appraised value in any one year or (2) after May 5, 2004.
INITIAL LEASES
The following description relates to the leases for the initial aircraft in
effect on June 30, 1999. Any leases of substitute aircraft, any leases of
additional aircraft and any future leases entered into for the re-lease of any
initial aircraft may differ from the description provided below.
MANAGEMENT, LEASE TERMS, RISK OF LOSS
All leases of the Aircraft will be managed by the servicer under the
Servicing Agreement. All of the leases for the initial aircraft are operating
leases. Under those leases, the lessees agreed to lease the aircraft for a fixed
term, although in some cases the lessees have purchase options, termination
rights and extension rights. Although most of the lease documentation for the
initial aircraft is fairly standardized in many respects, significant variations
do exist as a result of lessee negotiation.
LEASE PAYMENTS AND SECURITY
Each lease for an initial aircraft requires the lessee to pay periodic
rentals during the lease term. Certain of the leases require the lessee to pay
periodic amounts as maintenance reserves.
The lessees are required to make payments without withholding payment on
account of any amounts the lessor may owe the lessee or any claims the lessee
may have against the lessor for any breach of contract. Each lease includes an
obligation of the lessee to gross-up payments under the lease where lease
payments are subject to withholdings and other taxes, although sometimes the
gross-up amount will be limited to the amount that would have been payable if
such lease had never been transferred to Aircraft Finance or its subsidiary. The
leases for the initial aircraft also require the lessee to indemnify the lessor
for some tax liabilities including, in some leases, value added tax and stamp
duties, but generally excluding income tax or its equivalent imposed on the
lessor. The lessees must also pay default interest on any overdue amounts. In
the lease with British Airways, the lessee may exercise remedies if the lessor
breaches its covenant not to interfere with the lessee's use of the aircraft.
Under the leases for the initial aircraft, the lessee must pay operating
expenses accrued or payable during the term of the 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
50
<PAGE> 56
insurance premiums. The lessees are obliged to remove liens on the aircraft
other than certain liens permitted under the leases.
Under all but three of the leases for the initial aircraft, the lessee has
provided security deposits to secure its obligations. In fifteen of the leases,
the lessee has provided cash security deposits. In seven of the leases, the
lessee has provided a letter of credit. In the remaining eleven of the leases,
the lessee provided both letters of credit and cash.
RENTALS
Most of the rental payments are payable on a fixed rate basis and are not
adjustable by reference to market interest rate changes. Rentals under most of
the leases for the initial aircraft are payable monthly in advance.
OPERATION OF THE ORIGINAL AIRCRAFT
The leases require the lessees to operate the aircraft in compliance with
all applicable laws and regulations. The initial aircraft generally must remain
in the possession of the lessees, and any subleases of the aircraft must be
approved by the lessor. The Britannia lease, however, permits a sublease to
Britannia Airways GmbH, and TWA will be permitted to sublease to a pre-approved
list of major U.S. airlines. Under certain leases, the lessee may enter into
charter or other arrangements for the aircraft if the lessee does not part with
operational control of the aircraft. Generally, the lessees are not allowed to
re-register the Aircraft without the lessor's permission, except in connection
with a permitted sublease if operating in certain countries.
All of the leases for the initial aircraft permit the lessees to remove or
replace the engines and in some cases other equipment or components. Sometimes
lessees are allowed to enter into pooling arrangements for the temporary
borrowing of equipment, in some cases without the lessor's consent. Under all of
the leases, the lessees may deliver the aircraft, engines and other equipment or
components to their manufacturer for testing or similar purposes, or to other
parties 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 sublessee, transferee, manufacturer or other
person may be restricted by liens or similar rights and by applicable bankruptcy
and similar laws.
MAINTENANCE AND MAINTENANCE RESERVES
The leases for the aircraft specify maintenance standards and the required
condition of the aircraft upon redelivery to the lessor. In addition, under some
of the leases, depending on the condition of the aircraft including the
airframe, engines, the auxiliary power unit or landing gear at redelivery, the
lessee may have to make adjustment payments to the lessor. During the term of
each lease, the lessee must ensure that the aircraft is maintained in accordance
with an agreed maintenance program designed to provide that the aircraft meets
applicable airworthiness and other regulatory requirements. Under the leases for
the initial aircraft, maintenance is generally performed by the lessee or, for
some of the regional lessees, by a designated airline or other air authority
approved maintenance provider. Under most of the leases for the initial
aircraft, the lessee must provide monthly maintenance reserves. In some cases
where the lessee has paid maintenance reserves, those payments will be used to
reimburse the lessee for significant maintenance charges, including major
airframe and engine overhauls.
Some of the leases for the initial aircraft do not require maintenance
reserves to be paid. In those cases the lessor must rely on the credit of the
lessee or any credit support
51
<PAGE> 57
the lessee provides to ensure that the lessee returns the aircraft in the
condition required by the lease upon termination, makes any payments required
based on the aircraft's return condition upon termination of the lease and
performs scheduled maintenance throughout the lease term.
The leases for the initial aircraft require the lessees to comply with the
airworthiness directives of the relevant aviation authorities and with
manufacturers' service bulletins. The lessees primarily bear the cost of
compliance. However, some of the leases require the lessor to contribute to the
cost of compliance with certain airworthiness directives or manufacturers'
service bulletins if compliance costs are above a specified threshold.
LESSEES' OPTIONS
The leases or side agreements between the lessor and the lessee for three
of the initial aircraft, representing 11.3% of the appraised value of the
initial aircraft, grant purchase options to the lessee or its affiliates. None
of the purchase options are exercisable as of June 30, 1999. The latest date on
which a purchase option may be exercised is December 31, 2003 for a purchase on
April 30, 2005, or if all lease extension options are exercised, April 30, 2010.
If a purchase option is exercised and the Notes have been repaid in accordance
with the assumptions set forth under "Note Payment Assumptions" through the date
of exercise, the exercise of that purchase option would result in the proceeds
realized from the exercise being at least equal to the principal of the Notes
allocable to the relevant aircraft. If the Notes have not been so paid, this
might not be the case.
Nine of the leases for the initial 36 aircraft give the lessee the option
to extend the term of the lease. The rent payable during the extension period
varies from lease to lease. Six of the leases allow the lessee to terminate its
lease prior to the scheduled expiration date, though sometimes the lessee must
pay a fee or fulfill other requirements.
INDEMNIFICATION AND INSURANCE OF THE AIRCRAFT
INSURANCE REQUIREMENTS
The leases for the initial aircraft require the lessees to bear
responsibility and carry insurance for any liabilities arising out of the
operation of the aircraft. These include any liabilities for death or injury to
persons and damage to property that would ordinarily attach to the operator of
the aircraft, subject to customary exclusions. In addition, the lessees must
carry other types of insurance that are customary in the air transportation
industry. These include aircraft hull all risks and hull war risks insurance at
a value stipulated in the lease and aircraft spares insurance on a replacement
cost basis, in each case subject to customary deductibles. The servicer must
monitor the lessees' compliance with the insurance provisions of the leases.
In addition, Aircraft Finance and its subsidiaries also have in place their
own contingent liability coverage. That coverage covers both a liability that
exceeds the coverage provided by a lessee's policy and instances in which a
lessee's policy lapses for any reason. Aircraft Finance and its subsidiaries'
contingent third-party liability insurance covers all of the aircraft, and their
contingent hull and hull war risks insurance covers some of the aircraft. The
amount of the contingent liability policies may or may not exceed the amount
required under the relevant lease. The amount of third-party contingent
liability compliance insurance is subject to limitations imposed by the air
transportation insurance industry.
52
<PAGE> 58
If any of the existing insurance policies are canceled or terminated and if
an aircraft is re-leased, the servicer may from time to time engage insurance
experts at Aircraft Finance's expense to advise and recommend the appropriate
amount of insurance coverage Aircraft Finance should procure.
LIABILITY INSURANCE
The leases for the initial aircraft require third party liability insurance
for a combined single limit for bodily injury and property damage in minimum
amounts ranging between $500 million and $750 million for each aircraft. In
general, liability coverage on each aircraft includes third party legal
liability, passenger legal liability, baggage legal liability, cargo legal
liability, mail and aviation general third party (including products) legal
liability.
In some jurisdictions Aircraft Finance or its subsidiary may be liable, as
owner of an aircraft, for obligations that may be insured against by the lessees
even if Aircraft Finance or that subsidiary is not responsible for the loss that
results in the obligation. In addition, claims may be made against Aircraft
Finance or its subsidiary on the basis of alleged responsibility for a loss,
even if such claim is not ultimately sustained.
The losses for which coverage is provided include both operating costs
relating to the actual operation of the aircraft as well as losses to persons
and property resulting from the operation of the aircraft. The latter types of
losses are generally covered by the lessees' liability insurance.
AIRCRAFT PROPERTY INSURANCE
In addition to hull risk, hull war and allied peril risk and aircraft
spares insurance coverage obtained by the lessees, Aircraft Finance will also
purchase "total loss only" coverage with respect to some initial aircraft. As of
May 5, 1999, in no case was the sum of the stipulated loss value and Aircraft
Finance's additional coverage for hull all risks, hull war and allied peril and
all risks insurance less than 97% of the initial appraised value of the
applicable aircraft. The average, weighted by initial appraised value, of the
sum of those coverages in place for each initial aircraft was approximately 106%
of the initial appraised value of the applicable aircraft. In some cases, the
lessor is allowed to increase the insured value above the stipulated loss value
consistent with industry practice. In those cases the lessee is responsible for
any increased premium that results. Permitted deductibles range from $100,000 to
$1,000,000; the deductibles, however, apply only in the case of a partial loss.
The leases for the initial aircraft include provisions defining an event of
loss or a casualty occurrence so that upon total loss of the airframe, with or
without loss of the engines, an agreed value is payable by the lessee. This
payment is generally funded with insurance proceeds. The air transportation
insurance industry practice, however, is to treat only a loss with likely repair
costs of greater than 75% of the insured value of the aircraft, including the
engines, as a total loss. Where insurance proceeds exceed the cost of repair or
the amount required to be insured under the lease, 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 policies currently in place 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 provisions of the insurance policies. In many
cases, these endorsements also provide
53
<PAGE> 59
that this protection will only apply if the additional insured has not caused,
contributed to or knowingly condoned the breach.
An insurance advisor has confirmed to the servicer that the insurance
currently detailed in the current insurance certificates as to the initial
aircraft meets customary practices.
Except for one lease, the leases for the initial aircraft require the
lessee to maintain as part of its hull war and allied perils insurance coverage
for loss or damage resulting from a governmental confiscation or requisition of
the applicable aircraft. In certain countries, however, such as France and
China, that kind of insurance may not be obtainable by the lessee.
THE LESSEES
As of June 30, 1999, there were 23 lessees under leases for the initial
aircraft in 13 different countries.
PAYMENT HISTORY
As a general matter, weakly capitalized airlines are more likely than well
capitalized airlines to seek operating leases. You should expect varying numbers
of lessees at any point in time to be experiencing payment difficulties.
As of June 22, 1999, several lessees of initial aircraft were late in the
payment of rent, maintenance reserves and other amounts, though a default notice
had been issued to only one lessee. As of June 22, 1999, the amount outstanding
(including default interest) for two aircraft on lease to Viacao Aerea
Rio-Grandense, S.A. or VARIG, was approximately $3.3 million (approximately
$760,000 of which would be due and owing to Aircraft Finance upon the delivery
of such aircraft), the amount outstanding (including default interest) for one
aircraft on lease to Transbrasil S.A. Linhas Aereas or Transbrasil, was
approximately $2.65 million (approximately $500,000 of which would be due and
owing to Aircraft Finance upon delivery of such aircraft) and the amount
outstanding (including default interest) for two aircraft on lease to Istanbul
Hava Yollari A.S., was approximately $2.05 million (approximately $1.35 million
of which would be due and owing to Aircraft Finance upon the delivery of such
aircraft).
As of June 22, 1999, the weighted average number of days past due was 65
days for the leases to VARIG and 93 for all the leases in default. Aircraft
Finance is not, however, required to take delivery of the two aircraft leased to
VARIG unless all payment defaults are cured. If Aircraft Finance does take
delivery of the VARIG aircraft, the two reserves of $3.375 million each provided
by GE Capital will continue to be available.
Transbrasil's lease has been restructured to reduce monthly lease payments
to 50% of current levels for June, July and August, 1999, and thereafter to
increase to an amount sufficient to pay all past due amounts over a twenty-four
month period.
In certain cases, Aircraft Finance and its subsidiaries may respond to the
needs of lessees in financial difficulty including by restructuring the
applicable leases. Restructurings may involve reduced rental payments for a
specified period (which may be several months). In addition, restructurings may
involve the voluntary termination of a lease prior to its expiration and the
arrangement of subleases from the lessee to another aircraft operator.
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<PAGE> 60
DESCRIPTION OF THE INITIAL LEASES
The table below lists certain publicly available information with respect
to the country of domicile, first year of operation, service type, nature of
ownership and fleet size and composition of each lessee of the initial 36
aircraft.
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
------ ------------- --------- --------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Air Holland.......... Netherlands 1991 Charter Air Holland 1 B737-300
Finance B.V. 2 B757-200
(100%)
Airtours............. U.K. 1990 Charter Publicly traded; 10 A320-200
Carnival 2 A321-200
Corporation (28%); 1 A330-300
Schroder 5 B757-200
Investment 3 B767-300ER
Management (9%) 1 DC-10-30
On Order:
4 A330-200
Air 2000............. U.K. 1987 Charter Publicly traded; 5 A320-200
Principal 3 A321-200
Shareholders: 10 B757-200
First Choice plc, 2 B767-300ER
M&G Investment On Order:
(11%), UBS Asset 1 A321-200
Management (11%), 2 A330-200
Thomas Cook Group 1 B767-300ER
(10%)
Alitalia............. Italy 1946 Scheduled Publicly traded; 4 A300B4-100/200
I.R.I. SpA (53%) 2 A300 B2
(Italian state 22 A321-100
holding company) 11 B747-200
6 B767-300ER
8 MD-11
90 MD-82
2 DC-9-30
On Order:
19 A320-200
3 A321-100
3 B767-300ER
America West......... United States 1983 Scheduled Publicly traded, 35 A319/A320
Texas Pacific 18 B737-100/200
Group (49.1% 44 B737-300
voting), 2 B737-300QC
Continental (8.3% 13 B757-200
voting) On order:
35 A319/A320
Britannia............ U.K.* 1962 Charter Thomson Travel 1 B737-800
Group (100%) 25 B757-200
6 B767-200ER
5 B767-300ER
On order:
5 B737-800
1 B757-200
</TABLE>
55
<PAGE> 61
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
------ ------------- --------- --------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
British Airways...... U.K. 1935 Scheduled Publicly traded; 5 A320-100
Mercury Asset 5 A320-200
Management (10%) 23 B737-200
8 737-300
34 B737-400
10 B747-100
16 B747-200B/
200BSCD
56 B747-400
51 B757-200
28 B767-300ER
5 B777-200
16 B777-200ER
7 Concorde
6 DC-10-30
1 BAE ATP
On order:
39 A319-100
20 A320-200
1 B747-400
6 B757-200
24 B777-200ER
British Midland...... U.K. 1938 Scheduled BBW Partnership 1 A320-300
(60%); SAS (40%) 4 A321-200
7 B737-300
5 B737-400
12 B737-500
6 F-100
3 F-70
11 Saab 340
On Order:
9 A320-200
8 A321-200
Canadian Airlines.... Canada 1986 Scheduled Publicly traded; 12 A320-200
AMR (25%) 38 B737-200
6 B737-200C/200F
4 B747-400
12 B767-300ER
10 DC-10-30
On Order:
10 A320-200
2 B767-300ER
China Eastern
Airlines
Corporation
Limited............ China 1988 Scheduled Publicly traded 10 A300-600R
(38.4%); Civil 6 A320-200
Aviation 5 A340-300
Administration of 3 AN-24
China (61.6%) 6 AN-30
6 B737-300
6 Fokker 100
1 DHC-6
100/200/300
7 YAK-42
6 MD-11
13 MD-80
7 MD-90
5 Y-7
On Order:
4 A320-200
2 MD-90
</TABLE>
56
<PAGE> 62
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
------ ------------- --------- --------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Continental.......... United States 1934 Scheduled Publicly traded; 25 B727-200
Northwest Airlines 3 B737-100/200
(51% voting in 132 B737-300/500
trust) 37 B737-700/800/900
32 B757-200
7 B777-200/200ER
22 DC-9-30
69 MD-81/82/83
32 DC-10-10/30
On order:
2 B737-300/500
57 B737-700/800/900
6 B757-200
10 B767-200ER
26 B767-400ER
7 B777-200/200ER
Eurofly S.p.A........ Italy 1990 Scheduled Alitalia (45%); 2 DC-9-50
and Olivetti (45%) 6 MD-82/83
Charter 2 B767-300ER
Frontier Airlines.... United States 1994 Scheduled Publicly traded; B 5 B737-200
III Capital 3 B737-200H
Partners (35%); 9 B737-300
Wexford Management
(11%)
Istanbul............. Turkey 1986 Scheduled Ocan Toplar (90%) 1 B727-200
and 3 B737-300
Charter 10 B737-400
2 B757-200
Jet Airways.......... India 1993 Scheduled Naresh Goyal 1 B737-300
(100%) 15 B737-400
2 B737-500
4 B737-700
4 B737-800
On Order:
4 B737-800
Royal Aviation....... Canada 1979 Charter Publicly traded; 4 A310-300
Michel LeBlanc 6 B757-200
(76%)
Spanair S.A.......... Spain 1988 Scheduled Viajes Marsans; 2 B767-300ER
and (51%) SAS (49%) 2 B757-200
Charter 3 MD-82
17 MD-83
2 MD-87
STAR Airlines........ France 1995 Charter LOOK Voyages (50%) 4 A320-200
1 Lockheed L-1011
Transbrasil.......... Brazil 1955 Scheduled Fontana family 7 B737-300
(72%); Employees 7 B737-400
(20%) 3 B767-200
5 B767-200ER
3 B767-300ER
</TABLE>
57
<PAGE> 63
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
------ ------------- --------- --------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
TransMeridian
Airlines, Inc. .... United States 1995 Charter U.S. private 6 A320-200
investors (55.9%); 1 B727-200A
TransAer
International
Airlines (44.1%)
TWA**................ United States 1925 Scheduled Publicly traded; 4 B727-100/200
Nicholas- 23 B727-200
Applegate Capital 16 B757-200
Management (7% 12 B767-200
voting); TCW Group 4 B767-300ER
and Robert Day (5% 6 Lockheed L-1011
voting); Employees 7 DC-9-10
(10.6% voting, 36 DC-9-30/30H/30FH
excluding election 3 DC-9-40
of directors) 12 DC-9-50
40 MD-82
39 MD-83
On order:
10 A330-300
50 B717-200
11 B757-200
1 B767-300ER
24 MD-83
VARIG................ Brazil 1927 Scheduled Rio Grande do Sul 5 B727-100C/100F
State Government 17 B737-200
(1%); Ruben Berta 33 B737-300
Foundation (55%); 3 B747-300
Public (44%) 5 B737-700
1 B747-200SF
5 B747-300
6 B767-200ER
6 B767-300ER
3 DC-10-30
2 DC-10-30F
13 MD-11
On Order:
4 B737-700
5 B737-800
6 B767-300ER
6 B777-200ER
Virgin Express
(Ireland).......... Ireland 1999 Scheduled Virgin Express 1 B737-300
2 B737-400
</TABLE>
- -------------------------
* U.K. Company; aircraft habitually based in Sweden.
** TWA Aircraft.
58
<PAGE> 64
THE COMMERCIAL AIRCRAFT INDUSTRY
The following description of the commercial aircraft industry was prepared
for Aircraft Finance by Simat, Helliesen & Eichner, Inc., or SH&E, an
international air transport consulting firm, relied on as an expert. See
"Experts". Although Aircraft Finance believes the description to be reliable,
Aircraft Finance has not independently verified the information contained in the
description.
INTRODUCTION
The commercial aviation industry has recently experienced a period of
sustained growth and record-breaking financial performance.
(1) Revenue passenger kilometers grew 5.7%, while revenue ton
kilometers grew 11.9% in 1997 over 1996 levels.(1)
(2) Strong traffic growth and lower fuel prices contributed to
worldwide airline industry operating profits of $16.5 billion in 1997.(2)
(3) In 1997 and in 1998, there was a heightened demand for air
transport capacity in the form of both new and used aircraft and rapid
growth within the aircraft leasing industry.
The commercial aviation industry historically has, however, been extremely
cyclical, as evidenced by the periodic market declines experienced from 1974 to
1976, 1980 to 1982 and 1990 to 1992. In addition, there are currently some weak
segments of the industry:
(1) In the last two years, the Asia/Pacific region, once considered to
be a primary source for long-term air transport growth, has experienced a
substantial economic decline.
(2) Certain regions of Central and South America are experiencing
economic downturns.
(3) Other current or unanticipated factors, such as the Russian market
collapse, may continue to affect U.S. and other markets and, thus, the
demand for air travel.
AIR TRAFFIC DEMAND
PASSENGER DEMAND
Historically, air traffic demand has increased as economic activity
increases and real income levels rise. Traffic demand has risen despite higher
prices of air transportation. In 1997, the latest full year for which data is
publicly available, international scheduled traffic climbed 7.0% and domestic
traffic rose 4.0% over the previous year.(3) During the preceding eight years,
worldwide air traffic increased from 2,182 billion revenue passenger kilometers
in 1990 to 2,936 billion revenue passenger kilometers in 1997, an annual growth
rate of 4.3%.(4)
- ---------------
(1 )ICAO Annual Report of the Council -- 1997 (pg. A-44).
(2) ICAO Annual Report of the Council -- 1997 (pg. A-51).
(3) ICAO Civil Aviation Statistics -- Table 1-14 and Table 4 -- 1997.
(4) Boeing 1998 Current Market Outlook, Appendix A.
59
<PAGE> 65
Although recent traffic levels remain above the historical trend, the
Asia/Pacific economic situation and other factors are slowing worldwide growth
rates. In the 12-month period ending June 1998, the number of Asia/Pacific
passengers declined 3.3% and revenue passenger kilometers declined 1.4%.(5) The
Air Service Agreement(6) between the U.S. and Japan, amended in 1998, may help
generate additional traffic to offset some of the recent declines. Substantial
discounting in the Asia/Pacific region also may stimulate some traffic growth in
the region. For example, the Hong Kong Tourist Authority reported a record
amount of tourist traffic in August 1998. Discounting may not, however, be
sustained, and the size and timing of any offset or growth from any discounting
is uncertain.
Aircraft manufacturers, government agencies and airline groups regularly
prepare air traffic forecasts that project demand for periods as long as 20
years. These sources have projected average annual traffic growth of roughly 5%
per annum in the next 10 and 20-year periods. The Boeing 1998 Current Market
Outlook forecast for the next 20 years is set forth below. The most rapid growth
rates are projected for the CIS, Asia/Pacific and Latin American regions. The
smallest growth rates are expected in North America and Europe (where the base
from which to measure growth rates is much larger).
WORLDWIDE GROWTH IN AIR TRAVEL
<TABLE>
<CAPTION>
REVENUE PASSENGER KILOMETERS
(BILLIONS) ANNUAL GROWTH RATE
----------------------------- ---------------------------------
REGION 1990 1997 2007 2017 1990-1997 1997-2007 1997-2017
- ------ ----- ----- ----- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
North America........... 738 998 1,441 2,084 4.4% 3.7% 3.7%
Latin America........... 143 195 351 588 4.5% 6.1% 5.7%
Asia & Pacific.......... 278 519 992 1,811 9.4% 6.7% 6.4%
Middle East............. 54 79 132 222 5.8% 5.2% 5.3%
Africa.................. 75 113 200 337 6.1% 5.8% 5.6%
Europe.................. 647 943 1,493 2,328 5.5% 4.7% 4.6%
CIS..................... 248 87 180 314 -13.9% 7.5% 6.6%
----- ----- ----- -----
TOTAL.............. 2,183 2,934 4,789 7,684 4.3% 5.0% 4.9%
===== ===== ===== =====
</TABLE>
- -------------------------
Source: Boeing 1998 Current Market Outlook
Forecasts like those above are based on a number of assumptions and
estimates that may not actually occur or may occur in degrees or at times not
similar to those forecast. Accordingly, the growth illustrated may not occur at
the times or rate projected or at all.
- ---------------
(5)Association of Asia Pacific Airlines, June 1998.
(6)This Air Service Agreement, and others like it, are colloquially known as
"Open Skies Air Service Agreements," which refers to an agreement between the
U.S. and another country that reduces restrictions on air service between and
beyond each other's territory. The reduced restrictions include how often
carriers may fly, the type of aircraft that may be flown and the prices that
may be charged.
60
<PAGE> 66
CARGO DEMAND
Cargo demand through the end of 1997 has grown 7.9% per annum since
1980.(7) This growth reflects:
(1) the dramatic changes in overnight delivery services, such as
Federal Express and UPS;
(2) the general expansion of the economies of most nations;
(3) improved cargo handling and logistics;
(4) changes in production methods; and
(5) the continued decline of air cargo rates.
Total world air cargo traffic has been projected in the Boeing 1998/1999
World Air Cargo Forecast to grow 6.4% per annum for the next 20 years. The
impact of regional economic crises often does not affect demand for air freight
in the same manner that it impacts air passenger demand. For instance, a rapid
change in exchange rates and other factors that arise in economic crises could
spur demand for exports, which, in turn, could offset some of the decline in
imports.
AIRCRAFT SUPPLY AND DEMAND
CHANGES IN NUMBER OF MANUFACTURERS
The mid-1990s has seen a dramatic transformation of the worldwide aircraft
industry.
(1) Only Boeing Commercial Airplane Group and Airbus Industrie remain
the predominant competitors for the large jet aircraft that dominate the
fleets of the world's major airlines.
(2) The Dutch manufacturer of narrowbody twin-jets, Fokker N.V.,
declared bankruptcy in 1995.
(3) In North America, the McDonnell Douglas Corporation was acquired
by Boeing.
(4) The former Soviet Union manufacturers of Tupolev, Ilyushin and
Antonov equipment continue to meet air transport needs of various
developing countries, but so far have been unsuccessful in attracting
orders from major airlines and are not expected to do so in the near
future.
(5) The manufacturers of smaller jet aircraft have recently introduced
new types of equipment. Bombardier Aerospace, Empresa Brasileira de
Aeronautica S.A., or Embraer, and Fairchild Aerospace now compete with the
larger turboprop equipment and the regional jets offered by British
Aerospace and formerly by Fokker. In this market, however, there also is a
consolidation trend that is affecting the regional aircraft manufacturers.
CURRENT MARKET CONDITIONS AFFECTING AVAILABILITY OF NEW AND USED AIRCRAFT
The aviation industry, and therefore the aircraft manufacturing segment,
has had its own business cycles due, in part, to the delay between the placement
of orders for commercial aircraft and the delivery of those aircraft. Airlines
have tended to order aircraft
- ---------------
(7)Source: Boeing 1996/1997 World Air Cargo Forecast.
61
<PAGE> 67
during periods of strong relative profitability. Consequently, Boeing and Airbus
now find themselves with large order books and long backlogs. In 1998, Boeing
indicated that it was having difficulty delivering aircraft at the rate desired
by its customers. These production and delivery delays have, to a large extent,
been corrected, and both Boeing and Airbus are producing aircraft and delivering
them to customers by the contractual delivery dates.
AIRCRAFT ORDER/DELIVERY TRENDS
Aircraft Order/Delivery Trends
<TABLE>
<CAPTION>
ORDERS DELIVERIES
------ ----------
<S> <C> <C>
'1980' 380.00 568.00
'1981' 297.00 510.00
'1982' 210.00 412.00
'1983' 274.00 320.00
'1984' 357.00 327.00
'1985' 624.00 389.00
'1986' 686.00 441.00
'1987' 611.00 489.00
'1988' 1026.00 585.00
'1989' 1270.00 623.00
'1990' 901.00 810.00
'1991' 431.00 942.00
'1992' 392.00 885.00
'1993' 338.00 704.00
'1994' 425.00 501.00
'1995' 727.00 444.00
'1996' 1153.00 456.00
'1997' 1348.00 644.00
</TABLE>
- -------------------------
Source: ACAS, Lundkvist
Current orders are at an all-time high in absolute terms. When looked at in
terms of the percentage of the current fleet, however, the orders are still
below the peak reached at the top of the prior cycle, as shown in the table
below. Moreover, Boeing has indicated publicly that it expects orders to decline
after 2000 and to remain in line with passenger and cargo traffic growth
thereafter.(8) The entrance of new aircraft into the markets in which Aircraft
Finance and its subsidiaries compete with other companies, as well as the
availability of used aircraft discussed below, may have a material impact on the
ability of Aircraft Finance and its subsidiaries to lease and acquire aircraft.
While demand for aircraft has been strong, most aircraft ordered during the
past two years have not yet been delivered. If these deliveries occur at a time
when Aircraft Finance and its subsidiaries are seeking to re-lease a large
portion of its aircraft, capacity may exceed demand and force aircraft owners,
including Aircraft Finance and its subsidiaries, and operators to retire more
aircraft or sell assets, perhaps at substantial discounts from today's levels,
or to lease at lower rents.
- ---------------
(8)Boeing 1998 Current Market Outlook.
62
<PAGE> 68
AIRCRAFT ORDER BACKLOG
<TABLE>
<CAPTION>
1991 1999
----- ------
<S> <C> <C>
Order Backlog......................................... 3,535 3,655
Commercial Aircraft Fleet............................. 8,936 14,437
Backlog as a percent of fleet......................... 39.6% 25.3%
</TABLE>
- -------------------------
Source: ACAS, April 1999
The availability of used aircraft reflects a balance between used aircraft
supply and demand. Availability has, however, been rising since 1996, as shown
in the table below.
AIRCRAFT AVAILABILITY TRENDS
<TABLE>
<CAPTION>
YEAR END SALE SALE/LEASE LEASE TOTAL
- -------- ---- ---------- ----- -----
<S> <C> <C> <C> <C>
1988......................................... 107 35 75 217
1989......................................... 152 79 154 385
1990......................................... 306 142 105 553
1991......................................... 352 279 131 762
1992......................................... 230 301 116 647
1993......................................... 276 327 113 716
1994......................................... 279 227 69 575
1995......................................... 217 163 90 470
1996......................................... 83 154 62 299
1997......................................... 139 114 91 344
1998......................................... 201 147 86 434
</TABLE>
- -------------------------
Source: FEASI/BACK Commercial Jet Availability
There are additional indications that the demand for aircraft might be
weakening slightly due in part to the financial condition of the Asia/Pacific
carriers. Some of those carriers are experiencing difficulty in funding aircraft
lease payments and scheduled progress payments for new aircraft purchases. This
situation has resulted in the return of widebody and some narrowbody aircraft to
lessors and the deferral or cancellation of orders from the manufacturers. Thus
far in this cycle, many lessors have been able to re-lease these returned
aircraft and to manage the adverse impact. This favorable situation may not
continue, however, and the future levels of returns, deferrals and cancellations
may adversely affect the markets in which Aircraft Finance and its subsidiaries
compete.
COMMERCIAL JETS
The worldwide demand for increased air transport historically has been met
in a number of ways, including:
(1) increases in the number of aircraft in service;
(2) increases in the average number of seats per aircraft; and
(3) utilization of aircraft more intensively and efficiently.
63
<PAGE> 69
AIRCRAFT NUMBER. The current size of the worldwide commercial jet fleet is
approximately 14,400 aircraft.(9) As illustrated in the table below, the major
manufacturers currently project this fleet almost to double over the next two
decades. These forecasts project that approximately 7,400 to 8,400 new aircraft
will be added to airline fleets in the next 10 years and, as illustrated by the
Airbus forecast, more than 16,700 of such aircraft will be added in the next 20
years, in each case, both to replace retiring aircraft and to satisfy
requirements created by expected traffic growth.
PROJECTED COMMERCIAL AIRCRAFT FLEET GROWTH
<TABLE>
<CAPTION>
SOURCE: BOEING AIRBUS AIRLINE MONITOR
- ------- --------- --------- ---------------
<S> <C> <C> <C>
Projected Aircraft Additions........... 7,425 16,729 8,086
Growth............................... 5,225 8,243 5,395
Replacement.......................... 2,200 8,526 2,691
Forecast Period........................ 1998-2007 1997-2017 1999-2008
Aircraft Additions per year............ 743 838 809
</TABLE>
In addition to new deliveries, the size of the active commercial jet fleet
reflects the increasing longevity of some commercial jets. Some types of modern
jet aircraft are remaining in service much longer than their planned lives due
to, among other things, favorable operating economics as well as successful
aging aircraft maintenance and modernization programs. Although generally more
expensive to maintain, some types of these aircraft may continue to generate
revenues and profitability at ages in excess of 30 years.
SEAT CAPACITY. Demand for aircraft is also influenced by the relative
growth in the average seat capacity of commercial aircraft. If traffic increases
and average seat capacity remains constant, additional aircraft units must be
added to meet demand. The average seat capacity of the world's airlines has
remained relatively constant at 172 to 175 seats per aircraft in the 1990 to
1997 period.(10) This situation has resulted in aircraft unit growth that is
closely correlated to the underlying increase in passenger demand. As indicated
below, industry analysts expect average aircraft seat capacity to increase to
roughly 190 to 200 seats by 2008 and, in the case of the Airbus forecast, to
almost 210 seats by 2017. If this increase occurs, the demand for aircraft units
will be dampened because some capacity growth will be accomplished by adding
seats to aircraft. Increasing capacity growth in this manner also implies that
widebody aircraft demand would increase in the next 10 to 20 years.
AVERAGE AIRCRAFT SEAT CAPACITY
<TABLE>
<CAPTION>
SOURCE: BOEING AIRBUS AIRLINE MONITOR
- ------- --------- --------- ---------------
<S> <C> <C> <C>
Forecast Period........................ 1998-2007 1997-2017 1999-2008
Beginning of Forecast Period........... 190 173 175
End of Forecast Period................. 202 208 188
</TABLE>
- ---------------
(9) ACAS, April 1999.
(10) Airline Monitor, July 1998.
64
<PAGE> 70
AIRCRAFT UTILIZATION. Airlines also can increase aircraft productivity
with faster block times(11), shorter turn times(12) and more efficient aircraft
scheduling, all of which will help increase daily utilization. Airlines can
increase utilization by selling more of their available capacity. Capacity
utilization, or load factors, generally has been rising on a worldwide basis, as
shown in the table below. This trend is especially pronounced recently in North
America and Latin America.
1998 PASSENGER LOAD FACTORS BY WORLD REGION
<TABLE>
<CAPTION>
MIDDLE ASIA/ NORTH LATIN WORLD
YEAR EUROPE AFRICA EAST PACIFIC AMERICA AMERICA AVERAGE
- ---- ------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1991................. 65% 59% 68% 69% 63% 60% 64%
1992................. 66% 61% 65% 67% 64% 58% 64%
1993................. 66% 61% 66% 68% 64% 58% 64%
1994................. 68% 60% 64% 69% 66% 61% 65%
1995................. 70% 62% 67% 69% 67% 65% 67%
1996................. 70% 62% 67% 71% 69% 66% 68%
1997................. 72% 62% 68% 69% 71% 67% 69%
1998................. 70% 62% 67% 66% 71% 62% 69%
</TABLE>
- -------------------------
Source: ICAO Civil Aviation Statistics
Airbus expects that a 5% increase in annual worldwide traffic will be met
by a 4.4% increase in capacity and a 0.7% increase in productivity. The capacity
increase will represent a 3.1% increase in the number of aircraft in service and
a 1.2% increase in the average size of aircraft.(13)
AIRCRAFT FINANCE AND DEMAND. Historically demand and capacity factors
suggest that the aircraft in the portfolio of Aircraft Finance and its
subsidiaries will remain in demand as operators look to optimize their fleets.
Manufacturer's projections of worldwide fleet growth (net of replacements)
indicate a slow but steady increase in average seat capacity. The Aircraft
Finance portfolio, with an average seat capacity of 168, is slightly lower than
the industry average, but it does include a number of narrowbody aircraft that
have historically remained in high demand by operators. This portfolio also
comprises predominantly advanced technology aircraft that increase equipment
productivity by virtue of increased reliability as compared to older generation
aircraft. This factor adds to the desirability of the aircraft type in the
portfolio.
FREIGHTERS
The currently expected increase in air cargo demand raises the anticipated
demand for dedicated freighter aircraft over the next ten years. Currently, most
of the demand for freighter aircraft is expected to be met by converting
passenger aircraft to all-cargo equipment aircraft. In general, there is
relatively little demand for new freighter aircraft
- ---------------
(11) "Block time" refers to the elapsed time between takeoff and landing of the
aircraft.
(12) "Turn time" refers to the elapsed time between arriving and departing from
a gate.
(13) Airbus Industrie Global Market Forecast, April 1998.
65
<PAGE> 71
primarily since it is difficult for aircraft operators to find routes that can
support the high aircraft utilization levels typically required for profitable
operations with new freighter aircraft. Since freighter aircraft generally have
a lower utilization rate than passenger aircraft, the lower utilization rates
translate into relatively high unit ownership costs for new aircraft.
Consequently, the majority of operators acquire used freighter aircraft, and an
important sub-segment of the market will be met through freighter conversions.
SH&E has recently projected that approximately 60 percent of the demand for
freighter aircraft in the 1997-2008 period will be satisfied by converting
passenger aircraft to freighter.
FREIGHTER AIRCRAFT DEMAND FORECAST
(1997 TO 2008)
<TABLE>
<CAPTION>
UNITS REQUIRED OEM PAX CONVERSIONS
-------------- --- ---------------
<S> <C> <C> <C>
Low forecast............................. 364 146 218
High forecast............................ 407 163 244
</TABLE>
- -------------------------
Source: SH&E
AIRCRAFT PRICE TRENDS
Aircraft manufacturers have historically discounted, sometimes
significantly, from list price. Although Airbus and Boeing recently raised list
prices between 3 and 5%(14), both manufacturers already have sold a large
portion of their production in the next few years at price levels that have
already been agreed upon (subject to escalation clauses). Consequently, it may
take several years before the impact of the price increase will be fully
realized by the manufacturers. In addition, if aircraft deliveries of new
aircraft exceed demand, aircraft prices generally decline. Likewise, if aircraft
production rates cannot meet demand, prices generally increase or remain stable.
The overall inability of the aircraft manufacturers to achieve premium prices
for new aircraft has impacted prices of older aircraft. In general, older
aircraft prices historically have had a relationship to new aircraft prices.
AIRCRAFT AGE AND RETIREMENTS
Typically, aircraft are retired when they are no longer the most economical
choice to perform the required task.
In general, the average retirement age of jet aircraft has been climbing.
This trend has been most notable for narrowbody aircraft.
The lease rates of older aircraft are generally lower than new aircraft,
reflecting the older aircraft's lower price. Lease rate factors (lease rate as a
percentage of price) for older aircraft generally exceed that of new aircraft,
however, with lease rate factors that sometimes exceed 2% of the aircraft's
value per month, it is possible to recoup the cost of the aircraft in four years
or less.
This short pay-back period is, however, offset by increased risks of older
aircraft. Older aircraft historically have been more likely to require expensive
modifications imposed
- ---------------
(14) Manufacturer's data.
66
<PAGE> 72
by regulatory action and are liable to experience rapid drops in value during
periods of slow traffic growth.
As shown below, the majority of aircraft worldwide are less than 15 years
old.
COMMERCIAL AIRCRAFT AGE DISTRIBUTION BY SEAT SIZE
<TABLE>
<CAPTION>
WORLD US
---------------------- ----------------------
AGE (YRS) WIDEBODY NARROWBODY WIDEBODY NARROWBODY
- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Gless than...................... 24.7% 19.2% 13.8% 15.1%
GREATER THAN5-10................ 24.2% 25.6% 16.9% 21.2%
GREATER THAN10-15............... 14.6% 13.0% 15.3% 15.4%
GREATER THAN15-20............... 19.0% 11.9% 21.8% 13.6%
GREATER THAN20-25............... 10.1% 8.4% 17.1% 8.9%
GREATER THAN25-30............... 7.3% 10.9% 15.2% 12.8%
GREATER THAN30-35............... 0.0% 10.5% 0.0% 12.7%
GREATER THAN35.................. 0.0% 0.4% 0.0% 0.3%
</TABLE>
- -------------------------
Source: ACAS
The Aircraft Finance portfolio is relatively young with an average age of 4
years for the narrowbody aircraft and 10 years for the widebody aircraft.
Historical aircraft trends indicate that the majority of this portfolio will
remain in operation for a further 20 years.
AIRCRAFT OPERATING LEASING
GROWTH IN AIRCRAFT LEASING
Over the past 20 years, the world's airlines have leased a growing
proportion of the aircraft that they operate. As shown below, the percentage of
leased aircraft in commercial fleets has risen to 43.4% over the last 10 years.
OPERATING LEASE TRENDS
<TABLE>
<CAPTION>
YEAR % OWNED % LEASED
- ---- ------- --------
<S> <C> <C>
1989............................................... 61.6% 38.4%
1992............................................... 57.1% 42.9%
1995............................................... 55.8% 44.2%
1998............................................... 56.6% 43.4%
</TABLE>
- -------------------------
Source: ACAS
The growth of aircraft leasing has been accompanied by the entry of a wide
range of financial institutions into the leasing market. These companies
include:
(1) large organizations such as International Lease Finance
Corporation, which is owned by American International Group, and GECAS; and
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(2) many smaller organizations, including (a) public and private
financial institutions, (b) financing arms of manufacturers and public and
(c) private partnerships.
These lessors supply a mix of new and used aircraft operating leases, finance or
capital leases of new aircraft and sale-leaseback transactions generally
involving used aircraft.
ENTRY OF NEW LESSORS
The health of the airline industry over the past three years has supported
a general strengthening of the prices paid for used aircraft. More banks and
financial institutions have been attracted to the aircraft financing sector and
again have begun competing aggressively for available transactions. Several
aircraft lessors have raised funds in the capital markets for expansion. New
leasing companies also have formed and attracted sources of funding, including
lessors created as part of the securitization of a portfolio of operating leases
that were in another lessor's portfolio.
CURRENT AIRLINE PROFITABILITY
[World Airline Operating Results Bar Graph]
- -------------------------
Source: ICAO Civil Aviation Statistics
Many airlines have enjoyed record levels of profitability in 1996 and 1997.
The aviation industry historically has, however, been cyclical. The industry
correlates well with regional and global economic performance, which, in turn,
drives relative demand for air travel. Airline profitability has historically
moved in the same direction as world gross domestic product.
In 1997, the worldwide airline industry earned an operating profit of $16.5
billion. All major world regions shared this profitability, except the Middle
East, which experienced an operating loss of $100 million.(15)
- ---------------
15 ICAO Civil Aviation Statistics, 1997 (1-28).
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Overall unit costs, as measured by cost per available ton kilometer, have
been steadily decreased in both real and nominal terms since 1991 as a result of
high traffic volume and lower than expected operating costs. Fuel prices for
U.S. carriers, for example, averaged 56.9 cents per gallon in the first quarter
1998 or nine cents lower than in 1997.(16) Commissions, when expressed as a
percentage of sales, have also fallen as a result of caps that have been
implemented in the U.S. and elsewhere. In contrast, staffing levels have
increased 5 percent at eight of the ten U.S. Majors and compensation rose on
average of three percent.(17)
Unit revenue, as expressed by revenue per available ton kilometer, has
increased 1.1% per annum from 1987 to 1997. This unit revenue growth is mostly
attributable to passenger unit revenues, an indication that carriers are pricing
seats accordingly. Freight and mail unit revenue has remained flat or declined
slightly over the period.(18) Real passenger yield, which is a function of real
passenger revenue and revenue per available ton kilometers, has generally
declined since its peak in 1981. Optimal pricing and yield management systems
are now utilized to manage this erosion, resulting in no decline in real
passenger yield from 1996 to 1997.(19)
Although some carriers have recently settled with some of their labor
unions, certain carriers (including several lessees of the initial 36 aircraft)
have pending contract negotiations that are critical to their economic well
being. The impact of labor relations on industry results has historically been
significant and somewhat unpredictable. For example, the well-publicized labor
unrest involving the pilots at American Airlines in the first quarter of 1999
has reportedly resulted in a loss of between $200 and $225 million for the
carrier. Such a loss could be significant for an airline not so strong
financially as American Airlines is currently.
ALLIANCES AND CONSOLIDATIONS
Global and regional alliances take many forms and involve many different
levels of linking two or more airlines. The U.S. government recently has granted
antitrust immunity to alliances that meet specified conditions, such as an "Open
Skies Air Service Agreement". Antitrust immunity enables the participating
airlines to act as a single carrier. Currently, there are four broad global
alliances in various stages of development:
(1) the "Star Alliance", which links Lufthansa, United Airlines, Air
Canada, Thai Airways, VARIG, Ansett Australia, SAS and Air New Zealand;
(2) "OneWorld" which links American Airlines, British Airways,
Canadian Airlines, Cathay Pacific and Qantas;
(3) KLM, Northwest Airlines, Alitalia and Continental; and
(4) Delta Air Lines, Swissair, Sabena, Air France, Austrian Airlines
and TAP Air Portugal.
- ---------------
(16)Airline Monitor, August 1998.
(17)Warburg Dillon Read, Airline Quarterly Review, August 1998.
(18)ICAO Financial Data -- Commercial Air Carriers, 1997.
(19)ICAO Financial Data -- Commercial Air Carriers, 1997.
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Also, there currently exist some regional alliances, including that of
Grupo TACA (which consolidated or aligned certain operators of TACA (El
Salvador), NICA (Nicaragua), LACSA (Costa Rica), COPA (Panama) and Aviateca
(Guatemala)).
The authorities in the U.S. and the EU are scrutinizing those alliances
very carefully. This scrutiny could lead to significant changes to the structure
and shape of future alliances.
The creation of alliances is expected to result in somewhat greater
stability for the commercial aviation industry and may well enhance the credit
of certain participating airlines. The resulting stability may serve to balance
some of the cyclical effects encountered during past industry recessions.
ENVIRONMENTAL
The EU supports more stringent emission standards and land-use controls
than are currently required in the U.S. In addition, the EU has indicated that
it is considering additional regulatory proposals to address its environmental
goals. For example, the International Civil Aviation Organization's Committee on
Aviation Environmental Protection has decided to decrease Nitrous Oxide levels
by 16% and to require implementation in the year 2000 for new engine designs and
in 2008 for newly manufactured engines. Given the ability of individual
countries to impose even more stringent standards, operators could experience
significant increases in landing fees and fuel taxes.
Of the aircraft in the Aircraft Finance portfolio, only four MD-83s fail to
meet the new EU Nitrous Oxide standards. Pratt & Whitney, the manufacturer of
the engines installed on the MD-83, has, however, developed a modified
combustion system for the engine that will permit operations within the EU
limits. Aircraft Finance and its subsidiaries may not, however, have the
resources or will otherwise be able to make use of such a system.
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MANAGEMENT OF AIRCRAFT FINANCE
CONTROLLING TRUSTEES
The Trust Agreement governing Aircraft Finance provides for four trustees.
One of the four trustees of Aircraft Finance is Wilmington Trust Company, who is
acting as the statutory trustee and the Owner Trustee. The remaining three
trustees, David H. Treitel, Richard E. Cavanagh and Wayne D. Lippman are the
"Controlling Trustees" and have the authority to manage the property and affairs
of Aircraft Finance under the Trust Agreement. All of the Controlling Trustees
are independent from GE Capital. One of the Controlling Trustees, called the
"Equity Trustee", will be appointed by the holders of Aircraft Finance's
beneficial interest, while the two other Controlling Trustees, called the
"Independent Controlling Trustees" will be independent of those holders. The
holders of the beneficial interest of Aircraft Finance may replace the Equity
Trustee and each Independent Controlling Trustee may be replaced by the other
Independent Controlling Trustee.
The Trust Agreement requires that (1) any decision relating to insolvency
proceedings, merger or other reorganization of Aircraft Finance must be approved
by a unanimous vote of the Controlling Trustees and (2) any sale of any
aircraft, decisions requiring Aircraft Finance's approval under the Servicing
Agreement with GECAS or the agreement with the administrative agent and the
reduction of any required level of reserves must be approved by the Equity
Trustee and at least one of the Independent Controlling Trustees. The
Controlling Trustees approving certain aircraft sales must also confirm to the
Trustee, prior to the sale, that the sale will not materially and adversely
affect the holders of the Notes. The acquisition of additional aircraft by
Aircraft Finance and the terms of any related financing need only be approved by
the Equity Trustee.
The Controlling Trustees, their respective ages and principal activities as
of May 5, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE/PRINCIPAL ACTIVITIES
- ---- --- --------------------------
<S> <C> <C>
David H. Treitel................... 44 Independent Controlling Trustee
Richard E. Cavanagh................ 52 Independent Controlling Trustee
Wayne D. Lippman................... 51 Equity Trustee
</TABLE>
DAVID H. TREITEL -- Mr. Treitel is the Chairman and Chief Executive Officer
of Simat, Helliesen & Eichner, Inc., a leading aviation consulting firm based in
New York City. Mr. Treitel has been with SH&E since 1977, and prior to taking up
his current position at SH&E in 1996, he served as the firm's President from
1993 to September 1998 and its Executive Vice President from 1989 until 1993.
Mr. Treitel also serves as a director of Midwest Express Holdings, Inc.
RICHARD E. CAVANAGH -- Mr. Cavanagh is the President and Chief Executive
Officer of The Conference Board, Inc., a global business research and membership
enterprise supported by some 3,000 corporate members in 67 counties and based in
New York City. Prior to taking up his current position in 1995, he served for
eight years as the Executive Dean of the Kennedy School of Government at Harvard
University. Before that, he was a partner of McKinsey & Company, Inc., an
international management consulting firm. During his 17 years with McKinsey, he
took a two-year public service leave and held senior positions in The White
House Office of Management & Budget. He co-authored the management book The
Winning Performance. Mr. Cavanagh serves as a director of the
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Airplanes Group, the BlackRock Mutual Fund family, Arch Chemicals (formerly
Olin), The Fremont Group (formerly Bechtel Investments) and The Guardian Life
Insurance Company.
WAYNE D. LIPPMAN -- Mr. Lippman is the Vice Chairman of UniCapital Air
Group, Inc., a wholly-owned subsidiary of UniCapital Corporation, a New York
Stock Exchange listed company. Mr. Lippman has held the position of Vice
Chairman and Chief Operating Officer of Cauff, Lippman Aviation, Inc. and
affiliated aircraft leasing and trading companies since 1981. Cauff, Lippman
Aviation, Inc. and certain affiliates were acquired by UniCapital in May 1998.
In May 1999 Mr. Lippman was appointed President of UniCapital's Big Ticket
Leasing Division.
As is common with many other special purpose companies, neither Aircraft
Finance nor any of its subsidiaries will have any officers or other employees,
except, in the case of a subsidiary, as may be required by applicable law.
Aircraft Finance has arranged for GECAS, ReSource/Phoenix, Wilmington Trust
Company, Bankers Trust Company and Lehman Brothers to provide aircraft
servicing, managerial services and financial advice.
All trustees will be compensated for travel and other expenses incurred by
them in the performance of their duties. Aircraft Finance will pay each of the
Independent Controlling Trustees $60,000 per year for their services in such
capacity as well as additional compensation in the event Aircraft Finance
acquires additional aircraft. The aggregate annual compensation for each
Independent Controlling Trustee may not exceed $100,000. The Equity Trustee will
not receive any such compensation.
THE SERVICER
The servicer and its affiliates have not assumed and are not responsible
for, or guarantors of, and are not obligated to assume or be responsible for, or
guarantors of, any payments on the Notes or any other liabilities of the
Aircraft Finance group.
The servicer and Aircraft Finance have entered into a Servicing Agreement
dated as of May 5, 1999. The Servicing Agreement sets forth (1) the various
duties of the servicer with respect to the management and administration of the
aircraft and the leases, (2) the aircraft marketing activities to be performed
by the servicer and (3) the aircraft management-related obligations of the
servicer in connection with offers and sales by Aircraft Finance of refinancing
or additional Notes.
The servicer has agreed to provide its services in accordance with the
express terms of the Servicing Agreement. The terms of the Servicing Agreement
provide that the servicer will act in accordance with laws applicable to it,
with directions given by the administrative agent on behalf of Aircraft Finance,
with specified standards of care and with specified standards regarding
conflicts of interest. The duties and obligations of the servicer are limited to
those expressly set forth in the Servicing Agreement, and the servicer has not
undertaken any fiduciary or other implied duties or obligations to the Aircraft
Finance group, the holders of the Notes or any other person.
GECAS has agreed to perform the services required by the Servicing
Agreement with reasonable care and diligence at all times and, if a conflict of
interest arises as to an Aircraft Finance aircraft and other aircraft managed by
GECAS, in good faith. In addition, to the extent that either (1) two or more
particular Aircraft Finance aircraft or (2) an Aircraft Finance aircraft and
other aircraft managed by GECAS have substantially similar objectively
identifiable characteristics that are relevant for purposes of the particular
services to be performed, the servicer has agreed not to discriminate (a) among
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those Aircraft Finance aircraft or (b) between any of the Aircraft Finance
aircraft and any other managed aircraft on an unreasonable basis and, in the
case of the two aircraft leased to VARIG, on the basis of GE Capital's interest
in the reserve deposits established for the VARIG leases.
If the servicer in good faith determines that circumstances as to a
particular aircraft or lease require an arm's-length negotiation between the
servicer or any of its affiliates and Aircraft Finance and the servicer believes
it would not be appropriate for the servicer to act on behalf of Aircraft
Finance, the servicer has agreed to notify Aircraft Finance promptly and to
withdraw from acting as the servicer with respect to the matter and Aircraft
Finance has agreed to appoint an independent representative to act on its
behalf. The servicer is entitled to act on its own or its affiliates' behalf in
those negotiations.
Neither Aircraft Finance nor the servicer may assign its rights and
obligations under the Servicing Agreement without the other's prior consent. The
servicer may, however, delegate some, but not all, of its duties to some of its
affiliates.
AIRCRAFT SERVICES
The main categories of aircraft services being provided by the servicer
under the Servicing Agreement are:
(1) lease marketing and remarketing, lease negotiation and execution;
(2) collecting rental payments and other amounts due under leases,
aircraft maintenance, insurance monitoring and procurement, lease
compliance and enforcement and accepting delivery and redelivery of
aircraft;
(3) sales services and aircraft acquisition;
(4) monitoring aircraft maintenance and providing records and
information about the aircraft;
(5) using commercially reasonable efforts to keep Aircraft Finance in
compliance with terms of the indenture governing the Notes that directly
relate to the operation of the aircraft;
(6) limited assistance in connection with this Exchange Offer and the
public or private offerings of any Notes, such as providing information
relating to the servicer and its affiliates for inclusion in any offering
document or prospectus, participating in marketing activities solely with
respect to the aircraft and providing underwriters, rating agencies and
other advisors with the reasonable opportunity to conduct due diligence
with respect to the servicer as it relates to the aircraft;
(7) legal and other professional services with respect to the lease,
sale or financing of the aircraft, any amendment or modification of any
lease, the enforcement of the rights of Aircraft Finance and its
subsidiaries under any lease, any disputes that arise as to any aircraft or
for any other purpose that the servicer reasonably determines is necessary
in connection with the performance of its services; and
(8) periodic reporting of operational information relating to the
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 its services. The Servicing Agreement provides that the servicer will
(1) give Aircraft Finance and its
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agents access to records related to the aircraft under specified circumstances
to enable Aircraft Finance to monitor the performance by the servicer and (2)
not commingle any funds of the Aircraft Finance group with its own funds.
Aircraft Finance, acting through the administrative agent or directly, has
established monitoring and control procedures that it expects will enable it
properly to manage its and its subsidiaries' business and assets.
The Servicing Agreement requires all transactions entered into by the
servicer on behalf of Aircraft Finance and its subsidiaries (other than
intracompany transactions) to be at arm's length and on market terms unless
otherwise agreed or directed by the administrative agent on Aircraft Finance's
behalf. Transactions or matters on behalf of Aircraft Finance and its
subsidiaries that require the specific approval of Aircraft Finance include:
(1) sales of or agreements to sell aircraft, other than as required by
a lease or the purchase agreement for the initial 36 aircraft;
(2) entering into any new leases if the lease does not comply with any
applicable operating covenants set forth under the indenture governing the
Notes or if the lease grants a purchase option in favor of the lessee and
renewing or extending existing leases, other than as a result of the
exercise of an extension option;
(3) terminating any lease or leases to any single lessee for aircraft
then having an aggregate depreciated net book value in excess of $75
million unless a substantially similar replacement or substitute lease is
put into place;
(4) unless provided for in the applicable budget, entering into any
contract for the modification or maintenance of aircraft where the costs to
be incurred by Aircraft Finance and its subsidiaries will exceed the
greater of (a) the estimated aggregate cost of a heavy maintenance check
for similar aircraft and total refurbishment of the related engines and (b)
available maintenance reserves or other collateral under the related lease
or if those costs would be outside the ordinary course of the business of
Aircraft Finance and its subsidiaries;
(5) issuing any guarantee on behalf of, or otherwise pledging the
credit of, Aircraft Finance or any of its subsidiaries, other than with
respect to trade payables in the ordinary course of business and other than
guarantees by Aircraft Finance of the obligations of its subsidiaries;
(6) entering into, amending or granting a waiver with respect to, any
transaction between Aircraft Finance or its subsidiaries and GE Capital or
any of its affiliates not contemplated in the Servicing Agreement;
(7) incurring any actual or contingent liability, unless (a)
contemplated in the applicable budget, (b) pursuant to a transaction of a
type for which Aircraft Finance's specific approval is otherwise required,
(c) incurred in the ordinary course of the business of Aircraft Finance and
its subsidiaries or (d) incurred in entering into a lease or performing any
obligations under a lease; and
(8) entering into any order or commitment to acquire, or acquiring,
aircraft or aircraft engines unless (a) provided for in a lease, (b) the
order or commitment to acquire a replacement engine has been provided for
in the applicable budget or (c) the servicer determines that the purchase
or exchange of an engine is necessary or appropriate.
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<PAGE> 80
BUDGETS
The Servicing Agreement calls for the administrative agent to adopt each
year (1) a single lease operating budget for all aircraft owned by Aircraft
Finance and its subsidiaries and (2) a single budget for the aircraft expenses
related to all aircraft.
SERVICING FEES AND THEIR PAYMENT PRIORITY
The Servicing Agreement provides that Aircraft Finance will pay to the
servicer (1) a base fee of $150,000 per month, which increases if additional
aircraft are acquired by Aircraft Finance and (2) a rent fee equal to 1% of the
aggregate amount of basic rent due for all or any part of a month for any
Aircraft Finance aircraft and 1% of the aggregate basic rent actually paid for
the month. The servicer also will receive a disposition fee equal to 1% of the
gross proceeds of the sale of any Aircraft Finance aircraft. The servicer also
will be reimbursed for aircraft maintenance costs and insurance, outside legal
and professional advisory fees and other out of pocket expenses incurred in
connection with its performance. The aggregate reimbursement expenses may be
significant. Aircraft Finance has also agreed to indemnify the servicer as
described under "Risk Factors -- Aircraft Finance's contractual rights to
recover against the servicer for inadequate performance may be limited." The
subsidiaries of Aircraft Finance have guaranteed the obligations of Aircraft
Finance to the servicer.
The above fees and expense reimbursements are payable monthly in arrears on
the payment dates for the Notes. The payment of those fees and expenses has a
payment priority that is higher than that of all payments on the Notes. The
servicer has agreed to allocate a portion of the fees payable to it to
UniCapital to the extent of any aircraft acquired from UniCapital, including two
of the initial 36 aircraft.
The servicer is also entitled to additional fees (the "Additional Servicing
Fees") consisting of (1) an additional sales fee for each sale of an aircraft,
(2) an additional disposition fee for each sale of an aircraft and (3) an
additional rent-related fee based on basic rent actually paid. Additional
Servicing Fees are payable only after all amounts on the Notes have been paid in
full.
In addition, the servicer will be entitled to fees for aircraft management
services under the Servicing Agreement in connection with (1) the offer and sale
by Aircraft Finance of refinancing and additional Notes and (2) any resales of
Notes by any person who has any right to cause Aircraft Finance to assist in the
resale.
TERM AND TERMINATION
The term of the Servicing Agreement expires on the later of (1) the payment
in full of all amounts due on the Notes and other similar obligations and all
amounts due to the holders of the beneficial interest in Aircraft Finance and
(2) Aircraft Finance and its subsidiaries ceasing to hold any aircraft. Each
party also has the right to terminate the Servicing Agreement under specified
circumstances.
The servicer has the right to terminate the Servicing Agreement if, among
other things, (1) Aircraft Finance defaults in its payment and other obligations
under the Servicing Agreement and related documents, (2) any material
representation or warranty made by Aircraft Finance or its subsidiaries is false
or misleading in a manner material to the servicer, (3) Aircraft Finance or its
subsidiaries become subject to bankruptcy or other insolvency proceedings, (4)
neither Aircraft Finance nor any of its subsidiaries holds any
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<PAGE> 81
aircraft or (5) the indenture governing the Notes or any guaranty in favor of
the servicer ceases to be in effect.
The servicer may resign under the Servicing Agreement with respect to all
aircraft, or at its election, any affected aircraft if it reasonably determines
that directions given, or services required, would, if carried out (1) be
unlawful under applicable law, (2) be in violation of any corporate policy
regarding business practices or legal, ethical or social matters, (3) be likely
to lead to an investigation by any governmental authority of the servicer or its
affiliates, (4) expose the servicer to liabilities for which, in the servicer's
good faith opinion, adequate bond or indemnity has not been provided or (5)
place the servicer in a conflict of interest with respect to which, in the
servicer's good faith opinion, the servicer could not continue to perform its
obligations under the Servicing Agreement. Whether or not it resigns, the
servicer is not required to take any action of the foregoing kind. The servicer
may also resign in the event it becomes subject to unindemnified taxes.
Aircraft Finance has the right to terminate the Servicing Agreement upon
payment in full of the Notes and other similar obligations. Aircraft Finance
also has the right to terminate the Servicing Agreement if, among other things,
the servicer ceases to be at least 75% owned directly or indirectly by GE
Capital or its ultimate parent, General Electric Corporation, the servicer
breaches its obligations under the Servicing Agreement in a manner that is
material to Aircraft Finance and its subsidiaries as a whole, the servicer, GE
Capital or General Electric Company becomes subject to bankruptcy or insolvency
proceedings, there are insufficient funds for the payment on any Class A Note
for a period of 60 days or at least 10 aircraft remain off-lease but available
for re-lease for a period of at least 90 days following specified events set
forth in the indenture governing the Notes.
Aircraft Finance may remove the servicer for any affected aircraft if the
servicer has reasonably determined that directions given, or services required,
would, if carried out, place the servicer in a conflict of interest with respect
to which, in the servicer's good faith opinion, the servicer could not continue
to perform its obligations under the Servicing Agreement.
The servicer may not resign or be removed under the Servicing Agreement and
the Servicing Agreement may not be terminated, except as noted below and except
at the end of its term or unless a replacement servicer, which may be
UniCapital, has been appointed and Aircraft Finance has obtained a confirmation
from the rating agencies rating the Notes that they will not lower, qualify or
withdraw any rating as a result. If a replacement servicer has not been
appointed within 90 days after notice of any termination, resignation or
removal, the servicer may petition any court jurisdiction to appoint a
replacement servicer. The servicer may terminate the Servicing Agreement,
whether or not a replacement servicer has been appointed, if Aircraft Finance
fails, after the applicable cure periods, to pay amounts due to the servicer.
THE ADDITIONAL SERVICER
Aircraft Finance may appoint any UniCapital affiliate to act as the
servicer for any aircraft acquired from UniCapital. To do so, a majority of the
Controlling Trustees of Aircraft Finance must approve UniCapital's acting as an
additional servicer and the fees and other terms on which it would act, and
Aircraft Finance must obtain a confirmation from the rating agencies rating the
Notes that they will not lower, qualify or withdraw a rating of the Notes as a
result. Those services would be performed under an agreement reflecting those
confirmed and approved terms. The Controlling Trustee appointed by the
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holders of Aircraft Finance's beneficial interest, who are subsidiaries of
UniCapital, is not precluded from being included in that majority vote.
CORPORATE MANAGEMENT
Corporate management services for Aircraft Finance will be provided by the
administrative agent, the financial advisor, the Owner Trustee and the capital
markets advisor.
ADMINISTRATIVE AGENT
ReSource/Phoenix, Inc. will act as the initial administrative agent of
Aircraft Finance. The administrative agent has agreed to provide administrative,
accounting and other services that include:
(1) monitoring the performance of the servicer and reporting its
conclusions to the Controlling Trustees of Aircraft Finance;
(2) acting as a liaison with various rating agencies to assess the
impact of management decisions on the ratings of the Notes and coordinating
responses to rating agency questions;
(3) maintaining accounting ledgers and providing draft accounts on a
quarterly and annual basis;
(4) preparing annual budgets for Aircraft Finance's approval;
(5) authorizing the payment of expenses and determining the amount of
expense accruals;
(6) coordinating any amendments to the Aircraft Finance group's
agreements, with the approval of Aircraft Finance;
(7) supervising outside counsel and other professional advisers and
coordinating legal and other professional advice other than with respect to
any service or matter that is the responsibility of the servicer or any
additional servicer;
(8) preparing and coordinating reports to investors and to the
Securities and Exchange Commission, including press releases, and managing
investor relations;
(9) preparing or arranging for the preparation of and filing all
required tax returns; and
(10) overseeing the general operation of any liquidity facility and
advising Aircraft Finance as to the appropriate reserve levels for the
Notes.
In addition to its services on behalf of Aircraft Finance, the
administrative agent has agreed to act as the agent for the trustee and the
security trustee in managing the accounts in which the funds and investments of
Aircraft Finance will be held in the name of the security trustee and related
matters. Aircraft Finance is not entitled to direct the administrative agent as
to these matters. ReSource/Phoenix' duties for the trustee and the security
trustee include:
(1) establishing and maintaining the accounts held in the name of the
security trustee and any other accounts;
(2) directing withdrawals and transfers from those accounts under the
indenture governing the Notes;
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(3) calculating certain monthly payments and making all other
calculations required under that indenture;
(4) providing reports and other information required under that
indenture;
(5) providing the trustee with information required by the trustee to
provide its reports to the holders of the Notes; and
(6) subject to specified limitations and at the written direction of
the Controlling Trustees, directing the investment of the funds in those
accounts in investments permitted by that indenture.
The administrative agent is entitled to a fee of $497,000 per year, plus an
additional amount for any additional aircraft acquired in the future, payable
monthly in arrears in equal installments. The administrative agent is entitled
to be indemnified by Aircraft Finance against any loss or liability incurred by
the administrative agent in connection with its services to Aircraft Finance or
as the agent for the trustee and the security trustee, other than through its
own deceit, fraud, gross negligence or willful misconduct or that of its
officers, directors, agents and employees.
FINANCIAL ADVISOR
Bankers Trust will act as the initial financial advisor. The financial
advisor is responsible for assisting Aircraft Finance in developing models for
the purposes of analyzing the financial impact of aircraft lease, sale and
capital investment decisions. The agreement with the financial advisor may be
terminated by either Aircraft Finance or the financial advisor on 30 days'
written notice.
OWNER TRUSTEE
Wilmington Trust will act as the initial owner trustee. The owner trustee
will maintain the books and records, including minute books and records and
trust certificate records, of Aircraft Finance. It will make available
telephone, facsimile and post office box facilities and will maintain Aircraft
Finance's principal place of business in Delaware.
CAPITAL MARKETS ADVISOR
Lehman Brothers Inc. will act as the initial capital markets advisor. The
capital markets advisor is responsible for providing Aircraft Finance with
investment banking advice in connection with the issuance of additional Notes,
financial advice to assist Aircraft Finance in evaluating interest rate risk and
other analytical advice. Aircraft Finance may remove the capital markets advisor
at any time on 90 days' written notice.
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CAPITALIZATION
The following table sets forth the capitalization of Aircraft Finance as of
May 5, 1999 which reflects the issuance of the Initial Notes and the issuance of
the initial beneficial interest in Aircraft Finance. This table should be read
in conjunction with the consolidated balance sheet and the related notes
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Notes payable........................................... $1,209,000
Beneficial interestholders' equity:..................... 39,087
----------
Total capitalization.................................... $1,248,087
==========
</TABLE>
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<PAGE> 85
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data in the following table have been
derived from, and should be read in conjunction with, Aircraft Finance's
consolidated balance sheet as of May 5, 1999, including the related notes,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Aircraft under operating leases.................... $1,196,087
Total assets....................................... 1,278,268
Notes payable...................................... 1,209,000
Total liabilities.................................. 1,239,181
Total beneficial interestholders' equity........... 39,087
</TABLE>
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<PAGE> 86
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Aircraft Finance was organized on April 13, 1999, and the other initial
members of the Aircraft Finance group were organized prior to May 5, 1999. No
member of the Aircraft Finance group has engaged in any business activity, other
than in connection with transactions described in this Prospectus. The Aircraft
Finance group's business is expected to consist principally of:
(1) acquiring the initial aircraft,
(2) aircraft leasing activities,
(3) acquisitions of additional aircraft and
(4) sales of aircraft.
Cash flows generated from these activities will be used to service interest and
principal on the initial and future Notes, and make distributions of remaining
amounts to the holders of the beneficial interests in Aircraft Finance, in each
case, only after various expenses of the Aircraft Finance group have been paid
for. These expenses include any taxes, obligations to lessees including
maintenance obligations, fees and expenses of the servicer, administrative
agent, financial advisor, capital markets advisor, reference agent, trustee,
security trustee, the paying agent and registrar of the Notes and other service
providers. On May 5, 1999, when the initial Notes were issued, the Aircraft
Finance group had no indebtedness (other than ordinary course of business
obligations to suppliers, and obligations to lessees with respect to security
deposits and maintenance reserves) other than the initial Notes.
The Aircraft Finance group's ability to generate sufficient cash from its
initial aircraft assets to service the initial Notes will depend primarily on:
(1) the rental rates it can achieve on leases
(2) the lessees' ability to perform according to the terms of those
leases and
(3) the prices it can achieve on the sales of aircraft.
Aircraft Finance's ability to pay principal, interest and premium, if any, on
the initial Notes will also depend on the level of the Aircraft Finance group's
operating expenses, including maintenance obligations that are expected to
increase as the initial aircraft age, and on any unforeseen contingent
liabilities.
The sellers of the aircraft will retain their respective reserve accounts
with respect to maintenance expenses. The Aircraft Finance group will establish
a maintenance reserve account on and after May 5, 1999 (including with respect
to aircraft to be delivered between May 5, 1999 and December 1, 1999) that will
be funded from available funds (including funds received from lessees as
maintenance reserves after May 5, 1999) on deposit in the Collections Account
and any cash collateral account or any other eligible credit facilities.
Aircraft Finance cannot assure you that cash flows generated from the initial
aircraft will be sufficient to provide maintenance reserves and to service
interest and principal on the initial Notes. See "Risk Factors -- Risks Relating
to Cash Flows" and "-- Risks Relating to Collections under Leases".
The Aircraft Finance group will not use operational cash flow to pay for
additional aircraft but, instead, Aircraft Finance will issue additional Notes,
additional equity interests, or both to fund these purchases, if any. Any
additional Notes must be issued in
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<PAGE> 87
compliance with the limitations set forth under "Description of the
Notes -- Indenture Covenants -- Limitation on Indebtedness", and any additional
equity interests must be issued in compliance with the limitations set forth in
"Description of the Notes -- Indenture Covenants -- Limitation on the Issuance,
Delivery and Sale of Equity Interests".
Certain of the lessees of the initial aircraft were late in the payment of
rent, maintenance reserves and other amounts. For further detail please see "The
Initial Aircraft and Initial Lessees -- The Lessees -- Payment History".
CASH RESERVES AND LIQUIDITY
Cash reserves as of the date of this Prospectus are approximately $52
million, exclusive of security deposits and maintenance reserves under aircraft
leases. Cash reserves provide a source of liquidity to pay ongoing expenses,
amounts due under senior swap agreements and interest on the Notes. If cash
reserves fall below $33 million, Aircraft Finance may continue to pay ongoing
expenses, senior swap amounts and interest on the Class A Notes but may not make
any payments having a lower payment priority until the reserves have been
replenished to that amount. Similar cash reserve levels have been set as to the
Class B Notes, the Class C Notes and the Class D Notes. The reserve levels will
reduce as principal is paid and may be reduced by Aircraft Finance.
Aircraft Finance may put in place cash collateral accounts and other
eligible credit facilities from time to time. Each of these facilities, if put
in place, may be designated by the controlling trustees of Aircraft Finance as a
primary eligible credit facility, a secondary eligible credit facility, a
tertiary eligible credit facility, or a subordinate eligible credit facility.
Amounts available under these accounts or other facilities may be credited
against the reserve levels noted in the prior paragraph. Amounts drawn under any
these facilities will be repayable or replenished in the order of priority set
forth in "Description of the Notes -- Priority of Payments". As of May 5, 1999,
there were no cash collateral accounts or other eligible credit facilities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest incurred by Aircraft Finance on the Notes and the yield from
rental income received by the Aircraft Finance group under operating leases are
based on combinations of variable and fixed measures of interest rates. The
Aircraft Finance group is exposed to interest rate risk to the extent that the
mix of variable and fixed interest obligations under the Notes do not correlate
to the mix of variable and fixed yields from rental income under leases.
Aircraft Finance has engaged advisors to monitor continuously interest rates in
order to mitigate its exposure to unfavorable variations. The Aircraft Finance
group utilizes interest rate swaps that shift the risk of fluctuations in
floating rates to the counterparty in exchange for fixed payments by the
Aircraft Finance group. Risks in the use of these instruments arise from the
possible inability of the counterparties to meet the terms of their contracts
and from market movements in securities values and interest rates.
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<PAGE> 88
The terms of each class of the Notes, including the outstanding principal
amount at May 5, 1999, are as follows:
<TABLE>
<CAPTION>
INITIAL PRINCIPAL EXPECTED FINAL FINAL ESTIMATED
CLASS OF NOTES AMOUNT INTEREST RATE PAYMENT DATE MATURITY DATE FAIR VALUE
- -------------- ----------------- ------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Class A-1............ $512,500,000 LIBOR + 0.48% May 15, 2004 May 15, 2024 $512,000,000
Class A-2............ 400,000,000 LIBOR + 0.50% June 15, 2008 May 15, 2024 400,000,000
Class B.............. 126,500,000 LIBOR + 1.15% May 15, 2016 May 15, 2024 126,500,000
Class C.............. 106,000,000 8.00% July 15, 2016 May 15, 2024 105,933,750
Class D.............. 64,000,000 11.00% August 15, 2016 May 15, 2024 64,000,000
</TABLE>
At May 5, 1999, Aircraft Finance was a party to five interest rate swap
agreements. Under the agreements, Aircraft Finance will pay a fixed rate of
interest on the notional amount to the counterparty and, in turn, the
counterparty will pay the Aircraft Finance group a rate of interest on the
notional amount based on LIBOR. On May 5, 1999, the fair values of these
interest rate swaps was zero as the agreements became effective under the market
conditions existing on that same day.
The following table presents, as of May 5, 1999, the terms of Aircraft
Finance's interest rate swap agreements:
<TABLE>
<CAPTION>
RATE TO BE
RATE TO BE PAID RECEIVED BY
NOTIONAL AMOUNT BY AIRCRAFT FINANCE AIRCRAFT FINANCE MATURITY DATE
- --------------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
$ 80,000,000 5.23% LIBOR April 15, 2000
60,000,000 5.50% LIBOR January 15, 2002
175,000,000 5.56% LIBOR October 15, 2002
345,000,000 5.65% LIBOR January 15, 2004
230,000,000 5.71% LIBOR November 15, 2004
</TABLE>
The Master Swap Agreement of the Aircraft Finance group is attached as
Exhibit 10.6 to the Registration Statement of which this Prospectus forms a
part. The Aircraft Finance group expects to enter into additional swaps, or sell
at market values or unwind part or all of its initial swaps and any future swaps
on a periodic basis in its efforts to mitigate its exposure to unfavorable
changes in interest rates. Any changes in the Aircraft Finance group's policy
regarding its use of interest rate hedging products will be subject to periodic
review by the rating agencies. The controlling trustees of Aircraft Finance,
with the assistance of Bankers Trust and Lehman Brothers, are responsible for
reviewing and approving the overall interest rate management policies and
transaction authority limits. Counterparty risk will be monitored on an ongoing
basis. Counterparties will be subject to the prior approval of the controlling
trustees. Currently, Aircraft Finance's counterparty is an affiliate of Lehman
Brothers. Future counterparties will consist primarily of the affiliates of
major United States and European financial institutions, including
special-purpose derivative vehicles, that have credit ratings, or that provide
collateralization arrangements, consistent with maintaining the ratings of the
Notes.
NOTE PAYMENT ASSUMPTIONS
The assumptions and tables set forth below are 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
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<PAGE> 89
assumptions and by varying other assumptions and factors that affect Aircraft
Finance's revenues and expenses. The assumptions are not a complete list of
factors that may affect the revenues and expenses of Aircraft Finance. Rather,
they reflect those factors that are likely to affect significantly the
performance of Aircraft Finance in future years. More severe stresses may lead
to payments of principal on the Notes being delayed or decreased or, in certain
cases, default under the Indenture governing the Notes.
You should understand that the following tables only illustrate some of the
payment sensitivities of the Notes to market and economic stresses. These tables
were in the offering memorandum for the Initial Notes based on information as of
April 1, 1999. Aircraft Finance has not updated or revised the information
presented to reflect changes occurring after April 1, 1999. For example, LIBOR
rates have changed since that time. It is highly likely that actual experience
will vary from the assumptions and the possible revenue scenarios represented by
the tables. Factors that could cause Aircraft Finance's actual revenues to
differ materially from such scenarios include the stresses described below and
the risks set forth under "Risk Factors".
REVENUE ASSUMPTIONS:
Aircraft Finance used assumptions (1) to (12) below to determine its
assumed gross monthly revenue 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. See Appendix 3 to this
Prospectus for further data regarding assumed gross revenue.
(1) One-month LIBOR remains constant at 4.93% per annum.
(2) Aircraft Finance's floating rate leases are assumed to reset based upon
one-month LIBOR.
(3) 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 lease rate as of May
1, 1999 for aircraft of like age.
Lease rates are assumed to remain constant at the monthly lease rate for
the first 60% of an initial aircraft's expected useful life and then to
depreciate on a straight-line basis to 40% of that lease rate over the remainder
of its expected useful life.
The portion of rent subject to adjustment under each of the leases for the
two initial aircraft whose rents periodically re-set in part based upon
six-month U.S. Treasury bill rates has been assumed to be zero based upon the
relevant U.S. Treasury bill rate in effect on the commencement date of the
lease. Future lease rates for each of those aircraft have been assumed to be the
average lease rate for the relevant aircraft under the related initial lease
computed on the basis of the foregoing assumption over the entire term of the
relevant initial lease.
Three aircraft that have recently had their leases amended to adjust
rentals on a seasonal basis (without negatively affecting total rent payments)
are deemed to have their original rental profiles.
(4) Aircraft are sold at the end of their expected useful life for their
initial appraised value at May 5, 1999 times the applicable Depreciation Factor.
The DC-10-30 aircraft are expected to have an expected useful life of 30 years
and all other types of aircraft are assumed to have an expected useful life of
25 years.
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<PAGE> 90
(5) All contracted and assumed future payments in respect of the leases are
timely received by Aircraft Finance and twenty days of investment income are
earned at LIBOR on those amounts each month.
(6) Future lease terms are assumed to be five years.
(7) No new purchase options with respect to the aircraft are granted to
lessees by Aircraft Finance, and no existing purchase options are exercised.
(8) No new lease termination or extension options are granted to lessees by
Aircraft Finance, and no existing termination or extension options are
exercised.
(9) All 36 initial aircraft are delivered to Aircraft Finance on May 5,
1999.
(10) Aircraft Finance acquires no additional aircraft and issues no
additional Notes.
(11) Security deposits and Modification Payments are zero.
(12) Distributions on the Notes are made on the 15th day of each month and
the Calculation Date is assumed to be the 9th day of each month, regardless of
the day on which these actually occur.
INTEREST, EXPENSE, OPERATING COST AND OTHER REINVESTMENT ASSUMPTIONS:
(13) The Initial Notes are issued in amounts and with coupons as set forth
in the following table and payments are made in accordance with the payment
priorities set forth under "Description of the Notes -- Priority of Payments".
<TABLE>
<CAPTION>
CLASS OF INITIAL NOTES AMOUNT MONTHLY COUPON
- ---------------------- ------------ --------------
($ MILLIONS)
<S> <C> <C>
Class A-1 Notes.......................... 512.5 LIBOR + 0.48%
Class A-2 Notes.......................... 400.0 LIBOR + 0.50%
Class B Notes............................ 126.5 LIBOR + 1.15%
Class C Notes............................ 106.0 8.00%
Class D Notes............................ 64.0 11.00%
</TABLE>
(14) Refinancing Notes are issued and sold on the Expected Final Payment
Date of the Class A-1 Notes (and on each of the subsequent expected final
payment dates of any such refinancing Notes) on the same terms with respect to
priority, coupon and redemption as the Initial Notes being refinanced and with
maturities and amortization schedules paid with the application of the Minimum,
Supplemental and Scheduled Principal Payment Amounts. Issuance expenses are
0.05% of the outstanding principal balance.
(15) The servicer's fees are as described under "Management of Aircraft
Finance -- The servicer". The Aircraft Finance group's other selling, general
and administrative expenses in the amount of $2.1 million per year are deducted
from gross revenue and include fees to the administrative agent, the financial
advisor and the capital markets advisor.
(16) Gross revenues are reduced each year by 3.50% to account for
contingent costs, including insurance expenses, aircraft releasing costs,
leasing transaction expenses and maintenance expenditures net of maintenance
reserve receipts.
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<PAGE> 91
(17) Aircraft Finance makes and receives swap payments in accordance with
the swap agreements in place on May 5, 1999, and Aircraft Finance enters into no
additional swaps.
(18) Funds on deposit in the Collections Account other than lease payments
(see assumption (5)) earn interest each month at a rate per annum equal to
one-month LIBOR and are applied in accordance with the payment of priorities set
forth under "Description of the Notes -- Priority of Payments".
ASSUMED STRESS CASE SCENARIO
In this stress scenario, gross revenues are assumed to reduce by 4.5% per
annum as a result of rental payments lost and expenditures required due to AOG,
lessee defaults, aircraft repossession costs and bad debts. AOG is an acronym
for "Aircraft On the Ground". The following set of stresses are presented for
illustrative purposes and only represent an example of a combination of stresses
that result in approximately a 4.5% reduction in gross revenues. Other stress
combinations could result in gross revenue reductions which exceed 4.5%.
<TABLE>
<S> <C> <C>
A: Weighted Average Portfolio Turnover: 20% per annum (Assumption (6))
B: Average Re-marketing Time: 4 weeks (0.08 years)
C: Weighted Average Default Rate: 4% per annum
D: Average Repossession Time: 14 weeks (0.27 years)
E: Weighted Average Bad Debt Expense: 1% per annum
</TABLE>
<TABLE>
<S> <C>
AOG = (A X B) + (C X (B + D))
Annual Repossession Expense ("ARE") = C/8
AOG = (20% X .08 yrs) + (4% X (.08 yrs + .27 yrs))..... 3.0%
ARE (4%/8)............................................. 0.5%
Bad Debt Expense....................................... 1.0
---
Stress Related Gross Revenue Reduction................. 4.5%
Contingent Costs (See Assumption (16))................. 3.5
===
Gross Revenue Reduction in the assumed case............ 8.0%
</TABLE>
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 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 9.6%
Re-marketing Time........................... 8 weeks 9.9%
Default Rate................................ 8% per annum 9.9%
Repossession Time........................... 28 weeks 9.1%
Bad Debt Expense............................ 2% per annum 9.0%
</TABLE>
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<PAGE> 92
It is highly likely that actual experience will differ from the assumptions
and the stresses. As a result principal payments on the Notes will occur earlier
or later than assumed, and the timing differences may be substantial.
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 classes of Notes
expected to be outstanding on that Payment Date based on the assumptions set out
above. It is highly unlikely that the assumptions will correspond to actual
experience. Therefore, principal payments on the Initial Notes may occur earlier
or later than as set forth in the table. The failure of Aircraft Finance to pay
principal of any class of the Notes prior to the Final Maturity Date of that
class because sufficient funds are not available after paying obligations that
have a higher payment priority will not constitute an Indenture Event of
Default.
PERCENT OF INITIAL PRINCIPAL BALANCE OF THE
INITIAL NOTES BASED ON THE ASSUMED CASE(1)
<TABLE>
<CAPTION>
CLASS CLASS CLASS CLASS CLASS
PAYMENT DATE OCCURRING IN JUNE A-1 NOTES A-2 NOTES B NOTES C NOTES D NOTES
- ------------------------------ --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1999 (Closing Date)........... 100.00% 100.00% 100.00% 100.00% 100.00%
2000.......................... 100.00% 88.61% 98.70% 100.00% 100.00%
2001.......................... 100.00% 78.24% 95.22% 100.00% 100.00%
2002.......................... 100.00% 67.78% 94.09% 94.81% 99.78%
2003.......................... 100.00% 60.83% 91.16% 78.67% 94.58%
2004.......................... 100.00% 52.09% 83.28% 70.50% 90.39%
2005.......................... 0.00% 39.17% 80.86% 65.71% 86.10%
2006.......................... 0.00% 25.21% 76.68% 62.68% 82.17%
2007.......................... 0.00% 11.90% 65.49% 61.59% 78.53%
2008.......................... 0.00% 0.00% 58.09% 61.59% 58.17%
2009.......................... 0.00% 0.00% 50.72% 60.53% 45.02%
2010.......................... 0.00% 0.00% 43.59% 52.39% 36.21%
2011.......................... 0.00% 0.00% 36.15% 43.00% 32.57%
2012.......................... 0.00% 0.00% 27.52% 36.98% 29.68%
2013.......................... 0.00% 0.00% 17.81% 29.35% 29.68%
2014.......................... 0.00% 0.00% 10.18% 24.54% 28.45%
2015.......................... 0.00% 0.00% 7.95% 21.50% 28.45%
2016.......................... 0.00% 0.00% 0.00% 7.00% 28.45%
2017.......................... 0.00% 0.00% 0.00% 0.00% 0.00%
Weighted Average Life....... 5.0 4.9 10.0 10.4 11.0
</TABLE>
- -------------------------
(1) See Appendices 3 and 9, respectively, for further data regarding gross
revenues and Pool Factors.
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<PAGE> 93
DECLINING BALANCES OF THE INITIAL NOTES AND ASSUMED COLLATERAL VALUE*
BASED ON THE ASSUMED CASE
[DECLINING BALANCE OF NOTES]
- -------------------------
* "Collateral Value" is the sum of (1) the Depreciation Factor for each aircraft
at that time times the initial appraised value of that aircraft and (2) cash
reserves equal to the amount of cash reserves assumed to exist based on the
Assumed Case.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE THE INITIAL NOTES
The table below indicates the minimum percentage of gross revenue that will
be necessary to repay all interest and principal on each class of the Notes by
its respective Final Maturity Date. If the actual revenue received by the
Aircraft Finance group were to fall below the percentages of gross revenue
indicated below and all of the other assumptions occurred, Aircraft Finance
would be unable to meet its required payment obligations, which would constitute
an Indenture Event of Default.
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<PAGE> 94
PERCENTAGE OF GROSS REVENUE NECESSARY TO REPAY THE INITIAL NOTES
BY THE APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL EXPERIENCE
CORRESPONDS TO THE ASSUMED CASE UNTIL THE BEGINNING OF THE YEAR STATED
<TABLE>
<CAPTION>
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A Notes............................... 60.8% 60.1% 59.4% 56.3%
Class B Notes............................... 69.1% 68.3% 67.7% 60.7%
Class C Notes............................... 77.6% 75.8% 73.6% 66.3%
Class D Notes............................... 84.3% 82.2% 78.3% 69.8%
</TABLE>
EFFECT OF A PERMANENT CHANGE IN GROSS REVENUE
Aircraft Finance prepared the tables below based on the assumptions, except
that it varied the revenues received by the Aircraft Finance group from assumed
gross revenues by the indicated percentages, beginning in years 3, 6 and 9. If
Aircraft Finance receives actual revenues as indicated below and all of the
other assumptions occurred, then the expected maturities, weighted average lives
and yields of the respective classes of Notes would be as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL 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>
Class A-1 Notes...... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...... 6.7 3.8 7.8 4.3 9.1 4.9 10.2 5.5 10.1 5.8
Class B Notes........ 12.7 9.3 14.5 9.8 17.0 10.0 18.8 11.6 19.2 11.7
Class C Notes........ 12.9 9.2 14.8 9.8 17.2 10.4 19.4 11.7 23.3 13.8
Class D Notes........ 13.0 9.8 14.9 10.3 17.3 11.0 21.4 15.7 ** **
</TABLE>
- -------------------------
* Assumed Case
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
+10% 0% -8%* -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................... 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................... 11.0% 11.0% 11.0% 11.0% 7.8%
</TABLE>
- -------------------------
* Assumed Case
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<PAGE> 95
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL 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>
Class A-1 Notes...... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...... 7.8 4.5 8.4 4.7 9.1 4.9 10.1 5.0 10.2 5.2
Class B Notes........ 13.6 9.6 15.2 9.9 17.0 10.0 18.8 11.6 19.2 11.6
Class C Notes........ 13.9 9.6 15.4 10.0 17.2 10.4 19.4 11.7 22.5 12.8
Class D Notes........ 13.9 10.1 15.4 10.5 17.3 11.0 19.6 14.6 23.4 17.0
</TABLE>
- -------------------------
* Assumed Case
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
+10% 0% -8%* -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................... 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................... 11.0% 11.0% 11.0% 11.0% 11.0%
</TABLE>
- -------------------------
* Assumed Case
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<PAGE> 96
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
<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>
Class A-1 Notes........ 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes........ 8.8 4.9 8.9 4.9 9.1 4.9 9.1 4.9 9.1 4.9
Class B Notes.......... 14.6 9.8 15.7 9.9 17.0 10.0 17.9 10.9 18.8 11.3
Class C Notes.......... 14.9 9.8 15.9 10.1 17.2 10.4 18.4 11.4 19.4 11.7
Class D Notes.......... 14.9 10.3 16.0 10.7 17.3 11.0 18.6 14.2 20.1 14.8
</TABLE>
- -------------------------
* Assumed Case
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
----------------------------------------
10.0% 0.0% -8.0%* -15.0% -20.0%
----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Class A-1 Notes...................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes...................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................ 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................ 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................ 11.0% 11.0% 11.0% 11.0% 11.0%
</TABLE>
- -------------------------
* Assumed Case
EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
If the value of Aircraft Finance's portfolio of aircraft as adjusted for
appraisals is significantly less than the value assumed, the Scheduled Principal
Payment Amount payable to holders of the Class A Notes may increase. Payment of
that increased amount may shorten the weighted average lives of the Class A
Notes and lengthen the weighted average lives of the classes of Notes that have
a lower payment priority. The following tables show the expected maturity and
weighted average life of each class of Notes if the Adjusted Portfolio Value
permanently declined to a given percentage of the assumed portfolio value,
beginning in years 1 and 5, respectively.
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<PAGE> 97
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 1
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
ASSUMED 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>
Class A-1 Notes................... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes................... 9.1 4.9 8.7 4.8 8.7 4.8 8.7 4.8
Class B Notes..................... 17.0 10.0 17.0 10.5 17.0 11.0 17.0 11.1
Class C Notes..................... 17.2 10.4 17.3 10.4 17.3 10.9 17.3 11.0
Class D Notes..................... 17.3 11.0 17.4 13.2 17.4 13.5 17.4 13.5
</TABLE>
- -------------------------
* Assumed Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 5
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
ASSUMED 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>
Class A-1 Notes................... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes................... 9.1 4.9 8.7 4.8 8.7 4.8 8.7 4.8
Class B Notes..................... 17.0 10.0 17.0 10.4 17.0 10.9 17.0 11.1
Class C Notes..................... 17.2 10.4 17.3 10.4 17.3 10.9 17.3 11.0
Class D Notes..................... 17.3 11.0 17.4 13.2 17.4 13.5 17.4 13.5
</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. The Aircraft Finance group would be negatively
affected by a decline in the demand for aircraft. Aircraft Finance has assumed
that such a decline or "recession" (as used in this discussion) will result in a
decline in Aircraft values and an increase in defaults and downtime, as well as
a decline in operating lease rental rates. In that event gross revenues would
decline.
Aircraft Finance prepared the following tables to show the effect on
expected maturities and weighted average lives of the Class B and Class C Notes,
if recessions of different lengths occurred. Actual experience will likely
differ from that assumed, and, therefore, the actual expected maturities and
weighted average lives of the Notes will likely differ from those shown in the
tables below. In preparing the following tables Aircraft
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<PAGE> 98
Finance assumed that a recession would have the following effect on the Aircraft
Finance group:
(1) Aircraft values fall on the first day of the recession to a given
percentage of the assumed portfolio value. This decrease would trigger an
increase in Scheduled Principal Payment Amounts on the Class A Notes.
(2) 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. This would result in less cash flow being
available to make payments of interest and principal on the Notes.
(3) The recession lasts a given period of time. After that the
adjusted portfolio value returns to the assumed portfolio value on the
first day after the recession. Two years after the end of the recession,
gross revenues returns to the assumed case. Aircraft Finance cannot,
however, assure you that periods of weak traffic growth and lower demand
for aircraft will be followed by periods of strong growth and high demand
for aircraft or that following a recession aircraft values and gross
revenues will return to assumed case levels.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.1 10.0 17.0 10.0 17.0 10.2 17.9 11.6
3 16.2 10.0 17.0 10.0 17.0 10.2 17.8 11.5
5 16.3 10.0 17.0 10.0 17.0 10.1 17.6 11.4
10 16.5 10.0 17.0 10.0 17.0 10.1 17.4 10.9
</TABLE>
- -------------------------
* Assumed Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.7 9.9 17.0 10.0 17.1 10.4 18.8 11.6
3 15.8 9.9 17.0 10.0 17.0 10.2 18.6 11.6
5 15.9 9.9 17.0 10.0 17.0 10.3 18.3 11.5
10 16.3 10.0 17.0 10.0 17.0 10.2 17.6 11.1
</TABLE>
- -------------------------
* Assumed Case
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<PAGE> 99
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.4 10.2 17.2 10.4 17.3 10.6 18.3 11.4
3 16.5 10.2 17.2 10.4 17.3 10.5 18.0 11.4
5 16.6 10.2 17.2 10.4 17.3 10.5 17.9 11.4
10 16.8 10.3 17.2 10.4 17.3 10.7 17.7 11.2
</TABLE>
- -------------------------
* Assumed Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.9 10.1 17.2 10.4 17.4 10.9 19.4 11.7
3 16.1 10.1 17.2 10.4 17.4 10.8 18.9 11.6
5 16.2 10.1 17.2 10.4 17.3 10.7 18.6 11.5
10 16.5 10.2 17.2 10.4 17.3 10.6 17.9 11.4
</TABLE>
- -------------------------
* Assumed Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS D
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.4 10.8 17.3 11.0 17.4 13.1 18.5 14.3
3 16.5 10.8 17.3 11.0 17.4 12.9 18.3 14.0
5 16.6 10.8 17.3 11.0 17.4 12.7 18.1 13.9
10 16.8 10.9 17.3 11.0 17.4 12.2 17.9 13.4
</TABLE>
- -------------------------
* Assumed Case
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<PAGE> 100
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS D
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>
RECESSION BEGINS
AT START OF YEAR EXP AVG EXP AVG EXP AVG EXP AVG
---------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.9 10.6 17.3 11.0 17.5 13.6 19.8 16.4
3 16.1 10.7 17.3 11.0 17.5 13.6 19.1 14.5
5 16.2 10.7 17.3 11.0 17.5 13.4 18.9 14.3
10 16.6 10.8 17.3 11.0 17.4 13.0 18.1 13.6
</TABLE>
- -------------------------
* Assumed Case
DESCRIPTION OF THE NOTES
The following description is a summary of the Notes, the Indenture and
other agreements. The description does not restate those documents. Please read
those documents because they, and not this description, define your rights as
holders of the Notes. Aircraft Finance has filed those agreements as exhibits to
the registration statement of which this Prospectus is a part. The description
relies on a number of defined terms, and this Prospectus contains a glossary in
Appendix 1 that identifies the pages on which those terms are first defined or
used.
THE INDENTURE AND THE TRUSTEE
The Exchange Notes will be issued under the Trust Indenture, referred to in
this Prospectus as the Indenture, dated as of May 5, 1999 between Aircraft
Finance, ReSource/Phoenix, in its capacity as the administrative agent, and
Bankers Trust under which the Restricted Notes and the Initial Class D Notes
were issued. Bankers Trust is appointed the trustee under the Indenture. Bankers
Trust is also the security trustee and the operating bank under the Security
Trust Agreement.
The Notes are obligations solely of Aircraft Finance and are not secured by
the aircraft. The Notes are not guaranteed by any lessee, GE Capital or other
sellers of Aircraft, GECAS, the trustees and holders of the beneficial interest
of Aircraft Finance or any other person. Class A, Class B and Class C Notes are
issuable in definitive, fully registered form and in minimum denominations of
$100,000 or any higher whole multiple of $1,000. Class D Notes are issued in
definitive, fully registered form and in minimum denominations of $1,000,000 and
higher whole multiples of $100,000.
The appointment of Bankers Trust as the trustee is currently for each class
and subclass of Notes. Because the various subclasses of Notes may not always
have the same interests, the trustee may resign or be replaced by the holders of
any class or subclass of Notes as to any particular class or subclass of Notes
in each case for that or any other reason. Aircraft Finance may also replace the
trustee if the trustee is no longer eligible, becomes subject to any insolvency
proceeding or otherwise is no longer able to act. No resignation or removal for
replacement may be effective until the replacement trustee has accepted its
appointment. The Indenture provides that Aircraft Finance will pay the fees and
expenses of the trustee and will indemnify and defend the trustee against any
loss or liability incurred by the trustee other than through its own bad faith
or negligence.
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<PAGE> 101
RATINGS
The Exchange Notes and the Initial Class D Notes are rated as follows:
<TABLE>
<CAPTION>
RATING AGENCIES
----------------------------
CLASSES OF INITIAL NOTES MOODY'S STANDARD & POOR'S
- ------------------------ ------- -----------------
<S> <C> <C>
Class A-1........................... Aa2 AA
Class A-2........................... Aa2 AA
Class B............................. A2 A
Class C............................. Baa2 BBB
Class D............................. Ba2 BB
</TABLE>
You should not view the ratings of the Notes as a recommendation to buy,
sell or hold the Notes. The ratings only address the likelihood of the timely
payment of interest at the rate specified on the cover page of this Prospectus
and the ultimate payment of principal on the Notes. The ratings do not address
other payments on the Notes or the effect of any withholding tax on the Notes or
on the cash flows of Aircraft Finance and its subsidiaries.
PAYMENTS ON THE NOTES
PAYMENT DATES
On each Payment Date, the trustee will pay -- or will instruct a paying
agent appointed in Luxembourg to pay -- to the holders of the Notes all
interest, principal and any Sale Premium on the Notes so long as the trustee or
the paying agent confirms that it has received the payment by 1:00 p.m. (New
York time) on that Payment Date. If the trustee or the paying agent confirms
receipt of the payment after that time, it will make the payment to the holders
of the Notes on the business day after the business day on which it received the
payment. The trustee or the paying agent will make each payment on each Note on
any Payment Date other than the final payment date for that Note to the holder
of record as of the record date immediately preceding that Payment Date. The
final payment for any Note, however, will be made only upon surrender of the
Note by the holder or its agent -- including any holder in street name -- at the
office or agency of the trustee or the paying agent. So long as any Notes are
listed on the Luxembourg Stock Exchange, Aircraft Finance must appoint and
maintain a paying agent in Luxembourg.
If any Note is issued as a definitive note, payments on that Note will be
made by check mailed to its holder of record on the applicable record date at
its address appearing on the register for that Note. Alternatively, the holder
of one or more Notes in definitive form that have an aggregate principal amount
of at least $1,000,000 may apply in writing to the trustee to have payments to
it made by wire transfer to a designated account at a financial institution in
New York City. The final payment, however, on those Notes will be made only upon
surrender of those Notes by the holder or its agent -- including any holder in
street name -- at the office or agency of the trustee or the paying agent.
EXPECTED MATURITIES
The following table sets forth the expected weighted average life, the
Expected Final Payment Date and the Final Maturity Date of each class of
Exchange Notes and the Initial Class D Notes. The Expected Final Payment Date
for any Note is the date on which the final payment of principal of and interest
on that Note is expected to be made based on the assumptions described under
"Note Payment Assumptions". The Final
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<PAGE> 102
Maturity Date for any Note is the date on which all principal not previously
paid is due and payable. The actual final payment date for each of the Notes is
likely to occur earlier or later than that Note's Expected Final Payment Date as
a result of numerous factors, including that those assumptions are unlikely to
correspond to actual experience. Aircraft Finance may also refinance or
otherwise redeem Notes before their Expected Final Payment Dates.
WEIGHTED AVERAGE LIVES, EXPECTED FINAL
PAYMENT DATES AND FINAL MATURITY DATES OF THE INITIAL NOTES
<TABLE>
<CAPTION>
CLASS OF EXPECTED WEIGHTED EXPECTED FINAL
INITIAL NOTES AVERAGE LIFE IN YEARS PAYMENT DATE FINAL MATURITY DATE
- ------------- --------------------- --------------- -------------------
<S> <C> <C> <C>
Class A-1 Notes...... 5.0 May 15, 2004 May 15, 2024
Class A-2 Notes...... 4.9 June 15, 2008 May 15, 2024
Class B Notes........ 10.0 May 15, 2016 May 15, 2024
Class C Notes........ 10.4 July 15, 2016 May 15, 2024
Class D Notes........ 11.0 August 15, 2016 May 15, 2024
</TABLE>
SOURCES OF PAYMENT OF PRINCIPAL AND INTEREST
Payments on the Notes will be made only after the expenses, with specified
exceptions, of Aircraft Finance and its subsidiaries have been paid and
otherwise in the order of the payment priorities described under "-- Priority of
Payments". The sole sources of payment for the Exchange Notes, the Class D Notes
and the other obligations of Aircraft Finance and its subsidiaries are funds
derived from the aircraft owned by them -- rent and other payments under
existing leases and any future leases, insurance proceeds, sales proceeds and
any payments by GE Capital as to undelivered aircraft -- liquidity reserves
funded out the proceeds of the Initial Notes or that may be funded out of the
proceeds of future Notes or provided through any future credit facilities, lease
reserves provided by GE Capital and lessees, net payments under swap and other
hedging agreements, investment earnings and net proceeds from the sale of any
Notes issued to refinance other Notes.
If there are insufficient funds on any Payment Date to pay interest on any
Notes, Aircraft Finance may deposit all or part of the funds needed to pay
interest on any subclass of Notes. Those deposits ("Cure Amounts"), if provided,
may be made only out of funds provided to Aircraft Finance by the holders of its
beneficial interests. Cure Amounts are to be deposited into the Note Account for
that subclass of Notes and are not subject to the payment priorities described
under "-- Priority of Payments".
INTEREST
Each Note bears interest on its outstanding principal balance, payable
monthly in arrears on each Payment Date. Interest accrues for a period from and
including a Payment Date to but excluding the next Payment Date or, where
applicable, the final payment date for any Note. Each subclass of Exchange Notes
(and the related Restricted Notes) bears interest at the rate per annum set
forth on the cover page of this Prospectus. The Initial Class D Notes bear
interest at 11% per annum.
Interest accrued at the respective rates referred to above and the
equivalent rates for any future Notes and unpaid for any class of Notes on any
Payment Date and interest at that rate on any unpaid Interest Amount for that
class are referred to as the "Interest Amount". The Interest Amount for any
class of Notes has a higher payment priority than
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<PAGE> 103
the other interest components on the Notes, namely, Maturity Step-Up Interest,
Registration Step-Up Interest and Additional Interest.
If Aircraft Finance does not pay any Class A-1 Note on or before its
Expected Final Payment Date, that Note will bear additional interest of 0.50%
per annum ("Maturity Step-Up Interest"). The Initial Notes provide and future
Notes may provide for an increase in the rate of interest upon a failure by
Aircraft Finance to satisfy any registration requirements undertaken by it in
issuing those Notes ("Registration Step-Up Interest"). Accrued interest and
premium on any class or subclass of Notes that is not paid when due on any
Payment Date will bear interest at the then current interest rate for that class
or subclass of Notes. Interest on past due interest at the regular rate for any
Note is included in the Interest Amount and has the same payment priority as
regularly accruing interest. Any additional interest on past due interest and
interest on past due premium ("Additional Interest") will have a lower payment
priority, and the payment of those amounts is not and will not be rated by the
rating agencies rating the Notes.
Interest on the Class A-1, Class A-2 and Class B Notes will be calculated
on the basis of a 360-day year and the actual number of days elapsed in the
accrual period. Interest on the Class C and Class D Notes will be calculated on
the basis of one-twelfth of an annual interest payment on the outstanding
principal balance and in the case of an incomplete accrual period on the basis
of a 360-day year consisting of twelve 30-day months.
The rate of interest payable on the Class A and Class B Notes is based on
LIBOR. Aircraft Finance and the administrative agent have entered into an
agreement with the Bankers Trust to act as the reference agent and in that
capacity to determine LIBOR. The reference agent has agreed to determine LIBOR
for a reference date that is two business days before the start of each interest
accrual period. On each reference date, the reference agent is to 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 that offered rate is replaced by the corresponding rates of more than
one bank, the reference agent is to determine LIBOR based on the average of the
rates that appear. If no offered rates appear or the Telerate page is
unavailable, the reference agent is to request each of the banks whose offered
rates normally appear or substitute reference banks in London to provide the
reference agent with its offered quotation to prime banks for dollar deposits in
London for the next accrual period at 11:00 a.m. (London time) on the reference
date. LIBOR will be the average of the rates so quoted.
If the reference agent does not receive at least two quotations on a
reference date, the reference agent is to determine LIBOR for that reference
date based on the average of the U.S. dollar lending rates that New York City
banks selected by it are then quoting to leading European banks for the next
accrual period. If, again, the reference agent does not receive at least two
quotations, LIBOR as of that reference date is to be LIBOR for the last
preceding reference date. If the reference agent does not determine LIBOR for
any reason, the administrative agent has agreed to do so on the same basis.
Once the reference agent has determined LIBOR, the administrative agent is
to calculate the interest rate for each of the Class A-1, Class A-2 and Class B
Notes and the
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<PAGE> 104
amount of interest payable on the relevant Payment Date on each of those Notes.
The administrative agent is to calculate the interest amount for each subclass
of those Notes by
(1) multiplying the outstanding principal balance of that subclass on
the first day of the interest accrual period by the applicable rate of
interest;
(2) multiplying that product by the actual number of days in the
interest accrual period;
(3) dividing that number by 360; and
(4) rounding the resulting amount to the nearest cent.
The reference agent's determination of LIBOR and the administrative agent's
determination of the interest rate and the interest amount for each subclass of
Notes (in the absence of manifest error) will be conclusive and binding upon all
parties.
The administrative agent has agreed to give notice of the applicable LIBOR,
the Payment Date, the interest rate for each subclass Notes for each interest
accrual period and the amount of interest on each subclass of Notes to Aircraft
Finance, the listing agent and paying agent in Luxembourg, the trustee, the
rating agencies rating the Notes, the servicer, the financial advisor and the
capital markets advisor. Holders of the Notes may obtain such information at the
offices of the Luxembourg listing and paying agents or from the reports provided
to them by the trustee for the relevant Payment Date.
The initial reference agent is Bankers Trust. Aircraft Finance is entitled
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 that bear interest at
a floating rate. The reference agent may not be removed or resign unless a
successor has been appointed.
PRINCIPAL AMORTIZATION
On each Payment Date if there are sufficient funds available, Aircraft
Finance will pay the Minimum Principal Payment Amount for each class of Notes,
the Supplemental Principal Payment Amount for the Class A and Class B Notes only
and the Scheduled Principal Payment Amount for each class of Notes. Payments of
principal in those amounts will be made as to any class of Notes only after the
payment of all amounts having a higher payment priority, as set forth under
"-- Priority of Payments". If there are still available funds after payment of
the above principal installments and other amounts having a higher payment
priority, the excess funds will be paid to reduce principal of the Notes in
order of classes. A reduction in principal from excess funds is not treated as a
redemption under the Indenture and will not be paid with any premium, except in
the limited circumstances described under "-- Premium Sale".
The "Minimum Principal Payment Amount" for any class of Notes on any
Payment Date is the difference, if positive, between the outstanding principal
balance of that class and the Minimum Target Principal Balance for that class.
The "Minimum Target Principal Balance" for any class of Notes on any
Payment Date is determined by multiplying (1) the applicable "Minimum Class
Percentage" for that class of Notes set forth in Appendix 5 to this Prospectus
times (2) the Assumed Portfolio Value. If the outstanding principal balance of
the Class A Notes on any Payment Date is greater than the Adjusted Portfolio
Value, the Minimum Target Principal Balance of the Class A Notes will be the
Scheduled Target Principal Balance of the Class A Notes. The Minimum Class
Percentages will change as additional aircraft are acquired.
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<PAGE> 105
The "Assumed Portfolio Value" on any Payment Date is the total for all
aircraft in Aircraft Finance's portfolio on the fourth business day before the
Payment Date (a "Calculation Date") of the values obtained for each such
aircraft by
(1) dividing the Depreciation Factor for an aircraft on the
Calculation Date by the Depreciation Factor for that aircraft on May 5,
1999 in the case of any of the initial 36 aircraft or the date it was
acquired in the case of any other aircraft and
(2) multiplying the result times the initial appraised base value of
that aircraft on May 5, 1999 or its acquisition date, as applicable.
The Assumed Portfolio Value for the initial 36 aircraft is set forth on Appendix
4 to this Prospectus.
The "Depreciation Factor" for an aircraft is:
<TABLE>
<S> <C> <C>
(1 - (k x n)) x (1 + g)(n)
where:
n = the age of that aircraft expressed in years
k = 0.9
-------------------------
its expected useful life
g = 0.015
</TABLE>
The expected useful life of an aircraft is 25 years (except for the useful life
of a DC-10 aircraft which is 30 years) in the case of the initial 36 aircraft.
The expected useful life for any other aircraft will be determined by Aircraft
Finance.
The Depreciation Factor produces a "depreciation curve" that assumes that
the value of an aircraft will decline on an accelerated basis as the aircraft
ages. Aircraft Finance has used the Depreciation Factors solely to determine
repayments of principal of the Notes and to calculate the amount to be paid by
GE Capital for any initial aircraft that is not timely delivered. They do not
correlate to or predict actual declines in aircraft values over any period.
Furthermore, variables used to calculate the Depreciation Factors will change as
the composition of Aircraft Finance's portfolio of aircraft changes through
acquisitions and sales of aircraft. Finally, Aircraft Finance may also apply
different depreciation factors to express the assumed decline in values of
aircraft acquired in the future.
The "Adjusted Portfolio Value" on any Payment Date is the total for all
aircraft in Aircraft Finance's portfolio on the related Calculation Date of the
values obtained for each such aircraft by
(1) multiplying the Adjusted Base Value of an aircraft by its
Depreciation Factor on the Calculation Date and
(2) dividing the result by its Depreciation Factor as of the date of
its most recent appraisal.
The "Adjusted Base Value" of an Aircraft on any Calculation Date is the
average of the most recent base values appraisals obtained for that aircraft.
The "Supplemental Principal Payment Amount" for the Class A Notes and Class
B Notes on any Payment Date is the difference, if positive, between the
outstanding principal balance of that class (as reduced by any Minimum Principal
Payment Amount to be paid on that class) and the Supplemental Target Principal
Balance for that class.
The "Supplemental Target Principal Balance" for the Class A Notes and Class
B Notes is determined by multiplying (1) the applicable "Supplemental Class
Percentage"
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for that class set forth in Appendix 5 to this Prospectus and (2) the Assumed
Portfolio Value. The Supplemental Class Percentages will change as additional
aircraft are acquired.
The "Scheduled Principal Payment Amount" for any class of Notes on any
Payment Date is the difference, if positive, between the outstanding principal
balance of that class (as reduced by any Minimum Principal Payment Amount and,
in the case of the Class A Notes and the Class B Notes, any Supplemental
Principal Payment Amount to be paid on that class) and the Scheduled Target
Principal Balance.
The "Scheduled Target Principal Balance" for:
(1) the Class A Notes on any Payment Date is determined by multiplying
(a) the applicable "Scheduled Class Percentage" for that class set forth in
Appendix 5 to this Prospectus times (b) the lesser of the Assumed Portfolio
Value and 105% of the Adjusted Portfolio Value; and
(2) the Class B Notes, the Class C Notes and the Class D Notes is
determined by multiplying the (a) the applicable Scheduled Class Percentage
set forth in Appendix 5 to this Prospectus times (b) the Assumed Portfolio
Value.
PREMIUM SALE
If one or more aircraft are sold before the May 2010 Payment Date (a
"Premium Sale") other than by the security trustee in the exercise of remedies
under the Security Trust Agreement, the proceeds of the sale will be included in
the funds available for distribution on the next Payment Date. If the sale of
the relevant aircraft occurs after a Calculation Date and before the related
Payment Date, the distribution will instead be made on the second next Payment
Date. As part of that distribution, the administrative agent will calculate a
Sale Premium to be paid to the holders of the Class C Note and the Class D Notes
in accordance with the payment priorities set forth under "-- Priority of
Payments".
"Sale Premium" is as of a Calculation Date:
(1) in the case of the Initial Class C Notes, the excess, if any, of
(a) the Projected Principal Payment Amounts for that class and the
scheduled Interest Amount on that amount to and including the Expected
Final Payment Date discounted to present value at a discount rate of 0.50%
plus the applicable Treasury Yield over (b) the sum of those Projected
Principal Payment Amounts;
(2) in the case of the Initial Class D Notes and a distribution
occurring prior to May 15, 2004, the excess, if any, of (a) the sum of (x)
the Projected Principal Payment Amounts of that class and the scheduled
Interest Amount on that amount to but not including May 15, 2004 plus (y)
the applicable Redemption Premium times the sum of the Projected Principal
Payment Amounts of such Notes falling due on May 15, 2004 and each
subsequent Payment Date discounted as of May 15, 2004 to present value at a
discount rate of 0.75% plus the applicable Treasury Yield over (b) the sum
of the Projected Principal Payment Amounts for that class to and including
the Expected Final Payment Date;
(3) in the case of the Initial Class D Notes and a distribution
occurring on or after May 15, 2004, the excess, if any, of (a) the
applicable Redemption Premium times the sum of the Projected Principal
Payment Amounts on that class to and including the Expected Final Payment
Date over (b) the sum of those Projected Principal Payment Amounts.
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Sale Premium is designed to calculate a premium on only that portion of the
distributed principal that is in excess of the principal payments needed to
reduce the principal balance of the Class C Notes and the Class D Notes to the
level it should have if all expected installments are made. Sale Premium is not
payable on the Initial Class A Notes or Initial Class B Notes. Whether or not
any future class of Notes will be entitled to any Sale Premium and, if so, the
manner of calculating it will be determined by Aircraft Finance.
ALLOCATION OF PRINCIPAL AMONG SUBCLASSES OF NOTES
If any principal amount payable to any class of Notes at any level of
payment priority described in "-- Priority of Payments" is insufficient to pay
all subclasses of that class of Notes, the amount so payable will be allocated
to those subclasses in the following order of priority:
(1) To each subclass in order of issuance, the difference, if
positive, between (a) the outstanding principal balance of that subclass
and (b) the applicable Extended Pool Factor set forth in Appendix 7 to this
Prospectus times the initial principal balance of that subclass when it was
issued. If two or more subclasses were issued on the same date, principal
amount will be applied to each of those subclasses pro rata according to
the amount so calculated.
(2) To each subclass, the difference, if positive, between (a) the
outstanding principal balance of that subclass as reduced by any payment
under clause (1) above and (b) the applicable Pool Factor set forth in
Appendix 6 to this Prospectus times the initial principal balance of that
subclass when it was issued pro rata according to the amount so calculated.
(3) To each subclass that has an Expected Final Payment Date on or
before that Payment Date in order of issuance, the balance up to its
outstanding principal balance. If two or more subclasses were issued on the
same date, the balance will be applied in order of the earliest Expected
Final Payment Date. Likewise, if two or more subclasses have the same
Expected Final Payment Date, the balance will be applied pro rata according
to the outstanding principal balance of each of those subclasses as reduced
by any payments under clauses (1) and (2) above.
(4) To each subclass that has an Excess Amortization Date on or before
that Payment Date, the balance up to its outstanding principal balance, pro
rata according to the outstanding principal balance of each of those
subclasses as reduced by any payments under the above clauses.
(5) To each subclass in order of the earliest Expected Final Payment
Date, the balance up to its outstanding principal balance. If two or more
subclasses have the same Expected Final Payment Date, the balance will be
applied pro rata according to the outstanding principal balance of each of
those subclasses as reduced by any payments under the above.
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THE "EXCESS AMORTIZATION DATE" is for each subclass of the Initial Notes:
<TABLE>
<CAPTION>
CLASS OF INITIAL NOTES EXCESS AMORTIZATION DATE
- ---------------------- ------------------------
<S> <C>
Class A-1................................ May 15, 2004
Class A-2................................ June 15, 1999
Class B.................................. June 15, 1999
Class C.................................. July 15, 2016
Class D.................................. May 15, 2009
</TABLE>
REFINANCING
Aircraft Finance may repay all or any part of any class of Notes on any
Payment Date with the proceeds of Notes issued under the Indenture ("Refinancing
Notes"). The issuance of Refinancing Notes must satisfy Indenture covenants,
must be authorized by the Controlling Trustees of Aircraft Finance and will be
effective only after receipt of a confirmation of the rating agencies rating the
Notes that they will not lower, qualify or withdraw their ratings as a result.
The proceeds of the Refinancing Notes may be used to pay the Redemption Price of
the Notes to be repaid, to pay accrued and unpaid interest on those Notes and to
fund cash reserves. Any Refinancing Notes will have the same payment priority as
the Notes of the class to which they belong and will not have a payment priority
higher than that of the Class A Notes.
The Indenture treats the repayment of any Notes with the proceeds of
Refinancing Notes as a redemption. As a result, the notice and other procedures
that apply to a redemption will apply to such a repayment. See "-- Redemption".
Aircraft Finance intends to refinance 100% of the outstanding principal
balance of the Class A-1 Notes on their Expected Final Payment Date by selling
Refinancing Notes in the capital markets. Failure to repay any Class A-1 Notes
in full at its Expected Final Payment Date will not result in an Indenture Event
of Default. If the Class A-1 Notes are not repaid in full on their Expected
Final Payment Date, that subclass of Notes will convert automatically into a
subclass of Notes that has a principal repayment schedule intended to ensure
that the remaining outstanding principal balance of the Class A-1 Notes will be
repaid in full on or before its Final Maturity Date in accordance with the Class
A-1 Notes Pool Factors set forth in Appendix 6 to this Prospectus.
ADDITIONAL NOTES
Aircraft Finance may at any time issue additional notes ("Additional
Notes") under the Indenture to provide the funds to acquire additional aircraft
and to fund cash reserves. Additional Notes may be issued as part of any
outstanding subclass of Notes or as a separate subclass of any of the four
classes of Notes. Additional Notes of any subclass will have the same payment
priority as other Notes of the class to which they belong. The priority of any
subclass of Notes as to other subclasses of the same class will depend on the
factors described under "-- Allocation of Principal among Subclasses of Notes".
Additional Notes may be sold through one or more public offerings or private
placements of securities or otherwise. Additional Notes may provide that they
will bear Maturity Step-Up Interest after their Expected Final Payment Date and
may establish any Redemption Price and any Sale Premium. Any issuance of
Additional Notes and the related acquisition of additional aircraft must satisfy
Indenture covenants, must be authorized by the Controlling Trustees and will be
effective only after receipt of a confirmation from the
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rating agencies rating the Notes that they will not lower, qualify or withdraw
their ratings as a result.
REDEMPTION
Aircraft Finance may redeem all or any part of any class of Notes (an
"Optional Redemption") on any Payment Date. An Optional Redemption may be made
with the proceeds of Refinancing Notes or funds provided by the holders of the
beneficial interest in Aircraft Finance but not out of amounts required to be
deposited in the Collections Account. Within each subclass of Notes being
redeemed in part, the amount of the principal being prepaid will be applied pro
rata among all Notes of that subclass. An Optional Redemption does not include
the payment of principal faster than the expected schedule of installments out
amounts deposited in the Collections Account.
REDEMPTIONS WITH A PREMIUM
Except in the case of an Optional Redemption for tax reasons or after the
acceleration of the Notes, Aircraft Finance is required to pay a Redemption
Price that includes a premium to make an Optional Redemption of any Notes,
including in a refinancing with Refinancing Notes. Aircraft Finance is in
addition required to pay all accrued and unpaid interest and Sale Premium on the
Notes being redeemed to the date of redemption.
The "Redemption Price" is determined as of the relevant Calculation Date as
follows:
(1) If Aircraft Finance redeems any Initial Class A Notes or Initial
Class B Notes, the Redemption Price equals the applicable Redemption
Premium times the principal amount being redeemed.
(2) If Aircraft Finance redeems any Initial Class C Notes, the
Redemption Price equals the higher of (a) the sum of (x) the Projected
Principal Payment Amounts for those Notes and the scheduled Interest Amount
on those amounts to and including the Expected Final Payment Date
discounted to present value at a discount rate of 0.50% plus the applicable
Treasury Yield plus (y) the difference between the principal amount being
redeemed and the sum of those Projected Principal Payment Amounts and (b)
the principal amount being redeemed.
(3) If Aircraft Finance redeems any Initial Class D Notes before May
15, 2004, the Redemption Price equals the higher of (a) the sum of (x) the
Projected Principal Payment Amounts of those Notes and the scheduled
Interest Amount on those amounts to but not including May 15, 2004 plus the
applicable Redemption Premium times the sum of the Projected Principal
Payment Amounts of those Notes falling on or after May 15, 2004 discounted
as of May 15, 2004 to present value at a discount rate of 0.75% plus the
applicable Treasury Yield and (y) the difference between the principal
amount being redeemed and the sum of those Projected Principal Payment
Amounts and (b) the principal amount being redeemed.
(4) If Aircraft Finance redeems any Initial Class D Notes on or after
May 15, 2004, the Redemption Price equals the applicable Redemption Premium
times the principal amount being redeemed.
The Redemption Price for any future Notes will be established as part of
the terms of those Notes. If Aircraft Finance makes an Optional Redemption after
the acceleration of the Notes, the Redemption Price equals the outstanding
principal balance of the Notes without premium.
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"Projected Principal Payment Amounts" means as of the relevant Calculation
Date the Applicable Percentage of the Assumed Principal Payments of the Class C
Notes or Class D Notes.
The "Applicable Percentage" is determined for any Class C Notes or Class D
Notes as of the relevant Calculation Date for the Sale Premium and the
Redemption Price, as follows:
(1) In the case of the Sale Premium, it is determined by dividing (a)
the excess, if any, of (x) the difference between (A) the principal balance
of those Notes that would have remained outstanding had no Premium Sale
occurred prior to that Calculation Date and (B) the principal balance of
those Notes that would have remained outstanding were the proceeds of the
Premium Sale applied as provided in "-- Priority of Payments" without
paying any Sale Premium on either class of Notes over (y) the difference,
if positive, between (A) the outstanding principal balance of those Notes
as reduced by any principal payments that would have been made had there
been no Premium Sale and (B) the Assumed Principal Balance of those Notes
by (b) the Assumed Principal Balance of those Notes;
(2) In the case of the Redemption Price, it is determined by dividing
(a) the excess, if any, of (x) the principal amount of the Notes being
redeemed over (y) the difference, if positive, between the outstanding
principal balance of those Notes as reduced by any principal payments that
would have been made had there been no Optional Redemption and the Assumed
Principal Balance of those Notes by (b) the Assumed Principal Balance of
those Notes.
"Assumed Principal Balance" means as of the relevant Calculation Date the
sum of the Assumed Principal Payments.
"Assumed Principal Payments" means as of the relevant Calculation Date each
of the principal payment amounts for the Class C Notes or Class D Notes (as
applicable) set forth opposite a date in Appendix 8 to this Prospectus falling
after the related Payment Date and ending on the Expected Final Payment Date for
those Notes or any other specified date.
The "Redemption Premiums" of the Class A, Class B and Class D Notes are set
out below:
<TABLE>
<CAPTION>
REDEMPTION PREMIUM
--------------------------------------------
CLASS A-1 CLASS A-2 CLASS B CLASS D
REDEMPTION DATE NOTES NOTES NOTES NOTES
--------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
After the Closing Date but prior to
May 15, 2000........................ 101.00% 101.00% 101.50% --
On or after May 15, 2000 but prior to
May 15, 2001........................ 100.75 100.75 101.25 --
On or after May 15, 2001 but prior to
May 15, 2002........................ 100.50 100.50 101.00 --
On or after May 15, 2002 but prior to
May 15, 2003........................ 100.25 100.25 100.75 --
On or after May 15, 2003 but prior to
May 15, 2004........................ 100.00 100.25 100.50 --
</TABLE>
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<TABLE>
<CAPTION>
REDEMPTION PREMIUM
--------------------------------------------
CLASS A-1 CLASS A-2 CLASS B CLASS D
REDEMPTION DATE NOTES NOTES NOTES NOTES
--------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
On or after May 15, 2004 but prior to
May 15, 2005........................ 100.00 100.00 100.25 105.50%
On or after May 15, 2005 but prior to
May 15, 2006........................ 100.00 100.00 100.00 104.40
On or after May 15, 2006 but prior to
May 15, 2007........................ 100.00 100.00 100.00 103.30
On or after May 15, 2007 but prior to
May 15, 2008........................ 100.00 100.00 100.00 102.20
On or after May 15, 2008 but prior to
May 15, 2009........................ 100.00 100.00 100.00 101.10
On or after May 15, 2009.............. 100.00 100.00 100.00 100.00
</TABLE>
"Treasury Yield" means the interest rate (expressed as a semiannual decimal
and, in the case of United States Treasury bills, converted to a bond equivalent
yield) determined on the relevant Calculation Date to be the per annum rate
equal to the semiannual yield to maturity for United States Treasury securities
maturing on the Average Life Date of the relevant subclass of Notes and trading
in the public securities markets either (1) as determined by interpolation
between the most recent weekly average yield to maturity for two series of
United States Treasury securities trading in the public securities markets, (a)
one maturing as close as possible to, but earlier than, the Average Life Date of
that subclass and (b) the other maturing as close as possible to, but later than
the Average Life Date of that subclass in each case as published in the most
recent H.15(519) or (2) if a weekly average yield to maturity for United States
Treasury securities maturing on the Average Life Date of that subclass is
reported in the most recent H.15(519), that weekly average yield to maturity.
For the purposes of this definition,
"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, and the most recent H.15(519) is the H.15(519) published prior
to the close of business on the relevant Calculation Date.
"AVERAGE LIFE DATE" is, for any class of Notes, the date that follows the
applicable Payment Date by a period equal to the Remaining Weighted Average Life
of such class.
"REMAINING WEIGHTED AVERAGE LIFE" means, with respect to any class of Notes
on any Payment Date, (1) the sum of the products of (a) the Projected Principal
Payment Amount allocable to such class on each subsequent Payment Date and (b)
the number of days remaining until that subsequent Payment Date divided by (2)
the outstanding principal balance of such class on such Payment Date.
REDEMPTIONS WITHOUT PREMIUM
REDEMPTION FOR TAXATION PURPOSES. All payments of principal, interest and
premium made by Aircraft Finance on any Note 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 withholding or deduction be required by
law, Aircraft Finance is not obliged to pay any additional amounts in respect of
withholding or deduction.
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If at any time:
(1) Aircraft Finance is or on the next Payment Date will be required
to make any withholding or deduction under applicable with respect to any
payment on any Notes; or
(2) Aircraft Finance is or will be subject to any circumstance that
results or will result in any tax or other similar imposition that would
(a) materially increase the cost to Aircraft Finance of making payments on
any Notes or of complying with its obligations as to the Notes; (b)
materially increase the operating or administrative expenses of Aircraft
Finance; or (c) otherwise obligate Aircraft Finance 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 or on behalf of
Aircraft Finance;
Aircraft Finance is to inform the trustee at that time of any such requirement
or imposition and to use its best efforts to avoid its effect. Aircraft Finance
may not take any action to avoid such an effect unless it first obtains a
confirmation from the rating agencies rating the Notes that they will not lower,
qualify or withdraw their ratings as a result. If, after using its best efforts,
Aircraft Finance has not avoided the effects, Aircraft Finance may at its
election redeem all of the Notes of any or all subclasses to which the
withholding or deduction applies on any Payment Date. In such an Optional
Redemption, Aircraft Finance must pay the outstanding principal balance each
subclass to be redeemed plus accrued and unpaid interest to the redemption date
but without premium. No Optional Redemption for tax reasons may occur more than
30 days prior to the time at which the relevant imposition is to become
effective.
REDEMPTION AFTER ACCELERATION. If the Notes are accelerated, Aircraft
Finance may, at its election, redeem the Notes in full on the next Payment Date
by written notice to the trustee delivered not less than 30 days and no more
than 45 days prior to the next Payment Date. In such an Optional Redemption,
Aircraft Finance must pay the Redemption Price plus accrued and unpaid interest
and any unpaid Sale Premium. The Redemption Price for this purpose is the
outstanding principal balance of the Notes without premium.
METHOD OF REDEMPTION
The trustee is to give notice of any optional Redemption at least 20 days
before the relevant redemption date to the holders of the Notes of each affected
subclass. If a redemption is for less than all of the Notes of any subclass,
Notes of that subclass to be redeemed are to be repaid pro rata, to the extent
funds are available therefor. Aircraft Finance must deposit the funds necessary
for the redemption with the security trustee.
Each notice of redemption must state
(1) the applicable redemption date;
(2) the trustee's arrangements for making payments;
(3) the Redemption Price of the Notes to be redeemed;
(4) that, in the case of a redemption any subclass in whole, the Notes
of that subclass must be surrendered by the holder or its authorized agent
to the trustee to collect payment; and
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(5) that, in the case of a redemption in whole, interest on the Notes
called for redemption will cease to accrue on and after the redemption date
unless Aircraft Finance defaults.
Once a notice of a redemption in whole of a subclass of Notes is published, that
subclass of Notes will become due and payable on the redemption date stated in
that notice in the amounts stated above. All Notes that are redeemed must be
surrendered to the trustee for cancellation and accordingly may not be reissued
or resold.
DEFEASANCE
Aircraft Finance may at any time terminate all of its obligations under the
Notes and the Indenture ("legal defeasance"), except for certain obligations.
The continuing obligations include those respecting the defeasance trust and
obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain a register for the
Notes. Alternatively, Aircraft Finance may at any time terminate its obligations
under the covenants described under "-- Indenture Covenants" and "-- Operating
Covenants" ("covenant defeasance").
Aircraft Finance may exercise its legal defeasance option even if it has
already exercised the covenant defeasance option. If Aircraft Finance exercises
its legal defeasance option, payment of the Notes may not be accelerated because
of an Indenture Event of Default. If Aircraft Finance exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of the
Indenture Events of Default described under "-- Indenture Events of Default and
Remedies" other than clauses (1), (2), (3), (5) (solely with respect to Aircraft
Finance) and (6) (solely with respect to Aircraft Finance) set forth under
"-- Indenture Events of Default and Remedies".
In order to exercise either defeasance option, Aircraft Finance must
irrevocably deposit in trust cash or obligations of the U.S. Government or
obligations of corporate issuers that are rated AA+ (or equivalent) or higher by
the rating agencies rating the Notes and mature within 3 years of the date of
defeasance in such amounts as will be sufficient to pay all principal or
Redemption Price, accrued and unpaid interest and Sale Premium on the Notes to
redemption or maturity and must comply with specified other conditions. The
other conditions include delivering to the trustee an opinion of counsel to the
effect that the holders of the Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such deposit and defeasance and
will be subject to U.S. federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred. In the case of legal defeasance only, that opinion
of counsel must be based on a ruling of the IRS or other change in applicable
U.S. federal income tax law.
PRIORITY OF PAYMENTS
PRIORITY BEFORE ACCELERATION OF THE NOTES
On each Payment Date, the administrative agent will distribute or retain
all amounts on deposit in the Collections Account in the order of priority set
forth below. Payments of principal as to any class of Notes will be allocated
among the subclasses of that class as described under "-- Allocation of
Principal among Subclasses". Any amount specified below will be paid only if all
amounts having a higher payment priority have been paid or retained in full.
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(1) FIRST, to the Expense Account, an amount so that the amount on
deposit equals the Required Expense Amount;
(2) SECOND, the following amounts pro rata:
(a) to the holders of Class A Notes, the Interest Amount on the
Class A Notes, pro rata according to the Interest Amount due on the
Class A Notes; and
(b) to each swap provider, any payment due under a swap agreement
other than subordinated swap payments, pro rata according to the amounts
due;
(3) THIRD, to each provider of a primary eligible credit facility, any
amounts payable to it under the primary eligible credit facility (other
than expenses) and, to each cash collateral account that is a primary
eligible credit facility, an amount so that the amount on deposit equals
the required amount for that account;
(4) FOURTH, to retain in the Collections Account, cash reserves up to
the Senior Note Blockage Amount less aggregate amounts available for
drawing under any primary eligible credit facilities and on deposit in any
cash collateral account for the Class A Notes after giving effect to any
transfer under clause (3) above;
(5) FIFTH, to the holders of the Class A Notes, the Minimum Principal
Payment Amount for the Class A Notes;
(6) SIXTH, to the holders of Class B Notes, the Interest Amount on the
Class B Notes, pro rata according to the Interest Amount due on the Class B
Notes;
(7) SEVENTH, pro rata, to each provider of a secondary eligible credit
facility, any amounts payable to it under the secondary eligible credit
facility (other than expenses), and, to each cash collateral account that
is a secondary eligible credit facility, an amount so that the amount on
deposit equals the required amount for that account;
(8) EIGHTH, to retain in the Collections Account, cash reserves up to
the Mezzanine Note Blockage Amount less the amounts available for drawing
under any primary or secondary eligible credit facilities and on deposit in
any cash collateral accounts for the Class A or Class B Notes after giving
effect to any transfers under clauses (3) and (7) above;
(9) NINTH, to the holders of the Class B Notes, the Minimum Principal
Payment Amount for the Class B Notes;
(10) TENTH, to the holders of Class C Notes, the Interest Amount on
the Class C Notes, pro rata according to the Interest Amount due on the
Class C Notes;
(11) ELEVENTH, pro rata, to each provider of a tertiary eligible
credit facility, any amounts payable to it under the tertiary eligible
credit facility (other than expenses) and, to each cash collateral account
that is a tertiary eligible credit facility, an amount so that the amount
on deposit equals the required amount for that account;
(12) TWELFTH, to retain in the Collections Account, cash reserves up
to the Junior Note Blockage Amount less the amounts available for drawing
under any primary, secondary or tertiary eligible credit facilities and on
deposit in any cash collateral accounts for the Class A, Class B or Class C
Notes after giving effect to any transfers under clauses (3), (7) and (11)
above;
(13) THIRTEENTH, to the holders of Class A Notes, the Supplemental
Principal Payment Amount for the Class A Notes;
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(14) FOURTEENTH, to the holders of Class B Notes, the Supplemental
Principal Payment Amount for the Class B Notes;
(15) FIFTEENTH, to the holders of Class C Notes, the Minimum Principal
Payment Amount for the Class C Notes;
(16) SIXTEENTH, to the holders of the Class D Notes, the Interest
Amount on the Class D Notes pro rata according to the Interest Amount due
on the Class D Notes;
(17) SEVENTEENTH, pro rata, to each provider of a subordinate eligible
credit facility, any amounts payable to it under the subordinate eligible
credit facility (other than expenses) and, to each cash collateral account
that is a subordinate eligible credit facility, an amount so that the
amount on deposit is equal to the required amount for that collateral
account;
(18) EIGHTEENTH, to retain in the Collections Account, cash reserves
up to the Subordinate Note Blockage Amount less the amounts available for
drawing under any eligible credit facilities on deposit in any cash
collateral accounts for the Class A, Class B, Class C or Class D Notes
after giving effect to any transfers under clauses (3), (7), (11) and (17)
above;
(19) NINETEENTH, to the holders of Class D Notes, the Minimum
Principal Payment Amount for the Class D Notes;
(20) TWENTIETH, to the Expense Account, an accrual for expenses (other
than Modification Payments and refinancing expenses) that are anticipated
to become due between the next Payment Date and the fifth next Payment Date
in the amount the administrative agent reasonably determines should be
accrued;
(21) TWENTY-FIRST, to the holders of Notes, all accrued and unpaid
Maturity Step-Up Interest, Registration Step-Up Interest and Additional
Interest in order of seniority (by alphabetical designation) among the
classes of Notes but pro rata among the subclasses of each class according
to the amount of that interest due;
(22) TWENTY-SECOND, to the holders of Class A Notes, the Scheduled
Principal Payment Amount for the Class A Notes;
(23) TWENTY-THIRD, to the holders of Class B Notes, the Scheduled
Principal Payment Amount for the Class B Notes;
(24) TWENTY-FOURTH, to the holders of Class C Notes, the Scheduled
Principal Payment Amount for the Class C Notes;
(25) TWENTY-FIFTH, to the holders of Class D Notes, the Scheduled
Principal Payment Amount for the Class D Notes;
(26) TWENTY-SIXTH, to the Owner Trustee Account, the amount of any
unreimbursed Cure Payments for distribution by the Owner Trustee to the
holders of the beneficial interests of Aircraft Finance;
(27) TWENTY-SEVENTH, to the holders of the Class C Notes, the Class D
Notes, any Refinancing Notes and any Additional Notes, any Sale Premium as
of the Calculation Date for such Payment Date and any unpaid Sale Premium,
in order of seniority (by alphabetical designation) among those Notes but
pro rata among the subclass of those Notes according to the amount of Sale
Premium due;
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(28) TWENTY-EIGHTH, to the Expense Account, an accrual for any
Modification Payments or refinancing expenses in the amount the
administrative agent determines to accrue;
(29) TWENTY-NINTH, to the holders of Class A Notes, the outstanding
principal balance of the Class A Notes;
(30) THIRTIETH, to the holders of Class B Notes, the outstanding
principal balance of the Class B Notes;
(31) THIRTY-FIRST, to the holders of Class C Notes, the outstanding
principal balance of the Class C Notes;
(32) THIRTY-SECOND, to the holders of Class D Notes, the outstanding
principal balance of the Class D Notes;
(33) THIRTY-THIRD, to swap providers, payments under swap agreements
that are subordinated by the relevant swap agreement;
(34) THIRTY-FOURTH, to the servicer, the Additional Servicing Fees;
and
(35) THIRTY-FIFTH, to the Owner Trustee for distribution to the
holders of the beneficial interests of Aircraft Finance, all remaining
amounts.
The payment priorities provide for cash reserves to be retained in the
Collections Account before payments having a lower payment priority may be made.
No transfer will be made following clause (4), (8), (12) or (18), respectively,
except to the extent cash reserves on deposit in the Collections Account exceed
the amounts to be retained as provided in such clauses. The reserves are
intended to provide a source of liquidity for the payment of interest, expense,
swap payments and other items in accordance with the priorities set forth above
that are not subordinated to the Interest Amount on the Notes and for payments
on the Notes that rank senior in priority to the payment priority clause under
which those cash reserves were retained. As of June 30, 1999, the total cash
reserves were $52 million.
If the cash reserves reduce to below the Senior Note Blockage Amount,
Aircraft Finance may continue to pay the Required Expense Amount, swap payments
that are not subordinated to the Interest Amount on the Notes and the Interest
Amount on the Class A Notes but may not make any payment that has a lower
payment priority until cash reserves are replenished to that amount. Likewise,
if the cash reserves reduce to below the Mezzanine Blockage Amount, the Junior
Note Blockage Amount or the Subordinated Note Blockage amount, Aircraft Finance
may continue to pay the Interest Amount on the Class B Notes, the Class C Notes
or the Class D Notes, respectively, but may not make any payment that has a
lower respective priority.
The required levels of cash reserves will automatically reduce as the
principal balance of the classes of the Notes reduces below the target level set
forth in the Indenture governing the Notes. The "Senior Note Blockage Amount" is
initially $33 million but will reduce to $24 million on the Payment Date on
which the outstanding principal balance of the Class A Notes has reduced to $24
million or less. The "Mezzanine Blockage Amount" is initially $43 million but
will reduce to the sum, when less than $43 million, of the Senior Note Blockage
Amount and the outstanding principal balance of the Class B Notes. The "Junior
Note Blockage Amount" is initially $48 million but will reduce to the sum, when
less than $48 million, of the Mezzanine Blockage Amount and the outstanding
principal balance of the Class C Notes. The "Subordinate Note Blockage Amount"
is initially $52 million but will reduce to the sum, when less than $52 million,
of the Junior
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Note Blockage Amount and the outstanding principal balance of the Class D Notes.
Once the outstanding principal balance of the Notes is $24 million or less, all
blockage amounts will be reduced to zero. Aircraft Finance may also unilaterally
reduce any reserve level if it obtains a confirmation from the rating agencies
rating the Notes that they will not lower, qualify or withdraw their ratings as
a result.
Aircraft Finance may arrange for one or more credit facilities. These
facilities may consist of letters of credit, guarantees or other credit
facilities that meet criteria specified in the Indenture or cash collateral
accounts in the name of the security trustee. Eligible credit facilities may be
designated as primary, secondary, tertiary or subordinate depending on the class
of Notes that they support. Amounts available for drawing or on deposit in any
eligible credit facility will be credited against the related reserve levels
indicated above. Providers of eligible credit facilities will be reimbursed
under the terms of those facilities and cash collateral accounts will be
replenished to a required amount established by Aircraft Finance but in each
case only within the respective payment priorities set forth above. There are
currently no cash collateral accounts or other credit facilities.
"Required Expense Amount" means, the amount of expenses of the Aircraft
Finance group due and payable on the relevant Calculation Date or reasonably
anticipated to become due and payable before the Payment Date next succeeding
the following Calculation Date to the extent those expenses consist of (1)
expenses other than Modification Payments and refinancing expenses, (2) any
Modification Payments or refinancing expenses in respect of which an accrual was
previously made by a deposit in the Expense Account (whether or not any such
deposit has been previously used to pay any other expense described in clause
(1), but excluding any portion of the deposit previously used to pay any
Modification Payments or refinancing expenses), giving effect to any withdrawal
from any Lessee Funded Account or any drawing upon credit support provided by a
lessee that is then available for the payment of any expense.
PRIORITY OF PAYMENTS AFTER ACCELERATION
If the Notes have been accelerated, the priorities described above under
"-- Priority of Payments Before Acceleration" will not apply and all amounts
will instead be applied in the following order:
(1) FIRST, to the Expense Account, an amount so that the amount on
deposit equals the Required Expense Amount;
(2) SECOND, pro rata, to each provider of any primary eligible credit
facility, any amounts payable to it under the primary eligible credit
facility (other than expenses) and, to each cash collateral account that is
a primary eligible credit facility, an amount so that the amount on deposit
equals the required amount for that account;
(3) THIRD, pro rata
(a) to the holders of the Class A Notes, the Interest Amount on,
and all outstanding principal of, that class pro rata according to the
amount of the principal of that class and
(b) pro rata to any swap provider, any senior swap payments due
under any swap agreement;
(4) FOURTH, to the holders of the Class A Notes, all Maturity Step-Up
Interest, Registration Step-Up Interest, Additional Interest and redemption
premium, pro rata according to the amount due;
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(5) FIFTH, pro rata, to each provider of a secondary eligible credit
facility, any amounts payable to it under the secondary eligible credit
facility (other than expenses) and, to any cash collateral account that is
a secondary eligible credit facility, an amount so that the amount on
deposit equals the required amount for that account;
(6) SIXTH, to the holders of the Class B Notes, all accrued and unpaid
interest and interest and redemption premium on, and all outstanding
principal of, that class, pro rata according to the amount due;
(7) SEVENTH, pro rata, to each provider of a tertiary eligible credit
facility, any amounts payable to it under the tertiary eligible credit
facility (other than expenses) and, to each cash collateral account that is
a tertiary eligible credit facility, an amount so that the amount on
deposit equals the required amount for that account;
(8) EIGHTH, to the holders of the Class C Notes, all accrued and
unpaid interest, Sale Premium and redemption premium on, and all
outstanding principal of, that class, pro rata according to the amount due;
(9) NINTH, pro rata, to each provider of a subordinate eligible credit
facility, any amounts payable to it under the subordinate eligible credit
facility (other than expenses) and, to each cash collateral account that is
a subordinate eligible credit facility, an amount so that the amount on
deposit equals the required amount for that account;
(10) TENTH, to the holders of Class D Notes, all accrued and unpaid
interest, Sale Premium and redemption premium on, and all outstanding
principal of, that class pro rata according to the amount due;
(11) ELEVENTH, pro rata, to any swap provider, the amounts of
subordinated swap payments due under any swap agreement; and
(12) TWELFTH, to the Owner Trustee for distribution to holders of the
beneficial interests of Aircraft Finance, all remaining amounts.
INDENTURE COVENANTS
NO RELEASE OF OBLIGATIONS
Aircraft Finance has agreed that it will not take, or knowingly permit any
subsidiary to take, any action that would amend, terminate or discharge or
prejudice the validity or effectiveness of the Indenture, the Security Trust
Agreement, the Master Aircraft Purchase Agreement, the Administrative Agency
Agreement, the financial advisory Agreement, the Servicing Agreement, any
servicing agreement with UniCapital (if entered into) or the capital markets
advisory Letter or permit any party to any of those agreements to be released
from its obligations, except, in each case, as permitted or contemplated by the
terms of the agreement.
Aircraft Finance may, however, terminate any of those agreements in
connection with its replacement with an agreement on terms substantially no less
favorable to the Aircraft Finance group than the agreement being terminated. The
foregoing restriction also does not apply if the Controlling Trustees determine
in the resolution authorizing the action to be permitted or taken or the release
to be given that the action or release does not materially and adversely affect
the interests of the holders of the Notes and Aircraft Finance has provided
notice to the rating agencies rating the Notes. Aircraft Finance, however, may
not in any case take any action that would result in any amendment or
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modification to any conflicts standard or duty of care in any of those
agreements. In addition, there must be at all times an administrative agent for
the services now provided by the administrative agent to the Aircraft Finance
group, a financial advisor and a servicer for all aircraft in Aircraft Finance's
portfolio.
LIMITATION ON ENCUMBRANCES
Aircraft Finance has agreed that it 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 (each, an "Encumbrance") over or
with respect to any asset of Aircraft Finance or any subsidiary, including any
Ownership Interests and any Indebtedness of any subsidiary held by Aircraft
Finance or another subsidiary. This restriction does not apply to funds of
lessees required to be segregated from Aircraft Finance's other funds under the
terms of any lease. Encumbrances include any conditional sale, any sale with
recourse against the sellers or any affiliate of the sellers under the Master
Aircraft Purchase Agreement and any agreement to give any security interest.
The foregoing provision does not preclude:
(1) any Permitted Encumbrance;
(2) any security interest created or required to be created under the
Security Trust Agreement;
(3) any Encumbrance over rights in or derived from any leases, if
Aircraft Finance obtains a confirmation from the rating agencies rating the
Notes that they will not lower, qualify or withdraw their ratings as a
result and if the transaction or series of transactions resulting in the
Encumbrance, taken as a whole, does not materially and adversely affect the
amount of Collections that would have been received by Aircraft Finance and
its subsidiaries from the lease had the Encumbrance not been created; or
(4) any other Encumbrance the validity or applicability of which is
being contested in good faith in appropriate proceedings by Aircraft
Finance or any subsidiaries.
"Affiliate" means, with respect to any person, any other person that,
directly or indirectly, controls, is controlled by or is under common control
with, that person or is a director or officer of that person. For this
definition, to "control" a person means to have the direct or indirect power to
direct or cause the direction of the management and policies of that person,
whether through the ownership of voting Ownership Interests, by contract or
otherwise.
"Ownership Interests" means 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 interest.
"Permitted Encumbrance" means
(1) any lien for taxes, assessments and governmental charges or levies
not yet due and payable or that are being contested in good faith by
appropriate proceedings;
(2) any liens of a repairer, carrier or hanger keeper on any aircraft
arising in the ordinary course of business by operation of law, any engine
or parts-pooling arrangements or any other similar lien;
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(3) any lien or encumbrance on any aircraft, engines or parts
permitted under a lease of that property, other than liens or encumbrances
created by the lessor;
(4) 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 the lease has been
terminated) or without the consent of the relevant lessor; if the lessor
becomes aware of such a lien, the lessor must use commercially reasonable
efforts to have the lien lifted;
(5) any head lease, lease, conditional sale agreement or purchase
option under the lease of an aircraft existing on May 5, 1999 with respect
to the initial 36 aircraft or on the date the aircraft is acquired by
Aircraft Finance or any subsidiaries with respect to any initial or future
aircraft or any Aircraft Agreement meeting the requirements of clause (3)
or (4) of the second paragraph under "-- Limitation on Aircraft Sales";
(6) any lien for air navigation authority, airport landing, gate or
handling (or similar) charges or levies;
(7) any lien created in favor of Aircraft Finance, any subsidiaries or
the security trustee;
(8) any Encumbrance arising under an eligible credit facility; and
(9) any lien not referred to in clauses (1) through (8) above that
would not adversely affect the owner's rights and does not exceed the
greater of 1% of the aggregate initial appraised value of Aircraft
Finance's portfolio of aircraft or $250,000 per aircraft.
LIMITATION ON RESTRICTED PAYMENTS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to,
(1) declare or pay any dividend or make any distribution on its
Ownership Interests held by persons other than Aircraft Finance or any
subsidiaries, except that Aircraft Finance may make payments on its
beneficial interests out of funds distributed to the Owner Trustee as
described under "-- Priority of Payments";
(2) purchase, redeem, retire or otherwise acquire for value any
beneficial interest in Aircraft Finance or any Ownership Interest of its
subsidiaries held by and on behalf of persons other than Aircraft Finance,
any subsidiary or other persons permitted under the requirements described
in clause (2)(b) under "-- Limitation on the Issuance, Delivery and Sale of
Equity Interests";
(3) make any interest, principal or premium, if any, payment on the
Notes or make any voluntary or optional repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of Aircraft Finance or
any subsidiary that is not owed to Aircraft Finance or any subsidiary other
than in accordance with the Notes and the Indenture, except out of funds
other than Collections, if any new notes of Aircraft Finance issued in
connection with that action rank pari passu with the Notes being
repurchased, defeased, acquired or retired, the Controlling Trustees
determine that the action does not materially and adversely affect the
holders of the Notes and the rating agencies rating the Notes confirm that
they will not lower, qualify or withdraw their ratings on the Notes as a
result;
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(4) make any investments, other than investments of funds in the
Accounts permitted under the Indenture, investments permitted under
provision described under "-- Limitation on Engaging in Business
Activities", Allowed Restructurings and investments in any subsidiary that
owns aircraft, if written notice of the organization or acquisition of the
subsidiary is given to each rating agency rating the Notes.
For purposes of the above provision, the term "investment" means any loan
or advance to a person or entity, any purchase or other acquisition of any
beneficial interest, capital stock, warrants, rights, options, obligations or
other securities of a person or entity, any capital contribution to a person or
entity or any other investment in a person or entity. The term "investment" does
not include any obligation to make deferred or installment payments pursuant to
any agreement for the purchase of aircraft in clause (3) or (5) of the second
paragraph under "-- Limitation on Aircraft Sales" if Aircraft Finance or a
subsidiary retains a security interest in the relevant aircraft until all of
those obligations are discharged.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, create or otherwise suffer to exist any consensual encumbrance or
restriction of any kind on the ability of any subsidiary to:
(1) declare or pay dividends or make any other distributions permitted
by applicable law or purchase, redeem or otherwise acquire for value any
beneficial interest or the Ownership Interests of Aircraft Finance or any
subsidiary;
(2) pay any Indebtedness owed to Aircraft Finance or a subsidiary;
(3) make loans or advances to Aircraft Finance or a subsidiary; or
(4) transfer any of its property or assets to Aircraft Finance or any
other subsidiary.
The foregoing provision does not restrict any consensual encumbrances or
other restrictions:
(1) existing on May 5, 1999 with respect to the initial 36 aircraft or
on the date an aircraft is acquired with respect to any aircraft under the
transactional documents described in this Prospectus and any amendments,
extensions, refinancings, renewals or replacements of those documents, if
the consensual encumbrances and restrictions in any amendment, extension,
refinancing, renewal or replacement are no less favorable in any material
respect to the holders of the Notes than those previously in effect; or
(2) in the case of clause (4) in the prior 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 Aircraft Finance or any
subsidiary not otherwise prohibited by the Indenture.
This provision does not restrict Aircraft Finance or any subsidiary from
creating, incurring, assuming or suffering to exist any encumbrances not
otherwise prohibited under the Indenture.
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LIMITATION ON ENGAGING IN BUSINESS ACTIVITIES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, engage in any business or activity other than:
(1) (a) purchasing or otherwise acquiring, owning, holding,
converting, maintaining, modifying, managing, operating, leasing,
re-leasing aircraft within the limitations described under "-- Limitation
on Aircraft Acquisitions";
(b) selling or otherwise disposing of aircraft within the
limitations described under "-- Limitation on Aircraft Sales"; and
(c) entering into all contracts and engaging in all related
activities incidental to those activities, including from time to time
in the ordinary course of business accepting, exchanging or holding
promissory notes, contingent payment obligations or equity interests of
lessees or their affiliates issued in connection with the bankruptcy,
reorganization or other similar process of those lessees or affiliates
or in settlement of delinquent obligations or obligations anticipated to
be delinquent of those lessees or affiliates (an "Allowed
Restructuring");
(2) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of, any Aircraft Finance group member, in each
case on such terms and in such manner as the Controlling Trustees see fit
(whether or not the member of the Aircraft Finance group derives a benefit
from doing so) if the loan, guarantee or other support is provided in
connection with the purposes set forth in clause (1) above and Aircraft
Finance gives written notice of the loan, guarantee or other support to
each rating agency rating the Notes;
(3) financing or refinancing the business activities described in
clause (1) above through the offer, sale and issuance of any securities of
Aircraft Finance, upon such terms and conditions as the Controlling
Trustees see fit, for cash or in payment or in partial payment for any
property purchased or otherwise acquired by any Aircraft Finance group
member;
(4) 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 that 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 Aircraft Finance's or any of its subsidiaries' property or assets,
within limits and with providers specified in a resolution of the
Controlling Trustees and submitted to the rating agencies rating the Notes,
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;
(5) (a) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, trusts, syndicates, partnerships or other
entities of all kinds in any part of the world for the purposes set forth
in clause (1) above if Aircraft Finance gives written notice to each rating
agency rating the Notes that the entity is set up in compliance with the
Indenture;
(b) acquiring, holding and disposing of shares, securities and
other interests in any such trust, company, syndicate, partnership or
other entity; and
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(c) disposing of shares, securities and other interests in, or
causing the dissolution of, any existing subsidiary within the
requirements described under "-- Limitation on Aircraft Sales";
(6) taking out, acquiring, surrendering and assigning policies of
insurance and assurances with any insurance company or companies as
Aircraft Finance or any of its subsidiaries may think fit and to pay the
related premiums; and
(7) entering into a servicing agreement with any UniCapital affiliate
with respect to aircraft purchased from UniCapital or any of its affiliates
if Aircraft Finance first obtains a confirmation from the rating agencies
rating the Notes that they will not lower, qualify or withdraw their
ratings as a result and delivers to the trustee a resolution of the
Controlling Trustees approving the agreement.
LIMITATION ON INDEBTEDNESS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, incur, create, issue, assume, guarantee or otherwise become
liable for or with respect to, or become responsible for, the payment of,
Indebtedness, contingently or otherwise and whether present or future. For ease,
the term "incur" is used for each such action.
"Indebtedness" means, at any date of determination (without duplication),
(1) all indebtedness of a person for borrowed money;
(2) all obligations of a person evidenced by bonds, debentures, notes
or other similar instruments;
(3) all obligations of a person in respect of letters of credit or
other similar instruments (including reimbursement obligations);
(4) all obligations of a person to pay the deferred and unpaid
purchase price of property or services due more than six months after the
date of purchasing the property or service or taking delivery and title to
the property or the completion of the services and payment deferrals
arranged primarily as a method of financing the acquisition of the property
or service;
(5) all obligations of a person under a lease of (or other agreement
conveying the right to use) any property that is required to be classified
and accounted for as a capital lease obligation under generally accepted
accounting principles in the United States;
(6) all Indebtedness of other persons secured by a lien on any asset
of a person, whether or not such Indebtedness is assumed by that person;
and
(7) all Indebtedness of other persons guaranteed by a person.
The foregoing provision does not restrict:
(1) Indebtedness in respect of any Initial Note issued on May 5, 1999
and the Exchange Notes;
(2) Indebtedness in respect of any Refinancing Notes or other
Indebtedness issued in connection with the repurchase, defeasance,
acquisition or retirement for value of any Initial Notes or Exchange Notes,
if
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(a) Aircraft Finance receives a confirmation from the rating
agencies rating the Notes that they will not lower, qualify or withdraw
their ratings as a result with respect to the Refinancing Notes or other
Indebtedness;
(b) taking into account the refinancing or repurchase, Aircraft
Finance receives a confirmation from the rating agencies rating the
Notes that they will not lower, qualify or withdraw their ratings as a
result; and
(c) the net proceeds of the Refinancing Notes or other Indebtedness
are applied only (x) to repay the Redemption Price of the Notes being
refinanced or repurchased and related transaction expenses, (y) to fund
any cash collateral account established for the Refinancing Notes and
(z) for deposit into the Collections Account as cash reserves at any
existing or increased level;
(3) Indebtedness in respect of guarantees by any Aircraft Finance
group member (other than as provided in clause (5) below) unless it would
materially and adversely affect the holders of the Notes;
(4) Indebtedness in respect of any Additional Notes, if
(a) the net proceeds of the Additional Notes are applied (w) to
finance a Permitted Additional Aircraft Acquisition, (x) to pay related
transaction expenses, (y) to fund any cash collateral account
established for those Additional Notes and (z) for deposit into the
Collections Account as cash reserves at any existing or increased level;
(b) Aircraft Finance obtains a confirmation from the rating
agencies rating the Notes that they will not lower, qualify or withdraw
their ratings as a result; and
(c) the Additional Notes and all other secured obligations will be
secured by the Collateral under the Security Trust Agreement;
(5) obligations to each seller of aircraft under each agreement for
the purchase of aircraft, any related lease assignment and assumption
agreements and other related documents, including any Indebtedness owed to
any lessee with respect to maintenance contribution obligations;
(6) Indebtedness under intercompany loans or any agreement between
Aircraft Finance or any of its subsidiaries if the Indebtedness is
evidenced by promissory notes and Aircraft Finance provides written notice
of the Indebtedness to each rating agency rating the Notes; and
(7) Indebtedness of Aircraft Finance under any eligible credit
facility if Aircraft Finance obtains a confirmation from the rating
agencies rating the Notes that they will not lower, qualify or withdraw
their ratings as a result.
For the purposes of this provision, the term "guarantee" means any
contingent or other obligation of a person directly or indirectly guaranteeing
any Indebtedness or other obligation of any other person. Without limiting the
generality of that definition, the term "guarantee" includes any contingent or
other obligation of a person directly or indirectly (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) the Indebtedness or
other obligation of another person or (2) entered into for purpose of assuring
in any other manner the person owed the Indebtedness or other obligation of its
payment or protecting that person against loss in respect the whole or any part
of the Indebtedness or other obligation. The term "guarantee" does not include
endorsements for
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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
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, sell, transfer or otherwise dispose of any aircraft or any
interest in any aircraft other than as provided in the Servicing Agreement.
The foregoing provision does not restrict the sale, transfer or other
disposition of:
(1) any engine or part of any aircraft purchased on the date that
aircraft is acquired;
(2) one or more aircraft or interest in one or more aircraft
(a) pursuant to a purchase option or a similar agreement existing
on May 5, 1999 with respect to the initial 36 aircraft or on the date
the aircraft was acquired in the case of any aircraft or
(b) to Aircraft Finance or another subsidiary if Aircraft Finance
provides written notice to each rating agency rating the Notes;
(3) under any Aircraft Agreement if the 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;
(4) in connection with the receipt of insurance proceeds due to an
event of loss; or
(5) under an Aircraft Agreement when the net present value of the cash
Net Sales Proceeds is less than the Note Target Price if
(a) in any one calendar year sales under this clause do not exceed
10% of the Adjusted Portfolio Value as determined by the most recent
appraisals for that year;
(b) the Controlling Trustees unanimously confirm that the sale
would not materially and adversely affect the holders of the Notes; and
(c) unless Aircraft Finance obtains a confirmation from the rating
agencies rating the Notes that they will not lower, qualify or withdraw
their ratings as a result, the sale does not result in a Concentration
Default.
For the purposes of this provision, the net present value of the cash Net
Sale Proceeds is the present value of all payments received or to be received by
Aircraft Finance or any of its subsidiaries from the date on which the relevant
option is granted or the relevant Aircraft Agreement is executed through and
including the date on which title to the aircraft is transferred discounted back
to the option granting or execution date, as the case may be, at the weighted
average cost of funds of Aircraft Finance. The weighted average cost of funds
will be based on the cost of funds represented by the Notes taking into account
any swap agreements.
"Note Target Price" means an amount equal to 103% of the aggregate
outstanding principal balance of the Notes plus any accrued but unpaid interest
on the principal and any related swap breakage costs, allocable to an aircraft
on the date of the sale agreement is executed or the option granted. On any
date, the outstanding principal balance of the Notes allocable to an Aircraft is
determined by multiplying the principal balance by the
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Adjusted Base Value of that Aircraft on the most recent Payment Date and
dividing the result by the Adjusted Portfolio Value on that 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 to an Aircraft Finance group member) to
purchase an aircraft, in each case under which a person acquires or is entitled
to acquire legal title to, or the economic benefits of ownership of, the
aircraft.
"Net Sale Proceeds" means 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 the sale, transfer or other
disposition of an asset after deducting (without duplication) (1) reasonable and
customary brokerage commissions and other similar fees and commissions
(including fees received by the servicer under the Servicing Agreement) and (2)
the amount of taxes payable in connection with or as a result of the
transaction, in each case to the extent, but only to the extent, that the
amounts deducted are, at the time of receipt of the cash, actually paid to a
person that is not an affiliate of the seller and are properly attributable to
the transaction or to the asset.
"Concentration Default" means a default under the provision described under
"-- Operating Covenants -- Concentration Limits" that 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 related agreement for the purchase of the
aircraft regardless of whether the transaction is scheduled or expected to occur
after that date.
LIMITATION ON AIRCRAFT ACQUISITIONS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, purchase or otherwise acquire any aircraft other than the initial
36 aircraft.
Aircraft Finance and its subsidiaries may, however, purchase or otherwise
acquire, directly or indirectly:
(1) additional aircraft from time to time if
(a) no Indenture Event of Default has occurred and is continuing;
(b) the acquisition does not result in a Concentration Default; and
(c) after giving effect to the acquisition, no more than 90% of the
appraised base value of the aircraft in Aircraft Finance's portfolio
consists of Stage 3 narrowbody aircraft, no more than 50% of the
appraised base value of that portfolio consists of Stage 3 widebody
aircraft, no more than 15% of the appraised base value of that portfolio
consists of regional jets and none of the aircraft in the portfolio are
turboprop aircraft unless Aircraft Finance obtains a confirmation from
the rating agencies rating the Notes that they will not lower, qualify
or withdraw their ratings as a result; and
(2) substitute aircraft meeting the requirements of the Master
Aircraft Purchase Agreement with GE Capital.
If, in connection with any permitted acquisition of additional aircraft, a
confirmation from the rating agencies rating the Notes that they will not lower,
qualify or withdraw their ratings as a result has been obtained for UniCapital
or any affiliate of UniCapital to act as an additional servicer, Aircraft
Finance is required to enter into a servicing
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agreement with that entity upon the terms approved by the rating agencies rating
the Notes and set forth in a resolution of the Independent Controlling Trustees.
LIMITATION ON MODIFICATION PAYMENTS AND CAPITAL EXPENDITURES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, make any capital expenditures for the purpose of effecting any
optional improvement or modification of any aircraft, including the optional
conversion of any aircraft from a passenger aircraft to a freighter or mixed-use
aircraft or the purchase or other acquisition of any engines or parts outside of
the ordinary course of business (each, a "Modification Payment"). A Modification
Payment does not include any capital expenditure made in the ordinary course of
business in connection with a new lease of an aircraft or any capital
expenditure existing in any lease on May 5, 1999 for the initial 36 aircraft or
the date on which it was acquired in the case of any other aircraft.
Aircraft Finance and its subsidiaries may, however, make a Modification
Payment if
(1) that and all other Modification Payments made after May 5, 1999
with respect to any single aircraft do not exceed the amount of funds that
would be necessary to perform one incidence of heavy maintenance (as
described in the Servicing Agreement) on the aircraft;
(2) (a) the Modification Payment is included in the annual operating
budget of the Aircraft Finance group and approved by the Controlling
Trustees or (b) the amount of funds necessary to make such Modification
Payment has been accrued in the Expense Account or otherwise allowed to be
paid under the provision described under "-- Limitation on Indebtedness";
and
(3) that and all other Modification Payments do not exceed 5% of the
aggregate initial appraised value of all aircraft.
LIMITATION ON CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Aircraft Finance has agreed that it 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 as 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 Aircraft Finance or any subsidiary, unless
(1) (a) the resulting entity is a special purpose entity, with a
charter that is substantially similar to that of Aircraft Finance or the
subsidiary;
(b) payments from the resulting entity to the holders of the Notes
do not give rise to any withholding tax payments less favorable to them
than the amount of any withholding tax payments that would have been
required had the event not occurred; and
(c) the entity is not subject to taxation as a corporation, an
association or publicly traded partnership taxable as a corporation;
(2) in the case of Aircraft Finance, the current beneficial interests
remain outstanding or are exchanged for new interests that have
substantially the same terms and conditions and the resulting entity
expressly assumes all of the obligations of Aircraft Finance in the
Indenture, the Notes and each other transaction document described in this
Prospectus;
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(3) a confirmation from the rating agencies rating the Notes that they
will not lower, qualify or withdraw their ratings as a result is obtained;
(4) immediately after giving effect to the transaction, no Indenture
Event of Default occurs and is continuing;
(5) the transaction does not result in the recognition of gain or loss
by the holders of the beneficial interest of Aircraft Finance for U.S.
federal income tax purposes; and
(6) Aircraft Finance delivers to the trustee an officer's certificate
and an opinion of counsel, each stating that the consolidation, merger or
transfer and any related supplemental indenture comply with the above
criteria and, if applicable, the requirements described under
"-- Limitation on Aircraft Sales" and that all applicable conditions
precedent under the Indenture relating to such transaction have been
satisfied.
The foregoing provision does not apply to a consolidation, merger, sale,
conveyance, transfer, lease or disposition:
(a) within the Aircraft Finance group if it would not materially and
adversely affect the holders of the Notes and Aircraft Finance gives
written notice each rating agency rating the Notes;
(b) complying with the terms of the requirements described under
"-- Limitation on Aircraft Sales"; or
(c) effected as part of a single transaction providing for the
redemption or defeasance of the Notes in accordance with their terms.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, directly or indirectly, enter into, renew or extend any
transaction with any affiliate of Aircraft Finance or any subsidiary, except
upon fair and reasonable terms no less favorable to Aircraft Finance or the
subsidiary than could be obtained in a comparable arm's-length transaction with
a person that is not an affiliate. Without limiting the foregoing, this
provision applies to the purchase, sale, lease or exchange of property or
assets, or the rendering of any service.
The foregoing limitation does not limit or apply to
(1) any transaction in connection with the establishment of the
Aircraft Finance group or its acquisition of the initial 36 aircraft or
made under the transactional documents described in this Prospectus;
(2) any transaction among Aircraft Finance and its subsidiaries unless
it would materially and adversely affect the holders of the Notes;
(3) the payment of reasonable and customary fees to, and the provision
of reasonable and customary liability insurance in respect of, the
Controlling Trustees;
(4) any payments on or with respect to the Notes or to the Owner
Trustee under the Indenture and to the holders of the beneficial interests
of Aircraft Finance under its Trust Agreement;
(5) the acquisition of Additional Aircraft or any transaction
complying with the provisions described under "-- Limitation on Aircraft
Sales";
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(6) any payments of the types referred to in clause (1) or (2) of the
provision described under "Limitation on Restricted Payments" and not
prohibited under those clauses; or
(7) the sale of Aircraft Finance or any subsidiaries as part of a
single transaction providing for the redemption or defeasance of Notes in
accordance with their terms.
LIMITATION ON THE ISSUANCE, DELIVERY AND SALE OF EQUITY INTERESTS
Aircraft Finance has agreed that it will not:
(1) issue, deliver or sell any shares, interests, participations or
other equivalents in equity however designated and whether voting or
non-voting, other than beneficial interests existing on May 5, 1999; or
(2) sell, or permit any subsidiary, directly or indirectly, to issue,
deliver or sell, any shares, interests, participations or other equivalents
in equity however designated and whether voting or nonvoting, other than
the beneficial interests and shares existing on May 5, 1999.
The foregoing provision does not apply to:
(a) issuances, sales, delivery, transfer or pledge of beneficial
interests in any Aircraft Finance group member to or for the benefit of any
other Aircraft Finance group member;
(b) issuances or sales of any additional beneficial interest of
Aircraft Finance to finance the acquisition of Additional Aircraft as
permitted by the Indenture (a "Permitted Additional Aircraft Acquisition")
if (x) the rating agencies rating the Notes confirm that they will not
lower, qualify or withdraw their ratings as a result and (y) the net
proceeds are used only to finance such Permitted Additional Aircraft
Acquisition, to fund any cash collateral account, for deposit as cash
reserves in the Collections Account or to pay any related transaction
expenses;
(c) issuances or sales of interests of foreign subsidiaries of
Aircraft Finance to nationals in the jurisdiction of incorporation or
organization to the extent required by applicable law or necessary in the
determination of the Controlling Trustees to avoid adverse tax consequences
or to facilitate the registration or leasing of Aircraft;
(d) the pledge of interests in subsidiaries under the Security Trust
Agreement;
(e) the sale of any interests of a subsidiary to effect the sale of
all aircraft owned by the subsidiary in compliance with the terms of the
requirements described under "-- Limitation on Aircraft Sales"; and
(f) the issuance of additional beneficial interests in Aircraft
Finance to the holders of its current beneficial interest to the extent
those holders provide funds to Aircraft Finance to effect a redemption, to
fund Cure Amounts or to discharge the Notes upon their acceleration.
BANKRUPTCY AND INSOLVENCY
Aircraft Finance has agreed that:
(1) it will promptly provide the trustee and the rating agencies
rating the Notes with written notice of any proceeding by or against
Aircraft Finance or any of its subsidiaries (a) seeking to adjudicate any
of them a bankrupt or insolvent,
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(b) seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors
or (c) seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for either all or any
substantial part of its property;
(2) it will not take any action to waive, repeal, amend, vary,
supplement or otherwise modify its charter documents that would adversely
affect the rights, privileges or preferences of any holders of the Notes,
as determined by the Controlling Trustees; and
(3) it will not, without an affirmative unanimous written resolution
of the Controlling Trustees, take any action to waive, repeal, amend, vary,
supplement or otherwise modify the provision of the Trust Agreement that
requires a unanimous resolution of the Controlling Trustees or limits the
actions of its beneficial interest holders with respect to voluntary
insolvency proceedings or consents to involuntary insolvency proceedings.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Aircraft Finance has agreed that it will duly and punctually pay the
principal, Sale Premium, premium and interest on the Notes in accordance with
the terms of the Indenture and the Notes.
LIMITATION ON EMPLOYEES
Aircraft Finance has agreed that it will not, and will not permit any of
its subsidiaries to, employ or maintain any employees other than as required by
law. The trustees and directors of Aircraft Finance or any of its subsidiaries
are not deemed to be employees for this purpose.
OPERATING COVENANTS
CONCENTRATION LIMITS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to lease or re-lease any aircraft if doing so would violate the
concentration limits listed below unless the rating agencies rating the Notes
confirm that they will not lower, qualify or withdraw their ratings on the Notes
as a result. Aircraft Finance and its subsidiaries may, however, renew or extend
any lease to an existing lessee even if that would result in a violation of the
concentration limits. The concentration limits may be changed in the future but
only if the rating agencies rating the Notes confirm that they will not lower,
qualify or withdraw their ratings on the Notes as a result.
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
LESSEE CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- --------------------------- -------------------------------
<S> <C>
Single lessee rated BBB/Baa2 (or the
equivalent) or better..................... 15
Other single lessees........................ 10
Five largest lessees........................ 35
</TABLE>
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<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
COUNTRY CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- ---------------------------- -------------------------------
<S> <C>
Countries rated AAA/Aaa (or the
equivalent)(2)............................ 30
Countries rated BBB/Baa2 (or the equivalent)
or better(2).............................. 20
Other....................................... 15
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
REGION CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- --------------------------- -------------------------------
<S> <C>
Developed Market region(3).................. 55
Emerging Market region(3)................... 25
Asia and Pacific regions together(3)........ 45
Undesignated(3)............................. 20(4)
</TABLE>
- -------------------------
(1) This percentage is obtained by dividing the most recent appraised value of
all aircraft leased or to be leased to lessees habitually based in the
applicable country by the most recent appraised value of all aircraft then
owned by Aircraft Finance and its subsidiaries.
(2) The applicable rating is the sovereign foreign currency debt rating assigned
by the rating agencies rating the Notes to the country in which a lessee is
habitually based at the time the relevant lease is executed.
(3) The designation of regions is set out below.
(4) In addition, no more than 10% of the most recent appraised value of the
aircraft may be leased to lessees habitually based in "Undesignated"
countries rated below BBB/ Baa2 (or the equivalent) and no more than 5% of
the most recent appraised value of the aircraft may be leased to lessees
habitually based in "Undesignated" countries in Africa.
<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, Korea, Malaysia,
Pakistan, Philippines, Sri Lanka, Taiwan and
Thailand
Europe and Czech Republic, Greece, Hungary, Israel,
Middle East......... Jordan, Poland, Russia and Turkey
Latin America.......... Argentina, Brazil, Chile, Columbia, Mexico,
Peru and Venezuela
Undesignated............. All other countries (generally those with
small or Undeveloped capital markets)
</TABLE>
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In addition, the Indenture does not permit Aircraft Finance or any of its
subsidiaries to lease or re-lease aircraft to lessees who operate or intend to
operate those aircraft (1) in certain countries listed in the Indenture and (2)
in certain other countries listed in the Indenture without procuring airline
repossession insurance. The list of prohibited countries and countries with
respect to which airline repossession insurance must be procured may be modified
from time to time upon the approval of the rating agencies rating the Notes.
The Indenture contains no limitations on the countries or regions where
sub-lessees may habitually base aircraft if (1) the sublease is permitted under
the relevant lease and (2) the relevant lessee is a signatory to a lease.
COMPLIANCE WITH LAW; MAINTENANCE OF PERMITS
Aircraft Finance has agreed that it and its subsidiaries will (1) comply
with applicable laws, (2) with limited exceptions, obtain all material
governmental registrations, certificates, licenses, permits and authorizations
required to use and operate the aircraft they own, (3) not cause or knowingly
permit any lessee to operate any aircraft under any lease in any material
respect contrary to any applicable law and (4) with limited exceptions, not
knowingly permit any lessee not to obtain all material governmental
registrations, certificates, licenses, permits and authorizations required for
the lessee's use and operation of its leased aircraft.
The foregoing provision will not be deemed to have been breached by virtue
of acts or omissions of a lessee, sub-lessee or any person who 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 if (1) neither Aircraft Finance nor any subsidiary consents to those
acts or omissions and (2) Aircraft Finance or its subsidiary that is the lessor
or owner of the aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating lessor would
take under similar circumstances.
APPRAISAL OF AIRCRAFT
Aircraft Finance has agreed to deliver, commencing in 2000, to the trustee
appraisals of the base value of each of the aircraft at least once each year by
May 31. The appraisals must come from at least three independent appraisers that
are members of the International Society of Transport Aircraft Trading or any
similar organization and be dated within 30 days prior to their delivery to the
trustee.
MAINTENANCE OF AIRCRAFT
Aircraft Finance has agreed that it and its subsidiaries will maintain each
leased aircraft and engine in a condition consistent with the reasonable
commercial practice of leading international aircraft operating lessors with
respect to similar aircraft leased under similar circumstances. Aircraft Finance
also has agreed to maintain each aircraft that is not subject to a lease in a
condition consistent with the reasonable commercial practice of leading
international aircraft operating lessors with respect to similar aircraft not
under lease.
The foregoing provision will not be deemed to have been breached by virtue
of acts or omissions of a lessee, sub-lessee or any person who 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 if (1) neither Aircraft Finance nor any subsidiary consents to those
acts or omissions and (2) Aircraft Finance or its subsidiary
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that is the lessor or owner of the aircraft promptly and diligently takes such
commercially reasonable actions as a leading international aircraft operating
lessor would take under similar circumstances.
NOTIFICATION OF THE TRUSTEE AND THE ADMINISTRATIVE AGENT
Aircraft Finance has agreed to notify the trustee and the administrative
agent as soon as Aircraft Finance or any subsidiary becomes aware of any loss,
theft, damage or destruction to any aircraft or engine if the potential cost of
repair or replacement exceeds $2,000,000.
LEASES
The Indenture requires Aircraft Finance in general to use the pro forma
lease agreements then in use by the servicer or any additional servicer as a
starting point in the negotiation of future leases other than intracompany
leases. These pro forma leases may be revised especially for use by the Aircraft
Finance group. In connection with any (1) renewal or extension of a lease, (2)
lease to a person that is or was a lessee under a preexisting lease or (3) lease
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 the additional servicer,
Aircraft Finance may, however, use the pre-existing lease as a starting point in
the lease negotiations.
If in their annual review of the pro forma lease the Controlling Trustees
determine that any revision to the pro forma lease made since their last review
is substantially inconsistent with the core lease provisions listed in the
Indenture and materially and adversely affects the holders of the Notes, the
Indenture requires the Controlling Trustees to direct the servicer not to
include that revision in the pro forma lease to be used as the starting point in
the negotiation of future leases. If the Controlling Trustees determine that the
revision to the pro forma lease will not materially and adversely affect the
holders of the Notes, the Controlling Trustees must amend the applicable core
lease provisions and notify the rating agencies rating the Notes of any lease
entered into in the future whose terms are materially less favorable from the
point of view of the lessor than that of any lease then in effect.
Neither Aircraft Finance nor any subsidiary may enter into any future lease
if the rental payments are denominated in a currency other than U.S. dollars
unless the rating agencies rating the Notes confirm that they will not lower,
qualify or withdraw their ratings on the Notes as a result.
The Indenture requires that each lease of an aircraft owned by Aircraft
Finance or a subsidiary, other than an intracompany lease, contain an indemnity
from the lessee in respect of any losses or liabilities arising from the use or
operation of the aircraft during the term of the lease. The indemnity may be
subject to exceptions, limitations and qualifications that are consistent with
the reasonable commercial practices of leading international aircraft operating
lessors.
OPINIONS
The Indenture prohibits Aircraft Finance and its subsidiaries from entering
into any future lease, other than an intracompany lease, or changing the
jurisdiction of registration of any aircraft that is subject to a lease, unless
the servicer or an additional servicer obtains legal opinions regarding
compliance with the registration requirements of the
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relevant jurisdiction, enforceability of the future lease and certain other
matters that would customarily be obtained by leading international aircraft
operating lessors.
INSURANCE
Aircraft Finance has agreed that it or its subsidiaries will maintain (1)
airline hull insurance for each aircraft in an amount at least equal to the Note
Target Price for that aircraft, (2) airline liability insurance for each
aircraft and occurrence in an amount at least equal to the relevant amounts
stated in the Indenture for each model of aircraft, as those amounts may be
changed in the future with the approval of the rating agencies rating the Notes
and (3) airline repossession insurance for each aircraft subject to a lease and
habitually based in certain jurisdictions, in an amount at least equal to the
Note Target Price for that aircraft. Aircraft Finance has agreed that, for the
period July 3, 1999 to May 5, 2000, it will, if requested by any rating agency
rating the Notes, obtain aircraft repossession insurance for aircraft leased to
lessees habitually based in certain countries other than developed markets. That
period may be extended for up to one year if a rating agency so requests. Any
insurance for any aircraft subject to a lease may be subject to commercially
reasonable deductible and self-insurance arrangements. The coverage and terms of
any insurance maintained for any aircraft not subject to a lease must be
consistent with the commercial practices of leading international aircraft
operating lessors regarding similar aircraft.
In determining the amount of insurance required to be maintained, Aircraft
Finance may take into account any indemnification from, or insurance provided
by, any governmental, supranational or inter-governmental authority or agency
the sovereign foreign currency debt of which is rated at least AA, or the
equivalent, by at least one of the rating agencies rating the Notes. Any such
indemnification or insurance must provide substantially similar protection as
the insurance required by this covenant. Aircraft Finance is not required to
maintain any insurance to the extent that such insurance is not generally
available in the relevant insurance market at commercially reasonable rates.
COMPLIANCE THROUGH AGENTS
Aircraft Finance is entitled to delegate the performance of any of its
operating obligations under the Indenture to one or more service providers if
the document under which the delegation is made is included as Collateral under
the Security Trust Agreement. This provision is not intended to relieve Aircraft
Finance from any liability if Aircraft Finance or any service provider fails to
perform any obligation strictly in accordance with the Indenture.
INDENTURE EVENTS OF DEFAULT AND REMEDIES
Each of the following events is an "Indenture Event of Default" with
respect to any subclass of Notes:
(1) A failure to pay when due the Interest Amount on any subclass of
Notes that continues for a period of five or more business days.
(2) A failure to pay when due principal on any subclass of Notes
either on or prior to its Final Maturity Date.
(3) A failure to pay when due any amount (other than interest) on any
subclass of Notes if there are amounts available in the Collections Account
or any cash
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collateral account on a Payment Date to pay that amount and the failure
continues for five or more business days after that Payment Date.
(4) A failure by Aircraft Finance to comply with any of the provisions
of the Indenture or any Notes (other than a payment default under clause
(1), (2) or (3) above), if the failure materially and adversely affects the
holders of that subclass of Notes and continues for a period of 30 days or
more after written notice to Aircraft Finance by the Controlling Party or
by holders of at least 25% of the outstanding principal balance of the
senior-most class.
If the failure can be cured within 90 days of the date of that notice
and the administrative agent has promptly provided the trustee with a
certificate stating that Aircraft Finance has commenced, or will promptly
commence, and diligently pursue all reasonable efforts to cure the failure,
the 30-day period may be extended so long as Aircraft Finance or any
subsidiary is diligently pursuing the cure but no longer than 90 days.
(5) The entry by a court of a decree or order that remains unstayed
and undismissed for 90 days for:
(a) relief in respect of Aircraft Finance or any subsidiary that
owns or leases aircraft with a base value of at least 10% of the
Adjusted Portfolio Value at that time (each, a "Significant Subsidiary")
under any applicable law relating to bankruptcy, insolvency,
reorganization or other similar law;
(b) appointment of a receiver, trustee or similar official of
Aircraft Finance or any Significant Subsidiary; or
(c) the winding up or liquidation of the affairs of Aircraft
Finance or any Significant Subsidiary.
(6) Aircraft Finance or any Significant Subsidiary:
(a) commences a voluntary case under any applicable law relating to
bankruptcy, insolvency, reorganization or other similar law or consents
to the entry of an order for relief in any involuntary case under any
such law;
(b) consents to the appointment of or taking possession by a
receiver, liquidator, trustee or similar official for Aircraft Finance
or any Significant Subsidiary or for all or substantially all of the
property of Aircraft Finance or any Significant Subsidiary; or
(c) effects any general assignment for the benefit of creditors.
(7) A judgment or order for the payment of money in excess of 5% of
the aggregate Adjusted Portfolio Value is rendered against Aircraft Finance
or any subsidiary and either:
(a) enforcement proceedings are commenced on the judgment or order;
or
(b) no stay of enforcement of the judgment or order is in effect
for 10 consecutive days. A judgment or order will not be an Indenture
Event of Default so long as (x) the amount of the judgment or order is
covered by a binding policy of insurance and (y) the insurer, who must
be rated at least "A" by A.M. Best Company, has been notified of, and
has not disputed the claim for, the amount of the judgment or order.
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(8) The constitutional documents of Aircraft Finance cease to be in
full force and effect and are not replaced with documents that have the
same terms.
The Indenture provides that, within 30 days of an Indenture Event of
Default as to any subclass of Notes, the trustee will mail to the holders of
Notes of that subclass notice of all existing defaults under the Indenture known
to it. Other than a default as to interest, principal or premium, the trustee
may withhold the notice if it determines in good faith that withholding the
notice is in the interest of the affected holders.
If an Indenture Event of Default (other than an Indenture Event of Default
under clause (5) or (6) above) occurs and is continuing, the Controlling Party
may give a default notice to Aircraft Finance, the administrative agent, the
security trustee and the trustee declaring the outstanding principal balance of
the Notes and all accrued and unpaid interest to be due and payable. If the
Controlling Party is the Senior Trustee, the holders of at least 25% of the
outstanding principal balance of the senior-most class may instruct the
Controlling Party in writing to give a default notice.
At any time after the Controlling Party has sent a default notice and
before the exercise of any other remedies, the Controlling Party may annul the
declaration and its consequences by written notice to Aircraft Finance, the
Senior Trustee (if not the Controlling Party), the administrative agent, the
security trustee and the trustee if:
(1) Aircraft Finance deposits an amount sufficient to pay all overdue
installments of interest, and the principal, premium and Sale Premium on
the Notes that would have become due other than by acceleration;
(2) the annulment would not conflict with any judgment or decree; and
(3) all other defaults other than nonpayment of amounts that become
due solely because of acceleration have been cured or waived.
If the Controlling Party is the Senior Trustee, the holders of at least 25% of
the outstanding principal balance of the senior-most class of Notes may direct
the Controlling Party to give that notice of annulment.
If an Indenture Event of Default under clause (5) or (6) occurs, all
principal, interest, premium and Sale Premium will automatically become due
without any further action by any party.
The "Controlling Party" means the Senior Trustee. The "Senior Trustee" is
(1) so long as any Class A Notes are outstanding, the representative
of the majority holders of the Class A Notes;
(2) after the Class A Notes have been repaid in full, and so long as
any Class B Notes are outstanding, the representative of the majority
holders of the Class B Notes;
(3) 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 representative of the
majority holders of the Class C Notes; and
(4) after the Class A Notes, the Class B Notes and the Class C Notes
have been repaid in full and so long as any Class D Notes are outstanding,
the representative of the majority holders of the Class D Notes.
In some instances, the provider of a primary eligible credit facility may elect
to become the Controlling Party. If at any time each subclass of the senior-most
class of Notes does
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not have the same trustee, then the Senior Trustee will be the trustee of the
subclass with the lowest numerical designation. As of the date of this
prospectus, the Senior Trustee for each class of Notes is Bankers Trust.
The Indenture entitles the trustee, subject to its duty during a default to
act with the required standard of care, to be indemnified by the holders of any
class of Notes before exercising any right or power under the Indenture at the
request or direction of those holders. Except in limited circumstances, no
holder has the right to sue for recovery or take any other actions to enforce
the obligations of Aircraft Finance to pay any and all amounts due and payable
under the Notes other than through the Controlling Party acting in accordance
with the Indenture. No holder of the Notes has the right to take any steps to
cause the filing for bankruptcy of Aircraft Finance or any subsidiary.
Upon acceleration, the security trustee may exercise such remedies as to
the Collateral as are provided by the Uniform Commercial Code and other
applicable law. These remedies include the sale of all or any part of the
Collateral at public or private sale for cash, credit or other terms as the
security trustee may determine to be commercially reasonable.
SUBORDINATION
Under the terms of the Indenture and the Security Trust Agreement, each
holder of a Note agrees that its claims against Aircraft Finance for payment of
any amount are subordinate to any claims that have a higher payment priority as
described above in "-- Priority of Payments" and "-- Allocation of Principal
among Subclasses". This subordination continues until the holder of a prior
claim, or the trustee on its behalf, has received the full cash amount of the
prior claim. Each holder is also obligated to hold for the benefit of the holder
of a prior claim any amounts received by the holder that should have been paid
to or on behalf of the holder of a prior claim. Each holder also agrees to
execute and deliver such instruments and documents, and take all further action,
that the Controlling Party may reasonably request in order to effectuate the
above. Funds provided for the purpose of making payments of Cure Amounts,
depositing amounts in any cash collateral account, for a defeasance of the Notes
and for an Optional Redemption of the Notes and proceeds of Refinancing Notes
are not subject to these subordination provisions.
Under the Security Trust Agreement, so long as any prior claims remain
unpaid, neither any trustee or representative of any holders of Notes whose
claims are not prior nor the holders of these claims themselves may commence or
join in commencing any enforcement, collection, foreclosure or other proceeding
as to the Collateral. Upon request by the Controlling Party, however, the
holders of the junior claims and their representatives must, at the expense of
Aircraft Finance, join in enforcement, collection, foreclosure or other
proceedings and otherwise cooperate in the proceedings with the security
trustee. They must also execute all such consents, pleadings, releases and other
instruments as the security trustee may reasonably request. The conduct of the
proceedings are at all times to be under the exclusive control of the security
trustee.
Furthermore, upon request by the Controlling Party, the representatives of
the holders of the junior claims are required to release the security interests
in their favor in any Collateral and execute all such instruments as the
Controlling Party may reasonably request upon any sale, lease, transfer or other
disposition of any Collateral under the Security Trust Agreement. Neither the
holders of the junior claims nor their representatives may contest the validity,
perfection or priority of, or seek to avoid, the rights of the Controlling Party
or the holders of the prior claims as to any Collateral.
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MODIFICATION AND WAIVER
The Indenture provides that, with the consent of the holders of a majority
of the outstanding principal balance of the Notes (voting as a single class),
Aircraft Finance may amend or modify the Notes or the Indenture. Without the
consent of each provider of an eligible credit facility, no amendment may modify
the provisions of the Indenture relating to that credit facility or, to the
extent affecting its credit facility, credit facilities generally.
Except as provided in the Indenture in connection with the issuance of
Additional Notes or except as described under "-- Allocation of Principal among
Subclasses", no amendment may (1) alter the frequency or the currency of payment
of, the maturity of, or the method of calculation of the amount of any interest,
principal, premium and Sale Premium on any subclass of Notes, (2) reduce the
percentage of the outstanding principal balance of any subclass required to
approve any amendment or waiver or (3) alter the manner or priority of payment
of any subclass of Notes (each, a "Basic Terms Modification") without the
consent of each swap provider, each provider of an eligible credit facility and
the holder of each Note affected by the amendment.
The holders of a majority of the outstanding principal balance of the
senior-most class by notice to the Senior Trustee may waive certain Indenture
Events of Default. Any modification approved by the required holders of any
subclass of Notes will be binding on the holders of that subclass of Notes and
each party to the Indenture. Aircraft Finance is not restricted from amending
any lease if the 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 provider of an
eligible credit facility, each holder of the subclass of Notes affected by the
amendment or modification and each holder of any subclass of Notes that has a
payment priority higher than that of those Notes. The provisions in the
Indenture relating to the priority of expenses, swap payments or any eligible
credit facilities may in no event be amended or modified.
NOTICES TO HOLDERS
Except as provided below, any notice to the holders of Notes is valid if
given:
(1) by publication in the Luxemburger Wort or, if that newspaper is no
longer published or timely publication is not practicable, in such English
language newspaper or newspapers with a general circulation in Europe as
the trustee approves;
(2) by either of (a) the information in the 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 holders
or (b) publication in the Financial Times and The Wall Street Journal
(National Edition) or, if either newspaper is no longer published or timely
publication is not practicable, in such English language newspaper or
newspapers with a general circulation in Europe and the United States as
the trustee approves; and
(3) until such time as definitive notes are issued and, so long as the
Notes are registered in the name of a nominee for DTC, or Cedel Bank, and
so long as the Notes are listed on the Luxembourg Stock Exchange and its
rules so permit, delivery of the relevant notice to DTC, Euroclear or Cedel
Bank for communication by them to the holders.
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Any notice to the holders of any subclass of Notes bearing interest based
on LIBOR that specifies an interest rate for those Notes, any Payment Date, any
principal payment or any payment of premium is validly given by delivery to DTC,
Euroclear or Cedel for communication by them to the holders, does not need to be
published in the Luxemburger Wort, and must be promptly given to the Luxembourg
Stock Exchange and made available at the office of the Luxembourg paying agent.
Any notice specifying (a) an increase in the interest rate of any subclass of
Notes due to Maturity Step-Up Interest or Registration Step-Up Interest or (b)
redemption of principal of any Notes must be published in the Luxemburger Wort
or another daily newspaper of general circulation in Luxembourg. Any notice is
deemed to have been given on the first day on which any of those conditions
shall have been met.
Notices to holders of the Class D Notes generally will be made by the
trustee directly to the holders.
The trustee may approve some other method of giving notice to the
Noteholders if, in its opinion, the other method (1) is reasonable in light of
the number and identity of the holders and prevailing market practice, (2) is in
the best interests of the holders and (3) will comply with the rules of the
Luxembourg Stock Exchange or any other stock exchange on which the Notes may be
listed. The trustee must give notice of its approval of another method of
notice.
ACCOUNTS
The administrative agent, acting on behalf of the security trustee, has
directed the operating bank under the Security Trust Agreement to establish and
maintain on the operating bank's books and records in the name of the security
trustee the following accounts:
(1) the "Collections Account",
(2) one or more "Rental Accounts" and any additional Rental Accounts
and Lessee Funded Accounts,
(3) one or more accounts in which cash security deposits and
segregated funds are held in accordance with the requirements of a lease
(each, a "Lessee Funded Account"),
(4) the "Expense Account",
(5) one account for each subclass of the Initial Notes (each, a "Note
Account"),
(6) the two "VARIG Reserve Accounts", and
(7) an Owner Trustee's account (the "Owner Trustee Account").
When required under the Indenture or by action of the Controlling Trustees,
the administrative agent is to direct the operating bank to maintain in the name
of the security trustee
(1) the "Aircraft Purchase Account",
(2) the "Defeasance/Redemption Account",
(3) the "Refinancing Account" and
(4) any cash collateral accounts.
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Each of the foregoing accounts (the "Accounts") has been or will be
established and maintained initially with Bankers Trust. The administrative
agent has agreed to replace Bankers Trust as the operating bank if Bankers Trust
fails to maintain either (a) a long-term unsecured debt rating of A (or the
equivalent) or better by each of Standard & Poor's and Moody's or (b) a
short-term unsecured debt rating of A-1 by Standard & Poor's and P-1 by Moody's
with a bank that has such a rating. The security trustee and the trustee have
appointed the administrative agent as their agent to direct withdrawal and
transfer from the Accounts. Neither the security trustee nor the trustee are
responsible for the acts or omissions of the administrative agent.
Funds on deposit in the Accounts will be invested and reinvested by the
administrative agent on behalf of the security trustee in one or more
investments permitted under the Indenture. The Controlling Trustees of Aircraft
Finance may direct these investments unless the Notes are accelerated.
Investment earnings, net of losses and investment expenses, will be deposited in
the Collections Account and treated as Collections. The investment of funds in
any Lessee Funded Account must be made in a manner and with maturities that
conform, and the use of earnings must also conform, to the requirements of the
related leases.
RENTAL ACCOUNTS
Aircraft Finance is to direct all of the lessees to make all payments under
the leases directly into the applicable Rental Accounts. The administrative
agent is to transfer all funds deposited into the Rental Accounts into the
Collections Account within one business day of receipt. Limited amounts may need
to be left on deposit for local legal or regulatory reasons.
NON-TRUSTEE ACCOUNTS
If the administrative agent determines that, for any tax or other
regulatory or legal reason, any payments under any leases may not be deposited
into an account in the name of the security trustee, Aircraft Finance may
establish one or more accounts (each a "Non-Trustee Account") for such amounts
in its own name. Any Non-Trustee Account must be subject to the direction and
control of the administrative agent on behalf of the security trustee.
COLLECTIONS ACCOUNT
All Collections received by the Aircraft Finance group must be deposited in
the Collections Account and either be transferred to another Account or retained
in the Collections Account. "Collections" include all amounts received by the
Aircraft Finance group, including,
(1) rental payments transferred from the Rental Accounts;
(2) 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;
(3) cash reserves in the collections Account;
(4) amounts received as damages or for any breach of contract for
nonpayment of any of the foregoing;
(5) net proceeds of any aircraft sale or amounts received under any
agreement for the purchase of aircraft;
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(6) proceeds of any insurance payments for any Aircraft;
(7) amounts transferred from a Lessee Funded Account to the
Collections Account;
(8) net payments to Aircraft Finance under any swap agreement;
(9) investment income from the Accounts;
(10) any proceeds or other payments received under the purchase
agreement with GE Capital or any amounts transferred from the Aircraft
Purchase Account;
(11) any amounts drawn from a VARIG Reserve Account; and
(12) any other amounts received by any member of the Aircraft Finance
group.
Collections do not include funds required to be segregated by leases, funds to
be transferred to the VARIG Reserve Account, funds to be applied in connection
with a redemption or defeasance, funds received in connection with a refinancing
of Notes and other amounts required to be paid over to any third party pursuant
to any contract.
LESSEE FUNDED ACCOUNT
Lessee security deposits and payments for maintenance reserves may be
required to be segregated from other Aircraft Finance funds. These amounts will
be held in a Lessee Funded Account. Funds on deposit in any Lessee Funded
Account will be used to pay for maintenance and to repay security deposits or to
make such other payments as may be required or permitted under the terms of the
relevant leases. They also may be applied against maintenance payments otherwise
required to be made by the lessee during the term of the related lease. These
amounts may not be used to make payments on the Notes at any time, including
after a default, except to the extent applied to unpaid rents and other amounts
due from the lessee. If a lessee relinquishes its rights to receive these
amounts at the end of a lease, any surplus funds may be moved from the Lessee
Funded Account to the Collections Account.
EXPENSE ACCOUNT
On each Payment Date, the administrative agent is to withdraw the funds
from the Collections Account, in the priority of payments established for the
Notes, to replenish the Expense Account to the Required Expense Amount. On any
Payment Date or any other day, the administrative agent may withdraw funds from
the Expense Account to pay expenses then due. Modification Payments and
refinancing costs may be withdrawn only to the extent sufficient accruals were
made for those purposes. If funds in the Expense Account are insufficient to pay
all Expenses due on any day other than a Payment Date, the administrative agent
may withdraw funds from the Collections Account to avoid a default by Aircraft
Finance in its obligations to any third party.
REFINANCING ACCOUNT
Upon receipt of a notice of a refinancing, the trustee must direct the
administrative agent to cause the operating bank to establish a Refinancing
Account for the benefit of the holders of the subclass of Notes to be
refinanced. The administrative agent will deposit all net proceeds of any such
refinancing (after application of accruals made for that purpose in the Expense
Account) into the Refinancing Account. Those amounts will be held in the
Refinancing Account until the principal, interest and premium on the refinanced
Notes are paid and the refinanced Notes are cancelled.
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DEFEASANCE/REDEMPTION ACCOUNT
Upon receipt of a notice that any subclass of Notes is to be redeemed or
defeased other than in a refinancing, the trustee must direct the administrative
agent to cause the operating bank to establish and maintain a
Defeasance/Redemption Account. All amounts received for the purpose of any such
redemption or defeasance are to be deposited in the Defeasance/Redemption
Account.
AIRCRAFT PURCHASE ACCOUNT
The proceeds of any Additional Notes after making any other required
deposits must be deposited in the Aircraft Purchase Account and held in that
Account until applied for the purchase of additional aircraft.
NOTE ACCOUNT
Upon the issuance of Notes of any subclass for which a Note Account was not
previously established, the trustee must direct the administrative agent to
cause the operating bank to establish and maintain a Note Account for that
subclass of Notes. All amounts transferred to a Note Account for any subclass of
Notes in accordance with the "-- Priority of Payments" above are to be applied
to the payment of that subclass of Notes.
OWNER TRUSTEE ACCOUNT
All amounts transferred to the Owner Trustee Account as described under
"-- Priority of Payments" are to be paid to the Owner Trustee Account for
further application by the Owner Trustee in accordance with the Trust Agreement
of Aircraft Finance.
VARIG RESERVE ACCOUNTS
Amounts in the VARIG Reserve Accounts may be withdrawn and replenished as
set forth above in "The Initial Aircraft and Initial Leases -- The Master
Aircraft Purchase Agreement".
THE COLLATERAL
Aircraft Finance, its two subsidiaries and the security trustee have
entered into the Security Trust Agreement dated as of May 5, 1999. Under the
Security Trust Agreement, the Aircraft Finance group has granted to the security
trustee, for its benefit and the benefit of the holders of the Notes, persons
providing services to Aircraft Finance, such as GECAS, the trustee, the
administrative agent and others, swap providers and providers of eligible credit
facilities and in order to secure the payment and performance of all of their
obligations, a security interest in all of their right, title and interest in
the Collateral. The "Collateral" includes, but is not limited to, the following:
(1) all of the outstanding shares of common stock of subsidiaries and
indebtedness of subsidiaries, all additional shares of stock acquired by
the Aircraft Finance group and additional indebtedness owed to the Aircraft
Finance group and all property received, receivable or otherwise
distributable in respect to or in exchange for any stock or indebtedness;
(2) all of the beneficial interests in subsidiaries, all additional
beneficial interests acquired by the Aircraft Finance group, any and all
certificates or instruments
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evidencing or creating those interests and all property received,
receivable or otherwise distributable in respect of or in exchange for
those interests;
(3) all of the Non-Trustee Accounts, all funds in those accounts, all
notes and other instruments delivered to or otherwise possessed by the
security trustee for or on behalf of the Aircraft Finance group and all
property received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing;
(4) with respect to each member of the Aircraft Finance group, all
rights of the member to each other Account at any time established and all
cash, investment property, investment earnings, securities, instruments or
other property at any time credited to any Account;
(5) all other "investment property" of each member of the Aircraft
Finance group, including all investments made or acquired from or with the
proceeds of any Account, and all property received, receivable or otherwise
distributed in respect of or in exchange for any or all of the foregoing;
(6) with respect to Aircraft Finance, all of Aircraft Finance's right,
title and interest in all security assignments, cash deposit agreements and
other security agreements executed in its favor by any subsidiary and all
of Aircraft Finance's right, title and interest in all deposit accounts,
all property held in those deposit accounts and all certificates and
instruments provided to it as security under any such agreement;
(7) with respect to each member of the Aircraft Finance group, all of
the member's right, title and interest in all leases to which it is or may
from time to time be party and any leasing arrangements with respect to
such leases including (a) all rights to receive moneys due and to become
due under a lease, (b) all rights to receive proceeds of any insurance,
indemnity, warranty or guaranty as to a lease, (c) claims for damages
arising out of a default under a lease, (d) all rights under a lease with
respect to any subleases of the aircraft subject to that lease and (e) the
right to terminate a lease, to perform under a lease and to compel
performance and otherwise exercise all remedies under a lease;
(8) with respect to each member of the Aircraft Finance group, all of
the member's right, title and interest in the Servicing Agreement and all
other service agreements between any Aircraft Finance group member and a
service provider;
(9) with respect to each member of the Aircraft Finance group, all of
the member's right, title and interest in all eligible credit facilities
not consisting of a cash collateral account and swap agreements and all
rights to administer, draw upon and otherwise deal with each such eligible
credit facility and to administer and otherwise deal with each such swap
agreement;
(10) with respect to each member of the Aircraft Finance group, all of
the member's right, title and interest in the personal property identified
in a supplement to the Security Trust Agreement executed and delivered by
such member to the security trustee; and
(11) all proceeds of any and all of the foregoing.
The Collateral does not include approximately 3.27% of the amounts received
for a non-delivery of an aircraft or, if non-delivery payments are received for
more than one Aircraft, the product of approximately 0.0654 and the aggregate of
all non-delivery payments divided by the number of aircraft for which
non-delivery payments are made.
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Payments due to an event of loss are not counted for this purpose. The excluded
payments are to be paid to the Owner Trustee for distribution to the holders of
the beneficial interests.
If the Notes have not been accelerated, each member of the Aircraft Finance
group is entitled to exercise all voting and other consensual rights pertaining
to the stock and beneficial interest collateral. In doing so, the member may not
breach any other obligation and may not exercise or refrain from exercising any
such right if in its judgment that would materially and adversely affect the
value of any part of the stock and beneficial interest collateral.
GOVERNING LAW AND JURISDICTION
The Indenture and the Notes are governed by the laws of the State of New
York. Aircraft Finance and its subsidiaries have 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 the Indenture and the Notes.
REPORTS TO NOTEHOLDERS
On the second business day before each Payment Date, the administrative
agent must send to the trustee, and the trustee must then send to each holder of
Notes, a monthly report prepared by the administrative agent regarding payments
to be made on that Payment Date. The monthly report will list the following
information:
(1) Regarding 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 that
Calculation Date and the Calculation Date immediately preceding the
Payment Date; and
(c) the balances on deposit in the Expense Account, Collections
Account, any cash collateral account, any VARIG Reserve Account and
Lessee Funded Account on the Calculation Date immediately preceding that
Payment Date.
(2) Analysis of Expense Account activity balance on the preceding
Calculation Date
<TABLE>
<S> <C>
Net transfer to the Expense Account during the
period between the prior Calculation Date and the
relevant Calculation Date..........................
Payments during period between the prior
Calculation Date and the relevant Calculation
Date
-- Payments on the prior Payment Date........
-- Other payments............................
Balance on relevant Calculation Date..............
</TABLE>
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(3) Analysis of Collections Account activity
<TABLE>
<S> <C>
Balance on the preceding Calculation Date.........
Required Expense Amount (including on the
preceding Payment Date)........................
Net transfer to Lessee Funded Accounts and VARIG
Reserve Accounts during the period.............
Collections during the period.....................
Drawings under any liquidity facilities...........
Aggregate Note payments...........................
Swap payments.....................................
Repayments of drawings under liquidity
facilities.....................................
Balance on relevant Calculation Date (separately
stating the amount of cash reserve that must be
retained in the Collections Account)...........
Analysis of current Payment Date distributions....
</TABLE>
(4) Payments on the Notes
(a) Floating rate Notes (by class and, if applicable, subclass)
<TABLE>
<S> <C>
-- 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...............
-- Maturity Step-Up Interest.............
-- Registration Step-Up Interest.........
-- Additional 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>
(b) Fixed rate Notes (by class and, if applicable, subclass)
<TABLE>
<S> <C>
-- Interest rate.........................
-- 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...............................
</TABLE>
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(5) Floating rate Notes information for next interest accrual period
(by subclass)
<TABLE>
<S> <C>
LIBOR.............................................
Margin............................................
Interest rate.....................................
</TABLE>
(6) Payments per $100,000 initial outstanding principal balance of
Notes (by subclass)
<TABLE>
<S> <C>
Opening outstanding principal balance.............
Total principal payments..........................
Closing outstanding principal balance.............
Total interest....................................
Total premium.....................................
</TABLE>
After the end of each calendar year or earlier if required by law, the
administrative agent must send the trustee for delivery to each person who at
any time during that calendar year was a holder of any Notes a statement
containing the sum of the amounts calculated under items (4) and (6) above or,
if that person was a holder during only a portion of that calendar year, for the
applicable portion of that calendar year.
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BOOK-ENTRY REGISTRATION, GLOBAL CLEARANCE AND SETTLEMENT
BOOK-ENTRY REGISTRATION
The holders of Notes will hold them through The Depositary Trust Company
(in the United States), Cedel Bank, or Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System (in Europe) if they
are participants in these systems or indirectly through organizations that are
participants in these systems. Except as set forth below, the Notes are
registered in the name of Cede & Co. as the nominee for DTC. Unless and until
definitive Notes are issued, all references in this section to actions by
holders of Notes will refer to actions taken by DTC upon instructions from
participants whose securities are held by DTC (the "DTC Participants"). All
references in this Prospectus to distributions, notices, reports and statements
to you will refer to distributions, notices, reports and statements,
respectively to DTC or Cede & Co., as the registered holder of the Notes, or to
DTC Participants for distribution to you in accordance with DTC procedures.
Cedel Bank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in the names of Cedel Bank
and Morgan Guaranty Trust Company of New York, Brussels office, on the books of
their respective Depositaries which, in turn, will hold those 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 The Chase Manhattan
Bank, New York will act as depositary for Euroclear, which will be referred to
in this section as the "Depositaries".
Transfers 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 Bank and
Euroclear.
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 effected by
DTC in accordance with DTC rules on behalf of Cedel Bank or Euroclear, by its
respective Depositary. These cross-market transactions will, however, require
delivery of instructions to Cedel Bank or Euroclear by the counterparty in the
applicable system in accordance with its rules and procedures and within its
established deadlines. If the transaction meets its settlement requirements,
Cedel Bank or Euroclear 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 beneficial interests in the
global Notes 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. Any credits or
transactions in Notes settled during the processing will be reported to the
relevant Cedel Participant or Euroclear Participant on that business day. Cash
received in Cedel Bank or Euroclear as a result of sales of beneficial interests
in the global Notes by or through a Cedel Participant or Euroclear Participant
to a DTC Participant will be received with value on the DTC settlement date
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but will be available in the relevant Cedel Bank or Euroclear cash account only
as of the Business Day following settlement in DTC.
DTC
DTC is a limited purpose trust company organized under the New York Banking
Law, 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
holds 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, which eliminates
the need for physical movement of certificates. DTC Participants include
securities brokers and dealers, 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 (the "Indirect Participants").
If you are not a DTC Participant but want to purchase, sell or otherwise
transfer ownership of, or other interests in, beneficial interests in global
Notes, you can do so only through DTC Participants. Indirect Participants are
also required to effect transfers through a DTC Participant.
Payments of interest, principal and premium, on the Notes will be made to
DTC and are the responsibility of Aircraft Finance. You will receive all
distributions of interest, principal and premium on the Notes from the trustee
or a paying agent through DTC Participants and Indirect Participants.
Disbursement of these payments to DTC Participants will be the responsibility of
DTC and disbursement of payments to you 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 that payment date. Payments by DTC Participants to their
customers who own beneficial interests in the global Notes 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 that DTC Participant. So long as a Note
is registered in the name of Cede & Co., the only "Noteholder" will be Cede &
Co., as nominee for DTC and this nominee will be considered the sole owner or
holder of the Notes for all purposes under the indenture and the Notes. While so
registered, you will be permitted to exercise your rights only indirectly
through DTC and DTC Participants.
Under the rules governing DTC and its operations, DTC is required to make
book-entry transfers of beneficial interests in the global Notes among the DTC
Participants on whose behalf it acts with respect to the Notes and to receive
and transmit distributions of interest, principal and premium on the Notes. DTC
Participants and Indirect Participants similarly are required to make book-entry
transfers and receive and transmit these payments on behalf of their respective
beneficial interests in the global Notes. The DTC rules also provide a mechanism
by which you will receive payments and be able to transfer your interests.
DTC has advised Aircraft Finance that it will take any action permitted to
be taken by you in respect of each class of Notes under the Indenture only at
the direction of one or more DTC Participants to whose accounts beneficial
interests in the global Note
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representing that class of Notes is credited. Additionally, DTC has advised
Aircraft Finance that it will take these actions with respect to any percentage
of the outstanding principal amount of any class of Notes only at the direction
of and on behalf of the DTC Participants whose customers own that outstanding
principal amount. DTC may take conflicting actions with respect to different
classes of Notes to the extent that those actions are taken on behalf of DTC
Participants whose holdings include such different classes of Notes.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems and the
like for processing data 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 that it
has developed and is implementing a program so that its systems, as they relate
to the timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement of trades
within DTC 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.
DTC's ability to perform its services properly, is however, also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as DTC's direct and indirect participants and third party vendors from whom
DTC licenses software and hardware and third party vendors on whom DTC relies
for information or the provisions of services, including telecommunication and
electrical utility service providers. DTC has informed its participants and
other members of the financial community that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (a)
impress upon them the importance of such services being Year 2000 compliant and
(b) 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.
CEDEL
Distributions with respect to Notes held beneficially through Cedel Bank
will be credited to cash accounts of Cedel Participants in accordance with Cedel
Bank's rules and procedures, to the extent received by its Depositary. Cedel
Bank will take any other action permitted to be taken by you under the indenture
governing the Notes on behalf of a Cedel Participant only in accordance with its
rules and procedures and subject to its Depositary's ability to effect those
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 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
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Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes beneficially 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 you under
the indenture governing the Notes on behalf of a Euroclear Participant only in
accordance with the Terms and Conditions and subject to its Depositary's ability
to effect those actions on its behalf through DTC.
Although DTC, Cedel Bank and Euroclear have agreed to these procedures to
facilitate transfers of Notes among their respective participants, they are
under no obligation to perform or continue to perform these procedures and may
discontinue the procedures at any time by giving reasonable notice to Aircraft
Finance or the trustee.
DEFINITIVE NOTES
The Notes of any class may be issued in fully registered certificated form
(called "Definitive Notes") to you or your nominees if:
(1) Aircraft Finance advises the trustee in writing that DTC is no
longer willing or able to act as depositary for the Notes and the trustee
does not appoint a successor at Aircraft Finance's request within 90 days
of DTC's notice;
(2) Aircraft Finance, at its option, elects to terminate the
book-entry system through DTC. As long as any class of Notes is listed on
the Luxembourg Stock Exchange, Aircraft Finance will continue to clear
those Notes through a securities depository that is recognized by and
operates in accordance with the rules of the Luxembourg Stock Exchange; and
(3) after the occurrence of an Indenture Event of Default with respect
to any class of Notes, the holders of a subclass representing an
outstanding principal balance of not less than 51% of the aggregate
outstanding principal balance of Notes of that subclass advise Aircraft
Finance, the trustee and DTC through DTC Participants in writing that the
continuation of a book-entry system through DTC (or a successor depositary)
is no longer in the best interests of the holders.
If any of these events occur, the trustee is to notify the relevant holders and
to arrange for definitive Notes to be issued in exchange for the holder's
book-entry interests.
The trustee or a paying agent will make distributions of interest,
principal and any premium on any definitive Notes directly to the holders of
those Notes in whose names the definitive Notes were registered at the close of
business on the record date. The distributions will be made by check and mailed
to the address of the holder as it appears on the register maintained by the
registrar. Payments of principal and interest on any definitive Notes listed on
the Luxembourg Stock Exchange may also be made at the office of Kredietbank S.A.
Luxembourgeoise, 43, Boulevard Royal, L-2955, Luxembourg. Kredietbank is acting
as the paying agent in Luxembourg. The final payment on the definitive Notes,
however, will be made only upon presentation and surrender of the definitive
Notes at the office or agency specified in the notice of final distribution to
you or at Kredietbank's offices.
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-registrar in Luxembourg. If you transfer only part of your
holding of definitive Notes, a new definitive
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Note will be issued to the party you transferred it to in respect of the part
transferred and a new definitive Note in respect of the balance of the holding
not transferred will be issued to you and may be obtained at the office of the
co-registrar in Luxembourg. No service charge will be imposed for any
registration of transfer or exchange, but you may be required to pay a sum
sufficient to cover any tax or other governmental charge. No service charge will
be imposed for any registration of transfer or exchange, but you may be required
to pay a sum sufficient to cover any tax or other governmental charge may be
required.
You may exchange or replace a Note that is mutilated, destroyed, lost or
stolen at the offices of the trustee or the co-registrar in Luxembourg upon
presentation of the Note or satisfactory evidence of destruction, loss or theft.
An indemnity satisfactory to the trustee or co-registrar may be required at your
expense before a replacement Note will be issued. You will have to pay any tax
or other governmental charge imposed in connection with this exchange or
replacement and any other related expenses (including the fees and expenses of
the trustee and co-registrar).
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the SEC in no-action letters
issued to third parties in similar transactions, Aircraft Finance believes that
Exchange Notes issued to you in the Exchange Offer in exchange for your
Restricted Notes may be offered for resale, resold and otherwise transferred by
you, without compliance with the registration and prospectus delivery provisions
of the Securities Act. This applies, however, only if
(1) you are acquiring the Exchange Notes in the ordinary course of
your business;
(2) you are not participating, do not intend to participate and have
no arrangement or understanding with any person to participate, in a
distribution of the Exchange Notes;
(3) you are not an affiliate of Aircraft Finance; and
(4) you are not an initial purchaser who acquired Restricted Notes
directly from Aircraft Finance in the initial offering.
Aircraft Finance refers you to the "Morgan Stanley & Co. Inc." SEC No-Action
Letter available June 5, 1991, "Exxon Capital Holdings Corporation" SEC
No-Action Letter available May 13, 1988 and "Shearman & Sterling" SEC No-Action
Letter available July 2, 1993 for support of this belief.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Notes. This
Prospectus may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where Exchange Notes were acquired as a
result of market-making activities or other trading activities. Aircraft Finance
has agreed that, starting on the date of this Prospectus and ending on the close
of business on the earlier to occur of
(a) the date on which all Exchange Notes held by broker-dealers
eligible to use the Prospectus to satisfy their prospectus delivery
obligations under the Securities Act have been sold and
(b) the date 180 days after the consummation of the Exchange Offer,
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Aircraft Finance will make this Prospectus available to any broker-dealer that
requests the above documents for use in connection with any such resale. In
addition, until , 1999, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus. If this Prospectus is
amended or supplemented, that version must be used instead.
Aircraft Finance will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange 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 Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to the prevailing market prices or at negotiated prices. Any 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 broker-
dealer or the purchasers of any such Exchange Notes. Any broker-dealer that
resells Exchange 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 those Exchange Notes may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any resale of Exchange Notes and any
commission 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.
Aircraft Finance has agreed to pay all expenses of the Exchange Offer
(including the expense of one counsel for the holders of the Restricted Notes)
other than commissions or concessions of any broker-dealers. Aircraft Finance
has also agreed to indemnify the holders of the Restricted Notes (including any
broker-dealers) against specified liabilities, including liabilities under the
Securities Act.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion, in the opinion of Milbank, Tweed, Hadley & McCloy
LLP, describes the material United States federal tax consequences that result
from the purchase, ownership and disposition of Exchange Notes by U.S. Holders
and Non-U.S. Holders. It does not purport to consider all the possible tax
consequences of the purchase, ownership or disposition of the Exchange Notes,
and it is not intended to reflect the individual tax position of any holder. It
deals only with Exchange Notes held as capital assets. Except as expressly
indicated, it is addressed only to holders that purchased Notes in the original
offering at the original issue and does not deal with:
(1) holders with a special tax status or special tax situation, such
as financial institutions or dealers in securities or currencies;
(2) Notes held as a hedge against currency risks or as part of a
straddle with other investments or as part of a "synthetic security" or
other integrated investment (including a "conversion transaction")
consisting of a Note and one or more other investments; or
(3) situations in which the functional currency of the holder is not
the U.S. dollar.
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Except to the extent discussed below, this discussion is not applicable to
Non-U.S. Holders. This discussion is based upon the United States federal tax
laws and regulations now in effect and as currently interpreted. It does not
take into account possible changes in those tax laws or interpretations, all of
which may be applied retroactively. This discussion does not include any
description of the tax laws of any state or local government within the United
States or of any foreign government that may be applicable to you or the
Exchange Notes. You should consult your own tax advisors concerning the
application of the United States federal tax laws to your particular situation
as well as any consequences arising under the laws of any other taxing
jurisdiction.
You will be considered a U.S. Holder if you are
(1) a citizen or resident of the United States;
(2) a partnership, corporation or other entity created or organized in
or under the law of the United States or of any state of the United States;
(3) a trust subject to control of one or more United States persons
and the primary supervision of a United States court; or
(4) an estate the income of which is subject to United States federal
income tax regardless of its source.
If you are not a U.S. Holder you will be subject to the rules discussed
under "-- Taxation of Non-U.S. Holders."
This discussion assumes that the Notes will be characterized as
indebtedness for U.S. federal income tax purposes, and that the Notes were not
issued with original issue discount.
TAX CHARACTERIZATION OF AIRCRAFT FINANCE AS A PARTNERSHIP
Aircraft Finance received a legal opinion from Weil, Gotshal & Manges LLP
on May 5, 1999 that it is a partnership and will not be an association (or
publicly traded partnership) taxable as a corporation for United States federal
income tax purposes.
If the IRS were to successfully assert that Aircraft Finance was a publicly
traded partnership taxable as a corporation for federal income tax purposes,
Aircraft Finance would be subject to corporate income tax on its taxable income.
Aircraft Finance's taxable income would include all its income, including the
income on the leases on its 36 aircraft, any swap agreements, interest on its
accounts and gain on the sale or disposition of its aircraft. The income may
possibly be reduced by depreciation on the aircraft and interest expense on the
Exchange Notes and Initial Class D Notes, servicing and other fees, and losses
from the sale or disposition of aircraft. Any corporate income tax could
materially reduce cash available to make payments on the Notes.
TAXATION OF U.S. HOLDERS
Interest on an Exchange Note generally will be includible in your ordinary
income at the time the interest is accrued or received in accordance with your
regular method of accounting for U.S. federal income tax purposes.
Except as noted below, upon the sale, exchange or retirement of an Exchange
Note, you generally will recognize gain or loss equal to the difference between
the amount realized from that sale, exchange (other than accrued but unpaid
interest accrued between interest payment dates on the Exchange Note, which is
includible in income in accordance
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with your method of accounting as described above) and your adjusted tax basis
in the Exchange Note. Your adjusted tax basis in a Note generally will equal the
amount you paid for the Note, decreased by any principal repayments. Any gain on
the disposition of an Exchange Note will be capital gain and will generally be
U.S. source gain. You should consult your tax advisor regarding the United
States federal income tax treatment of capital gains (which may be taxed at
lower rates than ordinary income for certain non-corporate taxpayers) and losses
(the deductibility of which is subject to limitations).
An exchange of Exchange Notes for Restricted Notes will not be treated as a
taxable exchange for U.S. federal income tax purposes. Accordingly, if you
exchange your Restricted Notes for Exchange Notes you will not recognize income,
gain or loss for U.S. federal income tax purposes. Your tax basis in the
Exchange Notes will be equal to your adjusted basis in the Restricted Notes and
your holding period will include the period during which you held the Restricted
Notes.
TAXATION OF NON-U.S. HOLDERS
If you are a Non-U.S. Holder, any payments of interest (including original
issue discount), principal and premium, on the Exchange Notes to you will not be
subject to United States federal withholding tax if, in the case of interest:
(1) you do not own, actually or constructively, 10% or more of the
Capital or profits of Aircraft Finance;
(2) you are not a controlled foreign corporation related, directly or
indirectly, to Aircraft Finance through stock ownership;
(3) you are not a bank receiving interest described in Section
881(c)(3)(A) of the Internal Revenue Code; and
(4) the statement requirement described in the next sentence has been
fulfilled by you or on behalf of you.
Sections 871(h) and 881(c) of the Internal Revenue Code require that, in order
to obtain the exemption from withholding tax described in the previous sentence,
either you, or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business and that is holding an Exchange Note on your behalf, files a
statement with the withholding agent to the effect that you are not a United
States person.
Under temporary United States Treasury Regulations that apply to both
stated interest and sale or exchange proceeds if either is paid with respect to
a Note on or before December 31, 2000, this requirement will be fulfilled if:
(1) you certify on Internal Revenue Service Form W-8, under penalties
of perjury, that you are not a United States person and provide your name
and address; and
(2) any financial institution holding the Note on your behalf files a
Form W-8IMY, under penalties of perjury, stating that it has received such
a statement from you (and furnishes the withholding agent with a copy).
Recently issued final Treasury Regulations, which apply to interest
(including original issue discount) and sale or exchange proceeds paid with
respect to an Exchange Note after December 31, 2000, also provide that the
certification requirement of Sections 871(h) and 881(c) generally will be
fulfilled if beneficial owners as well as certain foreign partnerships
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(including partners of certain foreign partnerships) meet the two conditions set
forth in the preceding sentence. A beneficial owner that is a foreign estate or
trust (or a fiduciary of a foreign estate or trust ), a foreign partnership that
has entered into a withholding agreement with the IRS, or a Non-U.S. Holder
holding a Note through its United States branch will, however, be required to
provide its "taxpayer identification number" in addition to its name and address
on Form W-8BEN or Form W-8IMY, as appropriate. Foreign partnerships and their
partners should consult their tax advisors regarding possible additional
reporting requirements.
If interest or other income received with respect to an Exchange Note is
effectively connected with a United States trade or business conducted by you,
you may, although exempt from the withholding tax described in the preceding
paragraph, be subject to United States federal income tax on this interest in
the same manner as if you were a United States person. In addition, if you are a
corporation, you may be subject to a branch profits tax equal to 30% (or a lower
treaty rate) of your effectively connected earnings and profits for the taxable
year, subject to certain adjustments.
If you are a Non-U.S. Holder you will not be subject to United States
federal income tax on gain realized on the sale, exchange or other disposition
of a Note, unless (a) you are an individual who is present in the United States
for 183 days or more in the taxable year of disposition and either (1) your "tax
home" (as defined in Internal Revenue Code Section 911(d)(3)) is in the United
States (unless the gain is attributable to a fixed place of business that you
maintain in a foreign country and such income has been subject to foreign tax of
at least 10%) or (2) the gain is attributable to an office or other fixed place
of business maintained by you in the United States or (b) the gain is
effectively connected with your conduct of a trade or business in the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The trustee will be required to report annually to the IRS, and to each
holder of record of an Exchange Note, specified information, including the
holder's name, address and taxpayer identification number (either a social
security number or an employer identification number), the aggregate amount of
principal and interest paid and the amount of any tax withheld. This obligation,
however, does not apply to you if you are a corporation, tax-exempt
organization, qualified pension and profit-sharing trust, individual retirement
account or other organization specifically exempt from these rules.
If you are a U.S. Holder subject to the reporting requirements described
above and you fail to supply your correct taxpayer identification number in the
manner required by applicable law or you under-report your tax liability,
Aircraft Finance, its agents or paying agents may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal on your
Notes. This backup withholding is not an additional tax and may be credited
against your United States federal income tax liability, provided that certain
required information is furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made by Aircraft Finance or any agent of
Aircraft Finance if you are a Non-U.S. Holder and the certifications required by
Section 871(h) and 881(c) of the Code (described above) are received, provided
that Aircraft Finance or its agent does not have actual knowledge that you are a
United States person.
The Final Regulations modify the backup withholding and information
reporting procedures in certain respects for payments made after December 31,
2000. You are urged
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to consult your tax advisor regarding the application of the backup withholding
and information reporting rules.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES
If the IRS successfully asserted that one or more classes of Exchange Notes
did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in Aircraft Finance. If this were the case, Aircraft
Finance might be treated as a publicly traded partnership that would be taxable
as a corporation with the adverse consequences described above. Treatment of the
Exchange Notes as equity interests in a publicly traded partnership could have
additional adverse tax consequences to you. For example, income to foreign
investors generally would be subject to U.S. federal income tax payments, tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of
Aircraft Finance expenses.
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, or ERISA, imposes
certain requirements on persons who are fiduciaries with respect to employee
benefit plans that are subject to ERISA. A person who exercises discretionary
authority or control with respect to the management of the assets of a plan
subject to ERISA is a fiduciary of that plan for purposes of ERISA. Before
investing in a Note, a fiduciary of an ERISA plan should determine whether that
investment is permitted under the plan's governing instruments and is
appropriate for the plan in view of the overall investment policy of the plan
and the composition and diversification of its portfolio, taking into account
the limited liquidity of the Notes.
Other provisions of ERISA and the Internal Revenue Code prohibit specified
transactions that directly or indirectly involve the assets of an ERISA plan and
other types of retirement arrangements (including individual retirement
accounts) and persons who have specified relationships to the plan. In
particular, a sale or exchange of property or an extension of credit between a
plan and a related person might constitute a prohibited transaction unless an
exemption applies. Each of Aircraft Finance and GECAS may be a related person
with respect to a plan that purchases Notes. Any plan that proposes to purchase
Notes should determine that its purchase and holding of Notes will not give rise
to a non-exempt prohibited transaction.
Statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Internal Revenue Code may be available to a plan that
is purchasing the Notes. These exemptions might be available for a purchase of
Notes:
(1) by a collective investment fund maintained by a bank;
(2) by an insurance company pooled separate account;
(3) by the general account plan of an insurance company;
(4) that is directed by an independent qualified professional asset
manager; or
(5) that is directed by an in-house asset manager
if all of the applicable terms and conditions of the exemption are satisfied.
Governmental plans and certain church plans (as defined under ERISA) are
not be subject to the prohibited transaction rules of ERISA and the Internal
Revenue Code. These plans may, however, be subject to federal, state or local
laws or regulations that may affect their investment in the Notes. Any fiduciary
of such a governmental or church plan considering a purchase of the Notes should
determine whether the purchase and holding of Notes will result in a violation
of any such laws or regulations.
EACH PURCHASER OF A NOTE THAT IS NOT A CLASS D NOTE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED THAT EITHER (a) NO ASSETS OF A PLAN HAVE BEEN USED TO
PURCHASE THAT NOTE OR (b) THE USE OF PLAN ASSETS TO PURCHASE AND HOLD THAT NOTE
WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE
INTERNAL REVENUE CODE.
SPECIAL PROVISIONS FOR THE CLASS D NOTES AND THE BENEFICIAL INTERESTS OF
AIRCRAFT FINANCE
If a plan acquires a Class D Note or an equity interest in Aircraft
Finance, there are no assurances that the underlying assets of Aircraft Finance
would not constitute plan
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assets of that plan. As a result, no plan may be used to acquire or hold any
Class D Note or a beneficial interest in Aircraft Finance.
Each purchaser of a Class D Note will be required to represent and warrant
that no plan assets have been used to purchase those Notes and to agree not to
transfer a Class D Note to any person using plan assets to acquire or hold those
Notes. Any attempt to sell or transfer a Class D Note to any person utilizing
plan assets will be null and void.
THE FOREGOING DISCUSSION IS GENERAL IN NATURE AND IS NOT INTENDED TO BE
ALL-INCLUSIVE. ANY FIDUCIARY OF A PLAN, GOVERNMENTAL PLAN OR CHURCH PLAN
CONSIDERING THE PURCHASE AND HOLDING OF THE NOTES SHOULD CONSULT WITH ITS LEGAL
ADVISORS REGARDING THE CONSEQUENCES OF PURCHASING AND HOLDING ANY NOTES.
LEGAL MATTERS
The legality of the Exchange Notes will be passed upon for Aircraft Finance
by Milbank, Tweed, Hadley & McCloy LLP, New York, counsel to Aircraft Finance
and by Morris, James, Hitchens & Williams, Wilmington, Delaware, special
Delaware counsel to Aircraft Finance.
LUXEMBOURG LISTING AND GENERAL INFORMATION
(1) Aircraft Finance confirms that there has been no material adverse
change in its financial condition since the date of its formation on April 13,
1999.
(2) Aircraft Finance will deposit a legal notice relating to the issue of
the Exchange Notes with the Chief Registrar of the District Court in Luxembourg
(Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg) where such
documents may be examined and copies obtained. This is in connection with any
application to list the Exchange Notes on the Luxembourg Stock Exchange.
(3) The Exchange Notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with Common Codes of 009917322, 009917381,
009917411, and 009917454 for the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes, and the Class C Notes, respectively.
(4) The Exchange Notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with ISINs of US009341AL20, US009341AM03,
US009341AN85, and US009341AP34 for the Class A-1 Notes, the Class A-2 Notes, the
Class B Notes, and the Class C Notes, respectively.
(5) The Exchange Notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with CUSIP numbers 009341AL2, 009341AM0,
009341AN8, and 009341AP3 for the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes, and the Class C Notes, respectively.
(6) All documents mentioned in this Prospectus that have been prepared in
connection with the Exchange Offer will be available at the office of the
Luxembourg Paying Agent, so long as any of the Exchange Notes are outstanding.
(7) Aircraft Finance has obtained or will obtain all necessary consents,
approvals and authorizations in connection with the Exchange Offer.
(8) Aircraft Finance is not involved in litigation or arbitration
proceedings relating to claims on amounts which are material in the context of
the issuance of Exchange Notes,
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or, so far as Aircraft Finance is aware, is any litigation or arbitration
involving Aircraft Finance pending or threatened.
(9) The listing agent will notify the Luxembourg Stock Exchange promptly of
any change in the outstanding principal amounts of the Exchange Notes.
Information relating to changes in the outstanding principal amount of the
Exchange Notes will be made available at the offices of the Luxembourg paying
agent in the City of Luxembourg.
(10) As long as any of the Exchange Notes are outstanding, copies of the
monthly, quarterly and annual reports described in "Reports to Holders", and
copies of the annual appraisals described in "Description of the
Notes -- Operating Covenants -- Appraisal of Aircraft" will be made available at
the offices of the Luxembourg paying agent in Luxembourg, where copies may be
obtained upon request.
EXPERTS
The consolidated balance sheet as of May 5, 1999 included in this
Prospectus has been so included in reliance on the report of the
PricewaterhouseCoopers LLP, independent certified public accountants, given on
the authority of said firm as experts in auditing and accounting.
Valuations of the initial aircraft included or to be included in Aircraft
Finance's portfolio have been made by three expert aircraft appraisers: Aircraft
Information Services, Inc., BK Associates, Inc. and Morten Beyer & Agnew, Inc.
These valuations are discussed in detail elsewhere in this Prospectus and are
included in reliance upon the authority of such firms as experts in giving
appraisals.
The section entitled "The Commercial Aircraft Industry" in this Prospectus
is based upon information either compiled or produced by Simat, Helliesen &
Eichner and is included on reliance upon the authority of that firm as an
expert, although Simat, Helliesen & Eichner does not take responsibility for
factual inaccuracies in the material provided to it by the outside sources
referenced in that section.
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INDEX TO FINANCIAL STATEMENTS
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheet.................................. F-3
Notes to Consolidated Balance Sheet......................... F-4
</TABLE>
F-1
<PAGE> 161
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Trustees
In our opinion, the accompanying consolidated balance sheet presents
fairly, in all material respects, the financial position of Aircraft Finance
Trust and Subsidiaries at May 5, 1999, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Company's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Ft. Lauderdale, Florida
June 22, 1999
F-2
<PAGE> 162
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MAY 5, 1999
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 57,986
Restricted cash............................................. 21,140
Rents receivable............................................ 2,590
Aircraft under operating leases............................. 1,196,087
Other assets................................................ 465
----------
Total assets........................................... $1,278,268
==========
LIABILITIES AND BENEFICIAL INTERESTHOLDERS' EQUITY
Deferred rental income...................................... 9,038
Security and other deposits................................. 21,143
Notes payable:
Class A-1................................................. 512,500
Class A-2................................................. 400,000
Class B................................................... 126,500
Class C................................................... 106,000
Class D................................................... 64,000
----------
1,209,000
----------
Total liabilities...................................... 1,239,181
----------
Commitments and contingencies (Note 9)...................... --
Beneficial interestholders' equity:
Beneficial interest.................................... 39,087
----------
Total liabilities and beneficial interestholders'
equity................................................ $1,278,268
==========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE> 163
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
MAY 5, 1999
NOTE 1 -- ORGANIZATION
Aircraft Finance Trust ("Aircraft Finance") is a special-purpose statutory
business trust that was formed on April 13, 1999 under the laws of Delaware.
Aircraft Finance and its two subsidiaries (collectively "Aircraft Finance
group") were formed to conduct certain limited activities, including acquiring,
financing, re-financing, owning, leasing, re-leasing, selling, maintaining and
modifying commercial aircraft. All of the beneficial interest of the Aircraft
Finance group is owned by UniCapital AFT-I, Inc. and UniCapital AFT-II, Inc.,
both wholly-owned indirect subsidiaries of UniCapital Corporation. The Trust
Agreement provides for four trustees, an Owner Trustee and three Controlling
Trustees. The Owner Trustee will maintain the books and records of Aircraft
Finance. The three Controlling Trustees have the authority to manage the
property and affairs of Aircraft Finance under the Trust Agreement. One of the
Controlling Trustees, the Equity Trustee, was appointed by the beneficial
interestholders, while the other two Controlling Trustees are independent of the
beneficial interestholders. Aircraft Finance does not have any officers or
employees. Aircraft Finance has contracted with certain third parties to provide
aircraft servicing and lease administration, administrative and accounting
services and financial and capital markets advisory services.
On May 5, 1999, Aircraft Finance group completed a securitization
transaction in which it received proceeds from a private placement offering of
notes and simultaneously paid for 36 commercial jet aircraft to be acquired from
General Electric Capital Corporation and certain of its affiliates (together the
"Seller"). The Aircraft Finance group's obligations, including its debt
obligations, are not obligations of, or guaranteed by, the Seller, UniCapital
AFT-I, Inc., UniCapital AFT-II, Inc., UniCapital Corporation or any of its other
subsidiaries, or any person other than the Aircraft Finance group.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated balance sheet has been prepared in accordance
with generally accepted accounting principles and includes the accounts of
Aircraft Finance and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. While management believes that the estimates and related assumptions
used in the preparation of the balance sheet are appropriate, actual results
could differ from those estimates. Significant estimates are made in the
assessment of the collectibility of receivables, depreciable lives and estimated
salvage values of leased aircraft.
F-4
<PAGE> 164
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
CASH AND CASH EQUIVALENTS
The Aircraft Finance group classifies highly liquid investments with
original maturities of three months or less from the date of purchase as cash
equivalents.
OPERATING LEASES
Aircraft under operating leases are recorded at cost and depreciated on a
straight-line basis over the estimated lives to their estimated salvage value.
Generally, aircraft and aircraft equipment are depreciated over estimated useful
lives of 30 years from the date of manufacture to a 15% estimated salvage value.
The Aircraft Finance group's estimates are reviewed periodically to ensure
continued appropriateness.
Revenue under operating leases is recognized as rental income on a
straight-line basis over the lease term.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"), the recognition of an impairment loss for an asset
held for use is required when the estimate of undiscounted future cash flows
expected to be generated by the asset is less than its carrying amount.
Measurement of an impairment loss is based on the fair value of the asset. Fair
value reflects the underlying economic value of the aircraft, including 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. The fair value of the
assets is based on independent valuations of the aircraft and/or estimates of
discounted future cash flows. SFAS 121 also requires that long-lived assets to
be disposed of be reported at the lower of the carrying amount or fair value
less estimated disposal costs.
INCOME TAXES
The operating results of Aircraft Finance group are included in the tax
return of their beneficial interestholders. As such, Aircraft Finance group is
not subject to U.S. Federal, state and local income taxes.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, as defined in Statement of Financial
Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments", used by the Aircraft Finance group
include interest rate swaps. The Aircraft Finance group utilizes interest rate
swaps to synthetically alter the repricing characteristics of variable-rate
interest obligations, effectively allowing the Aircraft Finance group to pay a
fixed interest rate on certain notes, reducing its exposure to unfavorable
variations in the LIBOR rate charged on those variable rate interest
obligations. Risks arise from the use of such instruments from the possible
inability of the counterparties to meet the terms of their contracts and from
market movements in values and interest rates. The Aircraft Finance group does
not enter into interest rate swaps for trading purposes.
F-5
<PAGE> 165
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
In accounting for interest rate swaps, the net differential to be paid or
received on the interest rate swap is incurred as a yield adjustment to the
related liability over the life of the swap agreement. If the related liability
is disposed of, the swap agreement is marked to market. Thereafter, the interest
rate swap is accounted for in the financial statements at its fair value with
any unrealized gains and losses recognized in the period incurred. If the
interest rate swap agreement is terminated, the gain or loss is deferred and
amortized over the remaining life of the related liability.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires disclosure of the fair value of
financial instruments, for both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. The carrying value of the Aircraft Finance group's financial instruments
at May 5, 1999 approximates fair value due, in part, to their variable-interest
rate characteristics and due further to the completion of the offering of the
notes under the market conditions of that same day.
NOTE 3 -- CASH BALANCES
Aircraft Finance maintains various cash accounts as required by the Trust
Indenture, including a Rental Account, a Collections Account, an Expense
Account, the Lessee Funded Accounts and restricted reserve accounts related to
one lessee.
All payments under the leases are deposited into the Rental Account and
subsequently swept to the Collection Account within one business day of receipt.
Aircraft Finance maintains a cash reserve balance in the Collection Account in
an amount determined monthly in accordance with the Trust Indenture. At May 5,
1999, the cash reserves included in the Collection Account were $52 million. The
cash reserves are intended to provide a source of liquidity for the payment of
expenses, swap payments and interest on certain classes of notes. Expenses of
Aircraft Finance are generally paid out of the Expense Account which is funded
through transfers from the Collections Account.
The Lessee Funded Accounts and certain lessee reserve accounts are not
available for general use. Security deposits and maintenance reserve payments
from lessees that are required to be segregated from other funds are deposited
into the Lessee Funded Accounts. Certain lessee reserve accounts consists of a
deposit from the Seller of the aircraft that can be drawn upon by Aircraft
Finance should such lessee be delinquent on any of its rent payments. The
balances in the Lessee Funded Accounts and the one lessee reserve account at May
5, 1999 were $14.39 million and $6.75 million, respectively.
NOTE 4 -- AIRCRAFT UNDER OPERATING LEASES
On May 5, 1999, the Aircraft Finance group purchased 36 commercial jet
aircraft from General Electric Capital Corporation and certain of its
subsidiaries (together the "Seller") having an aggregate cost of $1,196 million
pursuant to a Master Aircraft Purchase Agreement. The Aircraft Finance group
financed these purchases primarily through the net proceeds from the Aircraft
Finance group's private placement of asset-backed notes and proceeds from the
issuance of beneficial interests.
F-6
<PAGE> 166
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
All aircraft are compliant with Stage 3 noise levels set out in the United
States Federal Aviation Regulations. An analysis of the various lessee
expiration periods of the aircraft under operating leases is as follows at May
5, 1999:
<TABLE>
<S> <C>
On lease for a further period of:
More than five years...................................... 4
From one to five years.................................... 28
Less than one year........................................ 4
---
Total aircraft portfolio.................................... 36
===
</TABLE>
If the Seller is unable to deliver any of the 36 aircraft on or before
December 1, 1999, the Seller must deliver a substitute aircraft satisfying
certain conditions or repurchase the undelivered aircraft. Any proceeds received
from the Seller for repurchase of such undelivered aircraft will be applied
towards principal reduction of the notes.
At May 5, 1999, future scheduled minimum lease contract payments to be
received under operating leases for the years ended December 31, are as follows
(dollars in thousands):
<TABLE>
<S> <C>
1999 (May 5 -- December 31)................................. $ 86,148
2000........................................................ 116,563
2001........................................................ 113,993
2002........................................................ 103,269
2003........................................................ 80,422
Thereafter.................................................. 97,837
--------
Total....................................................... $598,232
========
</TABLE>
Aircraft Finance group may acquire additional aircraft and related leases
from the Seller, UniCapital Corporation or their affiliates using proceeds from
the issuance of additional notes and equity. Any such acquisition of additional
aircraft by Aircraft Finance group will be subject to the terms of the Trust
Indenture and will require written confirmation from the rating agencies.
NOTE 5 -- NOTES PAYABLE
On May 5, 1999 (the "Initial Closing Date"), the Aircraft Finance group
completed a private placement offering of $1,209 million of securitized notes
(the "Initial Notes") on a basis exempt from registration under the Securities
Act of 1933, as amended. The Aircraft Finance group utilized the proceeds from
the Initial Notes as payment for the acquisition of 36 commercial jet aircraft.
Underwriting and certain other issuance related costs incurred in connection
with the offering were paid by the Seller.
The repayment terms of each class of Initial Notes are such that certain
principal amounts are expected to be repaid on dates which are based on certain
operating assumptions (the "Expected Final Payment Date") or refinanced through
the issuance of new notes, but in any event are ultimately due for repayment on
specified final maturity
F-7
<PAGE> 167
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
dates (the "Final Maturity Date"). The Expected Final Payment Dates, Final
Maturity Dates and interest rates applicable to each class of the Initial Notes
are listed as follows (dollars in thousands):
<TABLE>
<CAPTION>
INITIAL EXPECTED FINAL FINAL
CLASS OF NOTE PRINCIPAL AMOUNT INTEREST RATE PAYMENT DATE MATURITY DATE
- ------------- ---------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Class A-1............ $ 512,500 LIBOR + 0.48% May 15, 2004 May 15, 2024
Class A-2............ 400,000 LIBOR + 0.50% June 15, 2008 May 15, 2024
Class B.............. 126,500 LIBOR + 1.15% May 15, 2016 May 15, 2024
Class C.............. 106,000 8.00% July 15, 2016 May 15, 2024
Class D.............. 64,000 11.00% August 15, 2016 May 15, 2024
----------
$1,209,000
==========
</TABLE>
If the Class A-1 Notes are not repaid on or before their Expected Final
Payment Date, such class of notes will accrue interest thereafter at the stated
interest rate plus 0.50% per annum ("Maturity Step-Up Interest").
Aircraft Finance group is obligated to use its best efforts to consummate
an exchange offer (the "Exchange Offer") pursuant to which the Initial Notes,
other than Class D Notes, would be exchanged for substantially similar debt
securities issued pursuant to an effective registration statement under the
Securities Act of 1933. If the Exchange Offer is not consummated on or before
January 30, 2000, the Initial Notes will accrue interest at the stated interest
rate, plus 0.50% per annum until the date that the Exchange Offer is
consummated.
Aircraft Finance group has the right to make an optional redemption of any
Notes. Should Aircraft Finance choose to exercise an early redemption of any of
the Notes, it may be required to pay a redemption premium as required by the
Trust Indenture.
The dates on which principal repayments on the notes will actually occur
will depend on the cash flows generated by the rental income from the Aircraft
Finance group's portfolio of aircraft, Aircraft Finance group's ability to
refinance any or all of the notes and the amount of operating costs incurred in
the ordinary course of business. Amounts received by the Aircraft Finance group
and available for distribution are paid in accordance with the priorities
specified in the Trust Indenture.
NOTE 6 -- DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE SWAPS
At May 5, 1999, the Aircraft Finance group was a party to five interest
rate swap agreements which it entered into on May 5, 1999. Under the agreements,
the Aircraft Finance group will pay a fixed rate of interest on the notional
amount to the counterparty and, in turn, the counterparty will pay the Aircraft
Finance group a rate of interest on the notional amount based on LIBOR. On May
5, 1999, the fair values of these interest rate swaps was zero as the agreements
became effective under the market conditions of that same day.
F-8
<PAGE> 168
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The following table presents, as of May 5, 1999, a summary of the terms of
the Aircraft Finance group's interest rate swap agreements (dollars in
thousands):
<TABLE>
<CAPTION>
RATE TO BE RATE TO BE
FIXED PAID BY RECEIVED BY
NOTIONAL AIRCRAFT FINANCE AIRCRAFT FINANCE
AMOUNT GROUP GROUP MATURITY DATE
- -------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
$ 80,000 5.23% LIBOR April 15, 2000
60,000 5.50% LIBOR January 15, 2002
175,000 5.56% LIBOR October 15, 2002
345,000 5.65% LIBOR January 15, 2004
230,000 5.71% LIBOR November 15, 2004
</TABLE>
NOTE 7 -- NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities", which is effective for
fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and it
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of such derivatives
will vary based on the intended use of the derivative. The Aircraft Finance
group plans to adopt SFAS 133 beginning in the year 2001. Adoption of SFAS 133
is not expected to have a significant impact on Aircraft Finance group's results
of operations, cash flows or financial position.
NOTE 8 -- RELATED PARTY
On May 5, 1999, UniCapital Corporation (parent company of the beneficial
interestholders) purchased approximately $3.8 million of the Class D Notes.
One of the three Controlling Trustees, the Equity Trustee, is an employee
of UniCapital Air Group, Inc. a wholly-owned subsidiary of UniCapital
Corporation and the parent company of UniCapital AFT-I, Inc. and UniCapital
AFT-II, Inc. The Equity Trustee has the ability to exert certain influence over
the operations of Aircraft Finance group including that the acquisition of
additional aircraft by Aircraft Finance and the terms of any related financing
need only be approved by the Equity Trustee. Further, any sale of any aircraft,
decisions requiring Aircraft Finance's approval under the Servicing Agreement
with GECAS or the agreement with the administrative agent and the reduction of
any required level of reserves must be approved the Equity Trustee and at least
one of the Independent Controlling Trustees.
F-9
<PAGE> 169
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
In accordance with the terms of a servicing agreement (the "Servicing
Agreement"), GE Capital Aviation Services, Limited, ("GECAS") is performing
certain aircraft related services with respect to the Aircraft Finance group's
aircraft portfolio. Such activities include the collection of rents and other
amounts due from lessees, the monitoring of maintenance, insurance and other
obligations under the aircraft leases, the enforcement of rights against the
lessees, the remarketing of aircraft for re-lease or sale and the performance of
other specified aircraft-related services. In accordance with the Servicing
Agreement, fees payable to GECAS by Aircraft Finance include base fees and fees
calculated as a percentage of lease rentals received, in addition to certain
incentive based fees.
The Servicing Agreement expires on the latter of (i) the payment in full of
all amounts due on the notes and other similar obligations and all amounts due
to the holders of beneficial interests in Aircraft Finance and (ii) the date on
which Aircraft Finance and its subsidiaries cease to own any aircraft. Each
party has the right to terminate the Servicing Agreement under specified
circumstances.
Additionally, Aircraft Finance has contracted with third parties to provide
administrative, financial and capital markets advisory and trust services.
NOTE 10 -- CONCENTRATION OF CREDIT RISK
Credit risk with respect to operating lease receivables is generally
diversified due to the number of lessees comprising the Aircraft Finance group's
customer base and the different geographic areas in which they operate. At May
5, 1999, the Aircraft Finance group had leased aircraft to 23 lessees in 13
countries. Also, on May 5, 1999, nine of the aircraft were being leased to
lessees domiciled in certain emerging markets, including those located in
Eastern Europe, the Middle East, Latin America and Asia. The exposure of the
Aircraft Finance group's aircraft to particular countries and customers is
managed partly through concentration limits and through obtaining deposits from
lessees and certain cash reserves.
At May 5, 1999, Aircraft Finance group held cash reserves of $6.75 million
that are available to fund delinquent rentals and other payments due from one
certain lessee. Such amounts are not available for general use. Any unused
reserve amount must be returned to the Sellers at lease expiration.
F-10
<PAGE> 170
APPENDIX 1
INDEX OF SELECTED DEFINED TERMS
<TABLE>
<S> <C>
Accounts.................................................... 135
Additional Interest......................................... 98
Additional Notes............................................ 103
Additional Servicing Fees................................... 75
Adjusted Base Value......................................... 100
Adjusted Portfolio Value.................................... 100
Administrative Agent........................................ 113
Affiliate................................................... 114
Aircraft Agreement.......................................... 134
Aircraft Purchase Account................................... 121
Allowed Restructuring....................................... 117
Applicable Percentage....................................... 105
Assumed Portfolio Value..................................... 100
Assumed Principal Balance................................... 105
Assumed Principal Payments.................................. 105
Basic Terms Modification.................................... 133
Calculation Date............................................ 100
Collateral.................................................. 137
Collateral Value............................................ 88
Collections................................................. 135
Collections Account......................................... 134
Concentration Default....................................... 121
Controlling Party........................................... 131
Controlling Trustees........................................ 71
Cure Amounts................................................ 97
Defeasance/Redemption Account............................... 134
Depreciation Factor......................................... 100
Encumbrance................................................. 114
Equity Trustee.............................................. 71
Exchange Agent.............................................. 40
Exchange Notes.............................................. i
Exchange Offer.............................................. 30
Expected Final Payment Date................................. 2
Expense Account............................................. 134
Extended Pool Factor........................................ 102
Final Maturity Date......................................... 2
Indebtedness................................................ 118
</TABLE>
<PAGE> 171
<TABLE>
<S> <C>
Indenture Event of Default.................................. 129
Independent Controlling Trustees............................ 71
Interest Amount............................................. 97
Junior Note Blockage Amount................................. 111
Lessee Funded Account....................................... 134
Master Aircraft Purchase Agreement.......................... 42
Maturity Step-Up Interest................................... 98
Mezzanine Blockage Amount................................... 111
Minimum Class Percentage.................................... 99
Minimum Principal Payment Amount............................ 99
Minimum Target Principal Balance............................ 99
Modification Payment........................................ 122
Net Sale Proceeds........................................... 121
Non-Trustee Account......................................... 135
Note Account................................................ 134
Note Target Price........................................... 120
Optional Redemption......................................... 104
Owner Trustee Account....................................... 134
Ownership Interests......................................... 114
Payment Dates............................................... 3
Permitted Additional Aircraft Acquisition................... 124
Permitted Encumbrance....................................... 114
Pool Factor................................................. 102
Premium Sale................................................ 101
Projected Principal Payment Amounts......................... 105
Redemption Premiums......................................... 105
Redemption Price............................................ 104
Refinancing Account......................................... 134
Refinancing Notes........................................... 103
Registration Step-Up Interest............................... 98
Rental Accounts............................................. 134
Restricted Notes............................................ i
Sale Premium................................................ 101
Scheduled Class Percentage.................................. 101
Scheduled Principal Payment Amount.......................... 101
Scheduled Target Principal Balance.......................... 101
Senior Note Blockage Amount................................. 111
Senior Trustee.............................................. 131
Servicing Agreement......................................... 72
Significant Subsidiary...................................... 130
Subordinate Note Blockage Amount............................ 111
</TABLE>
<PAGE> 172
<TABLE>
<S> <C>
Supplemental Class Percentage............................... 100
Supplemental Principal Payment Amount....................... 100
Supplemental Target Principal Balance....................... 100
Treasury Yield.............................................. 106
</TABLE>
<PAGE> 173
APPENDIX 2
AIRCRAFT TYPES DATA(1)
<TABLE>
<CAPTION>
STAGE 3
NARROW/ TYPICAL NO. & MFR OF NOISE PRODUCTION CURRENT ON NO. OF
TYPE AND VARIANT WIDEBODY SEATS ENGINES COMPLIANCE YEARS FLEET ORDER OPERATORS
- ---------------- -------- ------- ------------ ---------- ---------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Airbus A310-300......... Wide 220 2 X GE/PW Yes 1986- 163 6 41
Airbus A320-200......... Narrow 150 2 X CFM/IAE Yes 1988- 667 416 77
Boeing 737-300.......... Narrow 130 2 X CFM Yes 1984- 1043 25 105
Boeing 737-400.......... Narrow 150 2 X CFM Yes 1988- 472 9 61
Boeing 767-200ER........ Wide 220 2 X GE/PW Yes 1984- 96 10 25
Boeing 767-300ER........ Wide 250 2 X GE/PW/RR Yes 1988- 376 60 58
McDonnell Douglas
DC-10-30.............. Wide 280 3 X GE Yes 1972-1988 129 0 31
McDonnell Douglas
MD-83(2).............. Narrow 150 2 X PW Yes 1985- 255 26 28
</TABLE>
- -------------------------
SOURCE: AIRCLAIMS CASE DATABASE
(1) Data as of January 14, 1999.
(2) Boeing has announced that production of this type is expected to end in
1999.
<PAGE> 174
APPENDIX 3
MONTHLY GROSS REVENUES BASED ON THE NOTE PAYMENT ASSUMPTIONS
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
June 1999............ 15,425,023
July 1999............ 10,734,539
August 1999.......... 10,734,539
September 1999....... 12,534,539
October 1999......... 10,734,539
November 1999........ 10,685,539
December 1999........ 12,435,539
January 2000......... 10,562,539
February 2000........ 10,562,539
March 2000........... 11,762,539
April 2000........... 10,562,539
May 2000............. 11,234,539
June 2000............ 11,284,539
July 2000............ 11,357,539
August 2000.......... 11,357,539
September 2000....... 11,357,539
October 2000......... 11,357,539
November 2000........ 11,285,539
December 2000........ 11,235,539
January 2001......... 11,162,539
February 2001........ 11,162,539
March 2001........... 11,162,539
April 2001........... 11,162,539
May 2001............. 11,234,539
June 2001............ 11,284,539
July 2001............ 11,357,539
August 2001.......... 11,357,539
September 2001....... 11,357,539
October 2001......... 11,357,539
November 2001........ 11,285,539
December 2001........ 11,235,539
January 2002......... 11,235,539
February 2002........ 11,235,539
March 2002........... 11,235,539
April 2002........... 11,221,990
May 2002............. 11,292,539
June 2002............ 11,285,383
July 2002............ 11,275,706
August 2002.......... 11,275,706
September 2002....... 11,222,997
October 2002......... 11,222,997
November 2002........ 11,150,997
December 2002........ 11,150,997
January 2003......... 11,150,997
February 2003........ 11,150,997
March 2003........... 11,150,997
April 2003........... 11,150,997
May 2003............. 11,219,022
June 2003............ 11,219,022
July 2003............ 11,219,022
August 2003.......... 11,219,022
September 2003....... 11,219,022
October 2003......... 11,219,022
November 2003........ 11,143,254
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
December 2003........ 11,143,254
January 2004......... 11,143,254
February 2004........ 11,143,254
March 2004........... 11,143,254
April 2004........... 11,149,932
May 2004............. 11,185,932
June 2004............ 11,202,932
July 2004............ 11,202,932
August 2004.......... 11,202,932
September 2004....... 11,202,932
October 2004......... 11,184,622
November 2004........ 11,184,622
December 2004........ 11,184,622
January 2005......... 11,184,622
February 2005........ 11,184,622
March 2005........... 11,184,622
April 2005........... 11,184,622
May 2005............. 11,172,784
June 2005............ 11,172,784
July 2005............ 11,172,784
August 2005.......... 11,172,784
September 2005....... 11,172,784
October 2005......... 11,172,784
November 2005........ 11,172,784
December 2005........ 11,172,784
January 2006......... 11,172,784
February 2006........ 11,172,784
March 2006........... 11,172,784
April 2006........... 11,172,784
May 2006............. 11,172,784
June 2006............ 11,172,784
July 2006............ 11,172,784
August 2006.......... 11,172,784
September 2006....... 11,172,784
October 2006......... 11,172,784
November 2006........ 11,172,784
December 2006........ 11,172,784
January 2007......... 11,172,784
February 2007........ 11,172,784
March 2007........... 11,172,784
April 2007........... 11,172,784
May 2007............. 11,172,784
June 2007............ 11,115,284
July 2007............ 11,115,284
August 2007.......... 11,115,284
September 2007....... 11,057,784
October 2007......... 11,038,434
November 2007........ 11,038,434
December 2007........ 11,038,434
January 2008......... 11,038,434
February 2008........ 11,038,434
March 2008........... 11,038,434
April 2008........... 11,038,434
May 2008............. 10,930,294
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
June 2008............ 10,901,654
July 2008............ 10,901,654
August 2008.......... 10,901,654
September 2008....... 10,901,654
October 2008......... 10,901,654
November 2008........ 10,839,871
December 2008........ 10,839,871
January 2009......... 10,839,871
February 2009........ 10,839,871
March 2009........... 10,839,871
April 2009........... 10,796,471
May 2009............. 10,748,871
June 2009............ 10,723,796
July 2009............ 10,723,796
August 2009.......... 10,723,796
September 2009....... 10,723,796
October 2009......... 10,662,683
November 2009........ 10,662,683
December 2009........ 10,662,683
January 2010......... 10,662,683
February 2010........ 10,662,683
March 2010........... 15,610,465
April 2010........... 10,188,587
May 2010............. 10,050,587
June 2010............ 10,050,587
July 2010............ 10,050,587
August 2010.......... 10,050,587
September 2010....... 10,050,587
October 2010......... 10,050,587
November 2010........ 10,050,587
December 2010........ 10,050,587
January 2011......... 10,050,587
February 2011........ 10,050,587
March 2011........... 10,050,587
April 2011........... 10,050,587
May 2011............. 10,050,587
June 2011............ 10,050,587
July 2011............ 10,050,587
August 2011.......... 10,050,587
September 2011....... 10,050,587
October 2011......... 9,871,885
November 2011........ 9,871,885
December 2011........ 14,074,953
January 2012......... 9,752,437
February 2012........ 9,752,437
March 2012........... 15,087,769
April 2012........... 9,605,321
May 2012............. 9,605,321
June 2012............ 9,605,321
July 2012............ 9,605,321
August 2012.......... 24,425,100
September 2012....... 9,239,201
October 2012......... 9,174,701
November 2012........ 9,006,701
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
December 2012........ 9,005,340
January 2013......... 9,005,340
February 2013........ 9,005,340
March 2013........... 15,995,768
April 2013........... 8,823,815
May 2013............. 8,737,895
June 2013............ 8,651,975
July 2013............ 8,651,975
August 2013.......... 8,651,975
September 2013....... 8,651,975
October 2013......... 8,651,975
November 2013........ 8,651,975
December 2013........ 8,651,975
January 2014......... 8,651,975
February 2014........ 8,651,975
March 2014........... 8,651,975
April 2014........... 8,494,506
May 2014............. 8,410,506
June 2014............ 8,285,613
July 2014............ 8,230,828
August 2014.......... 8,193,203
September 2014....... 8,193,203
October 2014......... 12,307,889
November 2014........ 8,051,625
December 2014........ 7,962,254
January 2015......... 7,962,254
February 2015........ 7,962,254
March 2015........... 7,962,254
April 2015........... 7,893,458
May 2015............. 7,556,054
June 2015............ 7,556,054
July 2015............ 7,556,054
August 2015.......... 7,556,054
September 2015....... 7,501,479
October 2015......... 7,501,479
November 2015........ 7,441,136
December 2015........ 7,441,136
January 2016......... 7,441,136
February 2016........ 7,441,136
March 2016........... 7,441,136
April 2016........... 7,441,136
May 2016............. 11,697,857
June 2016............ 7,309,986
July 2016............ 7,309,986
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
August 2016.......... 23,458,641
September 2016....... 6,879,586
October 2016......... 16,812,438
November 2016........ 11,482,516
December 2016........ 6,124,856
January 2017......... 6,124,856
February 2017........ 17,676,742
March 2017........... 5,868,179
April 2017........... 10,034,720
May 2017............. 5,663,112
June 2017............ 5,663,112
July 2017............ 5,663,112
August 2017.......... 5,663,112
September 2017....... 5,663,112
October 2017......... 5,663,112
November 2017........ 5,415,462
December 2017........ 14,469,414
January 2018......... 5,109,800
February 2018........ 10,297,128
March 2018........... 4,928,375
April 2018........... 4,928,375
May 2018............. 4,928,375
June 2018............ 4,928,375
July 2018............ 4,928,375
August 2018.......... 4,928,375
September 2018....... 4,928,375
October 2018......... 4,928,375
November 2018........ 4,928,375
December 2018........ 4,928,375
January 2019......... 4,928,375
February 2019........ 4,928,375
March 2019........... 4,928,375
April 2019........... 4,579,871
May 2019............. 4,579,871
June 2019............ 4,492,528
July 2019............ 4,323,028
February 2020........ 4,034,123
March 2020........... 4,034,123
April 2020........... 4,034,123
May 2020............. 3,669,205
June 2020............ 3,669,205
July 2020............ 3,669,205
August 2020.......... 3,669,205
September 2020....... 3,580,705
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
October 2020......... 3,580,705
November 2020........ 3,505,276
December 2020........ 3,505,276
January 2021......... 3,505,276
February 2021........ 3,505,276
March 2021........... 3,505,276
April 2021........... 3,505,276
May 2021............. 3,505,276
June 2021............ 3,505,276
July 2021............ 3,505,276
August 2021.......... 3,505,276
September 2021....... 8,542,726
October 2021......... 3,337,606
November 2021........ 3,337,606
December 2021........ 19,088,646
January 2022......... 7,903,751
February 2022........ 2,798,210
March 2022........... 2,798,210
April 2022........... 7,913,568
May 2022............. 7,755,939
June 2022............ 7,584,515
July 2022............ 7,391,823
August 2022.......... 7,225,948
September 2022....... 7,097,825
October 2022......... 13,697,467
November 2022........ 1,326,717
December 2022........ 6,459,660
January 2023......... 6,309,133
February 2023........ 1,028,182
March 2023........... 1,028,182
April 2023........... 1,028,182
May 2023............. 1,028,182
June 2023............ 1,028,182
July 2023............ 6,257,559
August 2023.......... 860,542
September 2023....... 860,542
October 2023......... 860,542
November 2023........ 860,542
December 2023........ 860,542
January 2024......... 860,542
February 2024........ 860,542
March 2024........... 860,542
April 2024........... 13,326,973
May 2024............. 13,059,274
</TABLE>
<PAGE> 176
APPENDIX 4
ASSUMED PORTFOLIO VALUES FOR THE INITIAL PORTFOLIO
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 1999............. 1,322.64
June 1999............ 1,319.34
July 1999............ 1,316.04
August 1999.......... 1,312.72
September 1999....... 1,309.39
October 1999......... 1,306.05
November 1999........ 1,302.70
December 1999........ 1,299.34
January 2000......... 1,295.97
February 2000........ 1,292.58
March 2000........... 1,289.19
April 2000........... 1,285.79
May 2000............. 1,282.38
June 2000............ 1,278.96
July 2000............ 1,275.52
August 2000.......... 1,272.08
September 2000....... 1,268.62
October 2000......... 1,265.16
November 2000........ 1,261.68
December 2000........ 1,258.20
January 2001......... 1,254.70
February 2001........ 1,251.19
March 2001........... 1,247.68
April 2001........... 1,244.15
May 2001............. 1,240.61
June 2001............ 1,237.06
July 2001............ 1,233.50
August 2001.......... 1,229.93
September 2001....... 1,226.34
October 2001......... 1,222.75
November 2001........ 1,219.15
December 2001........ 1,215.53
January 2002......... 1,211.91
February 2002........ 1,208.27
March 2002........... 1,204.62
April 2002........... 1,200.97
May 2002............. 1,197.30
June 2002............ 1,193.62
July 2002............ 1,189.92
August 2002.......... 1,186.22
September 2002....... 1,182.51
October 2002......... 1,178.79
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
November 2002........ 1,175.05
December 2002........ 1,171.30
January 2003......... 1,167.55
February 2003........ 1,163.78
March 2003........... 1,160.00
April 2003........... 1,156.21
May 2003............. 1,152.41
June 2003............ 1,148.59
July 2003............ 1,144.77
August 2003.......... 1,140.93
September 2003....... 1,137.08
October 2003......... 1,133.23
November 2003........ 1,129.36
December 2003........ 1,125.48
January 2004......... 1,121.58
February 2004........ 1,117.68
March 2004........... 1,113.76
April 2004........... 1,109.84
May 2004............. 1,105.90
June 2004............ 1,101.95
July 2004............ 1,097.99
August 2004.......... 1,094.02
September 2004....... 1,090.03
October 2004......... 1,086.04
November 2004........ 1,082.03
December 2004........ 1,078.01
January 2005......... 1,073.98
February 2005........ 1,069.94
March 2005........... 1,065.88
April 2005........... 1,061.82
May 2005............. 1,057.74
June 2005............ 1,053.65
July 2005............ 1,049.55
August 2005.......... 1,045.43
September 2005....... 1,041.31
October 2005......... 1,037.17
November 2005........ 1,033.02
December 2005........ 1,028.86
January 2006......... 1,024.69
February 2006........ 1,020.51
March 2006........... 1,016.31
April 2006........... 1,012.10
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 2006............. 1,007.88
June 2006............ 1,003.65
July 2006............ 999.41
August 2006.......... 995.15
September 2006....... 990.88
October 2006......... 986.60
November 2006........ 982.31
December 2006........ 978.00
January 2007......... 973.69
February 2007........ 969.36
March 2007........... 965.01
April 2007........... 960.66
May 2007............. 956.29
June 2007............ 951.92
July 2007............ 947.53
August 2007.......... 943.12
September 2007....... 938.71
October 2007......... 934.28
November 2007........ 929.84
December 2007........ 925.38
January 2008......... 920.92
February 2008........ 916.44
March 2008........... 911.95
April 2008........... 907.45
May 2008............. 902.93
June 2008............ 898.40
July 2008............ 893.86
August 2008.......... 889.31
September 2008....... 884.74
October 2008......... 880.16
November 2008........ 875.57
December 2008........ 870.97
January 2009......... 866.35
February 2009........ 861.72
March 2009........... 857.08
April 2009........... 852.42
May 2009............. 847.75
June 2009............ 843.07
July 2009............ 838.38
August 2009.......... 833.67
September 2009....... 828.95
October 2009......... 824.22
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
November 2009........ 819.47
December 2009........ 814.71
January 2010......... 809.94
February 2010........ 805.15
March 2010........... 795.10
April 2010........... 790.42
May 2010............. 785.72
June 2010............ 781.01
July 2010............ 776.29
August 2010.......... 771.55
September 2010....... 766.81
October 2010......... 762.04
November 2010........ 757.27
December 2010........ 752.48
January 2011......... 747.68
February 2011........ 742.87
March 2011........... 738.04
April 2011........... 733.20
May 2011............. 728.35
June 2011............ 723.49
July 2011............ 718.61
August 2011.......... 713.71
September 2011....... 708.81
October 2011......... 703.89
November 2011........ 698.96
December 2011........ 689.81
January 2012......... 684.98
February 2012........ 680.13
March 2012........... 669.92
April 2012........... 665.18
May 2012............. 660.42
June 2012............ 655.65
July 2012............ 650.87
August 2012.......... 631.33
September 2012....... 626.96
October 2012......... 622.58
November 2012........ 618.19
December 2012........ 613.79
January 2013......... 609.37
February 2013........ 604.94
March 2013........... 593.54
April 2013........... 589.29
May 2013............. 585.04
June 2013............ 580.77
July 2013............ 576.49
August 2013.......... 572.20
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
September 2013....... 567.90
October 2013......... 563.58
November 2013........ 559.26
December 2013........ 554.92
January 2014......... 550.57
February 2014........ 546.21
March 2014........... 541.84
April 2014........... 537.46
May 2014............. 533.06
June 2014............ 528.65
July 2014............ 524.24
August 2014.......... 519.80
September 2014....... 515.36
October 2014......... 506.77
November 2014........ 502.43
December 2014........ 498.08
January 2015......... 493.71
February 2015........ 489.33
March 2015........... 484.94
April 2015........... 480.54
May 2015............. 476.13
June 2015............ 471.70
July 2015............ 467.27
August 2015.......... 462.82
September 2015....... 458.36
October 2015......... 453.89
November 2015........ 449.40
December 2015........ 444.91
January 2016......... 440.40
February 2016........ 435.88
March 2016........... 431.35
April 2016........... 426.81
May 2016............. 417.99
June 2016............ 413.55
July 2016............ 409.10
August 2016.......... 388.54
September 2016....... 384.54
October 2016......... 370.32
November 2016........ 361.40
December 2016........ 357.83
January 2017......... 354.25
February 2017........ 339.20
March 2017........... 335.94
April 2017........... 328.43
May 2017............. 325.28
June 2017............ 322.13
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
July 2017............ 318.96
August 2017.......... 315.79
September 2017....... 312.61
October 2017......... 309.42
November 2017........ 306.22
December 2017........ 293.92
January 2018......... 290.98
February 2018........ 282.81
March 2018........... 280.01
April 2018........... 277.20
May 2018............. 274.38
June 2018............ 271.55
July 2018............ 268.71
August 2018.......... 265.87
September 2018....... 263.02
October 2018......... 260.17
November 2018........ 257.30
December 2018........ 254.43
January 2019......... 251.55
February 2019........ 248.66
March 2019........... 245.77
April 2019........... 242.87
May 2019............. 239.96
June 2019............ 237.04
July 2019............ 234.11
August 2019.......... 231.18
September 2019....... 228.24
October 2019......... 225.29
November 2019........ 222.34
December 2019........ 219.37
January 2020......... 216.40
February 2020........ 213.42
March 2020........... 210.44
April 2020........... 207.44
May 2020............. 204.44
June 2020............ 201.43
July 2020............ 198.41
August 2020.......... 195.39
September 2020....... 192.35
October 2020......... 189.31
November 2020........ 186.26
December 2020........ 183.21
January 2021......... 180.14
February 2021........ 177.07
March 2021........... 173.99
April 2021........... 170.90
</TABLE>
<PAGE> 178
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 2021............. 167.81
June 2021............ 164.70
July 2021............ 161.59
August 2021.......... 158.47
September 2021....... 150.29
October 2021......... 147.30
November 2021........ 144.31
December 2021........ 125.62
January 2022......... 118.12
February 2022........ 115.72
March 2022........... 113.31
April 2022........... 105.73
May 2022............. 98.31
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
June 2022............ 91.04
July 2022............ 83.93
August 2022.......... 76.97
September 2022....... 70.13
October 2022......... 56.67
November 2022........ 55.49
December 2022........ 49.14
January 2023......... 42.99
February 2023........ 42.11
March 2023........... 41.23
April 2023........... 40.35
May 2023............. 39.46
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
June 2023............ 38.57
July 2023............ 32.44
August 2023.......... 31.71
September 2023....... 30.97
October 2023......... 30.23
November 2023........ 29.49
December 2023........ 28.74
January 2024......... 28.00
February 2024........ 27.25
March 2024........... 26.50
April 2024........... 13.06
May 2024............. 0.00
</TABLE>
<PAGE> 179
APPENDIX 5
CLASS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLOSING............... 68.99% 9.56% 8.01%
JUNE 1999............. 68.99% 68.99% 68.80% 9.56% 9.56% 9.56% 8.04% 8.04%
JULY 1999............. 68.99% 68.99% 68.76% 9.56% 9.56% 9.56% 8.06% 8.06%
AUGUST 1999........... 68.99% 68.99% 68.73% 9.56% 9.56% 9.56% 8.08% 8.08%
SEPTEMBER 1999........ 68.99% 68.99% 68.57% 9.56% 9.56% 9.56% 8.10% 8.10%
OCTOBER 1999.......... 68.99% 68.99% 68.53% 9.56% 9.56% 9.56% 8.12% 8.12%
NOVEMBER 1999......... 68.95% 68.95% 68.48% 9.60% 9.60% 9.58% 8.14% 8.14%
DECEMBER 1999......... 68.92% 68.92% 68.29% 9.63% 9.63% 9.61% 8.16% 8.16%
JANUARY 2000.......... 68.89% 68.89% 68.24% 9.66% 9.66% 9.63% 8.18% 8.18%
FEBRUARY 2000......... 68.85% 68.85% 68.19% 9.70% 9.70% 9.66% 8.21% 8.21%
MARCH 2000............ 68.82% 68.82% 68.05% 9.73% 9.73% 9.68% 8.23% 8.23%
APRIL 2000............ 68.78% 68.78% 67.99% 9.77% 9.77% 9.71% 8.25% 8.25%
MAY 2000.............. 68.75% 68.75% 67.89% 9.80% 9.80% 9.74% 8.27% 8.27%
JUNE 2000............. 68.66% 68.66% 67.78% 9.89% 9.89% 9.76% 8.29% 8.29%
JULY 2000............. 68.50% 68.50% 67.68% 9.92% 9.92% 9.77% 8.32% 8.32%
AUGUST 2000........... 68.12% 68.12% 67.62% 9.95% 9.95% 9.74% 8.34% 8.34%
SEPTEMBER 2000........ 67.92% 67.92% 67.59% 9.98% 9.98% 9.68% 8.36% 8.36%
OCTOBER 2000.......... 67.80% 67.80% 67.50% 10.01% 10.01% 9.67% 8.38% 8.38%
NOVEMBER 2000......... 67.67% 67.67% 67.44% 10.03% 10.03% 9.65% 8.41% 8.41%
DECEMBER 2000......... 67.58% 67.58% 67.34% 10.06% 10.06% 9.66% 8.43% 8.43%
JANUARY 2001.......... 67.55% 67.55% 67.26% 10.09% 10.09% 9.65% 8.45% 8.45%
FEBRUARY 2001......... 67.53% 67.53% 67.16% 10.12% 10.12% 9.67% 8.48% 8.48%
MARCH 2001............ 67.72% 67.72% 67.09% 10.14% 10.14% 9.65% 8.50% 8.50%
APRIL 2001............ 67.82% 67.82% 66.97% 10.17% 10.17% 9.68% 8.52% 8.52%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
CLOSING............... 4.84%
JUNE 1999............. 4.87% 4.87%
JULY 1999............. 4.91% 4.91%
AUGUST 1999........... 4.88% 4.88%
SEPTEMBER 1999........ 4.89% 4.89%
OCTOBER 1999.......... 4.91% 4.91%
NOVEMBER 1999......... 4.96% 4.96%
DECEMBER 1999......... 4.93% 4.93%
JANUARY 2000.......... 4.94% 4.94%
FEBRUARY 2000......... 4.96% 4.96%
MARCH 2000............ 4.98% 4.98%
APRIL 2000............ 4.98% 4.98%
MAY 2000.............. 5.00% 5.00%
JUNE 2000............. 5.02% 5.02%
JULY 2000............. 5.02% 5.02%
AUGUST 2000........... 5.04% 5.04%
SEPTEMBER 2000........ 5.05% 5.05%
OCTOBER 2000.......... 5.06% 5.06%
NOVEMBER 2000......... 5.10% 5.10%
DECEMBER 2000......... 5.10% 5.10%
JANUARY 2001.......... 5.12% 5.12%
FEBRUARY 2001......... 5.12% 5.12%
MARCH 2001............ 5.13% 5.13%
APRIL 2001............ 5.20% 5.20%
</TABLE>
<PAGE> 180
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2001.............. 67.67% 67.67% 66.85% 10.20% 10.20% 9.71% 8.55% 8.55%
JUNE 2001............. 67.59% 67.59% 66.72% 10.22% 10.22% 9.74% 8.57% 8.57%
JULY 2001............. 67.50% 67.50% 66.59% 10.25% 10.25% 9.75% 8.60% 8.60%
AUGUST 2001........... 67.42% 67.42% 66.45% 10.28% 10.28% 9.78% 8.62% 8.62%
SEPTEMBER 2001........ 67.32% 67.32% 66.37% 10.31% 10.31% 9.77% 8.65% 8.65%
OCTOBER 2001.......... 67.24% 67.24% 66.29% 10.34% 10.34% 9.74% 8.67% 8.67%
NOVEMBER 2001......... 67.37% 67.37% 66.15% 10.38% 10.38% 9.77% 8.70% 8.70%
DECEMBER 2001......... 67.38% 67.38% 66.02% 10.40% 10.40% 9.80% 8.73% 8.73%
JANUARY 2002.......... 67.40% 67.40% 65.88% 10.43% 10.43% 9.83% 8.75% 8.75%
FEBRUARY 2002......... 67.41% 67.41% 65.75% 10.47% 10.47% 9.86% 8.78% 8.78%
MARCH 2002............ 67.45% 67.45% 65.60% 10.50% 10.50% 9.89% 8.80% 8.80%
APRIL 2002............ 67.46% 67.46% 65.46% 10.53% 10.53% 9.92% 8.83% 8.83%
MAY 2002.............. 67.49% 67.49% 65.52% 10.49% 10.49% 9.94% 8.66% 8.66%
JUNE 2002............. 67.51% 67.51% 65.64% 10.44% 10.44% 9.97% 8.42% 8.42%
JULY 2002............. 67.52% 67.52% 65.71% 10.29% 10.29% 10.00% 8.25% 8.25%
AUGUST 2002........... 67.54% 67.54% 65.62% 10.14% 10.14% 10.03% 8.21% 8.21%
SEPTEMBER 2002........ 67.55% 67.55% 65.78% 9.95% 9.95% 9.95% 8.08% 8.08%
OCTOBER 2002.......... 67.45% 67.45% 65.69% 9.99% 9.95% 9.95% 8.16% 8.11%
NOVEMBER 2002......... 67.66% 67.66% 65.74% 10.02% 9.97% 9.97% 7.99% 7.99%
DECEMBER 2002......... 67.76% 67.76% 65.76% 9.99% 9.99% 9.99% 7.88% 7.88%
JANUARY 2003.......... 67.86% 67.86% 65.66% 10.01% 10.01% 10.01% 7.87% 7.87%
FEBRUARY 2003......... 67.93% 67.93% 65.62% 10.02% 10.02% 10.02% 7.82% 7.82%
MARCH 2003............ 68.04% 68.04% 65.68% 10.03% 10.02% 10.02% 7.67% 7.67%
APRIL 2003............ 68.12% 68.12% 65.75% 10.04% 10.03% 10.03% 7.50% 7.50%
MAY 2003.............. 68.21% 68.21% 65.77% 10.04% 10.04% 10.04% 7.39% 7.39%
JUNE 2003............. 68.30% 68.30% 65.80% 10.05% 10.04% 10.04% 7.26% 7.26%
JULY 2003............. 68.38% 68.38% 65.83% 10.04% 10.04% 10.04% 7.13% 7.13%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2001.............. 5.16% 5.16%
JUNE 2001............. 5.22% 5.22%
JULY 2001............. 5.22% 5.22%
AUGUST 2001........... 5.24% 5.24%
SEPTEMBER 2001........ 5.22% 5.22%
OCTOBER 2001.......... 5.24% 5.24%
NOVEMBER 2001......... 5.25% 5.25%
DECEMBER 2001......... 5.27% 5.27%
JANUARY 2002.......... 5.29% 5.29%
FEBRUARY 2002......... 5.30% 5.30%
MARCH 2002............ 5.33% 5.33%
APRIL 2002............ 5.33% 5.33%
MAY 2002.............. 5.35% 5.34%
JUNE 2002............. 5.35% 5.35%
JULY 2002............. 5.35% 5.35%
AUGUST 2002........... 5.37% 5.37%
SEPTEMBER 2002........ 5.35% 5.35%
OCTOBER 2002.......... 5.33% 5.33%
NOVEMBER 2002......... 5.30% 5.30%
DECEMBER 2002......... 5.29% 5.29%
JANUARY 2003.......... 5.29% 5.29%
FEBRUARY 2003......... 5.29% 5.29%
MARCH 2003............ 5.28% 5.28%
APRIL 2003............ 5.28% 5.28%
MAY 2003.............. 5.27% 5.27%
JUNE 2003............. 5.27% 5.27%
JULY 2003............. 5.27% 5.27%
</TABLE>
<PAGE> 181
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2003........... 68.47% 68.47% 65.98% 10.04% 10.03% 10.03% 6.90% 6.90%
SEPTEMBER 2003........ 68.55% 68.55% 66.14% 9.96% 9.95% 9.95% 6.71% 6.71%
OCTOBER 2003.......... 68.53% 68.53% 65.99% 9.98% 9.97% 9.97% 6.78% 6.73%
NOVEMBER 2003......... 68.77% 68.77% 66.06% 9.78% 9.78% 9.78% 6.77% 6.76%
DECEMBER 2003......... 68.80% 68.80% 66.11% 9.75% 9.75% 9.75% 6.64% 6.64%
JANUARY 2004.......... 68.85% 68.85% 66.03% 9.70% 9.70% 9.70% 6.67% 6.66%
FEBRUARY 2004......... 68.90% 68.90% 65.93% 9.65% 9.65% 9.65% 6.70% 6.69%
MARCH 2004............ 68.95% 68.95% 65.82% 9.60% 9.60% 9.60% 6.72% 6.71%
APRIL 2004............ 68.99% 68.99% 65.72% 9.56% 9.56% 9.56% 6.75% 6.73%
MAY 2004.............. 68.99% 68.99% 65.57% 9.56% 9.56% 9.56% 6.77% 6.76%
JUNE 2004............. 68.99% 68.99% 65.41% 9.56% 9.56% 9.56% 6.80% 6.78%
JULY 2004............. 68.99% 68.99% 65.24% 9.56% 9.56% 9.56% 6.82% 6.81%
AUGUST 2004........... 68.99% 68.99% 65.09% 9.56% 9.56% 9.56% 6.85% 6.83%
SEPTEMBER 2004........ 68.99% 68.99% 64.97% 9.56% 9.56% 9.56% 6.81% 6.81%
OCTOBER 2004.......... 68.99% 68.99% 64.84% 9.56% 9.56% 9.56% 6.79% 6.79%
NOVEMBER 2004......... 68.99% 68.99% 64.71% 9.56% 9.56% 9.56% 6.78% 6.78%
DECEMBER 2004......... 68.99% 68.99% 64.55% 9.56% 9.56% 9.56% 6.77% 6.77%
JANUARY 2005.......... 68.99% 68.99% 64.38% 9.56% 9.56% 9.56% 6.78% 6.78%
FEBRUARY 2005......... 68.99% 68.99% 64.48% 9.56% 9.56% 9.56% 6.51% 6.51%
MARCH 2005............ 68.74% 68.74% 64.22% 9.81% 9.81% 9.60% 6.57% 6.53%
APRIL 2005............ 68.73% 68.73% 63.99% 9.82% 9.82% 9.63% 6.59% 6.56%
MAY 2005.............. 68.74% 68.74% 63.75% 9.81% 9.81% 9.67% 6.61% 6.59%
JUNE 2005............. 68.74% 68.74% 63.51% 9.81% 9.81% 9.71% 6.63% 6.61%
JULY 2005............. 68.73% 68.73% 63.28% 9.82% 9.82% 9.75% 6.61% 6.61%
AUGUST 2005........... 68.74% 68.74% 63.12% 9.81% 9.81% 9.78% 6.55% 6.55%
SEPTEMBER 2005........ 68.73% 68.73% 62.91% 9.82% 9.82% 9.82% 6.54% 6.54%
OCTOBER 2005.......... 68.68% 68.68% 62.66% 9.87% 9.87% 9.86% 6.55% 6.55%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2003........... 5.26% 5.26%
SEPTEMBER 2003........ 5.26% 5.26%
OCTOBER 2003.......... 5.26% 5.26%
NOVEMBER 2003......... 5.26% 5.26%
DECEMBER 2003......... 5.25% 5.25%
JANUARY 2004.......... 5.25% 5.25%
FEBRUARY 2004......... 5.25% 5.25%
MARCH 2004............ 5.25% 5.25%
APRIL 2004............ 5.24% 5.24%
MAY 2004.............. 5.25% 5.25%
JUNE 2004............. 5.25% 5.25%
JULY 2004............. 5.25% 5.25%
AUGUST 2004........... 5.24% 5.24%
SEPTEMBER 2004........ 5.24% 5.24%
OCTOBER 2004.......... 5.23% 5.23%
NOVEMBER 2004......... 5.23% 5.23%
DECEMBER 2004......... 5.23% 5.23%
JANUARY 2005.......... 5.23% 5.23%
FEBRUARY 2005......... 5.23% 5.23%
MARCH 2005............ 5.23% 5.23%
APRIL 2005............ 5.23% 5.23%
MAY 2005.............. 5.23% 5.23%
JUNE 2005............. 5.23% 5.23%
JULY 2005............. 5.23% 5.23%
AUGUST 2005........... 5.23% 5.23%
SEPTEMBER 2005........ 5.23% 5.23%
OCTOBER 2005.......... 5.23% 5.23%
</TABLE>
<PAGE> 182
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2005......... 68.63% 68.63% 62.41% 9.92% 9.92% 9.90% 6.63% 6.58%
DECEMBER 2005......... 68.55% 68.55% 62.17% 10.00% 10.00% 9.94% 6.57% 6.57%
JANUARY 2006.......... 68.49% 68.49% 61.94% 10.06% 10.06% 9.98% 6.56% 6.56%
FEBRUARY 2006......... 68.42% 68.42% 61.70% 10.13% 10.13% 10.02% 6.56% 6.56%
MARCH 2006............ 68.37% 68.37% 61.49% 10.18% 10.18% 9.98% 6.56% 6.56%
APRIL 2006............ 68.29% 68.29% 61.35% 10.26% 10.26% 9.89% 6.59% 6.59%
MAY 2006.............. 68.23% 68.23% 61.21% 10.32% 10.32% 9.78% 6.62% 6.62%
JUNE 2006............. 68.17% 68.17% 61.11% 10.38% 10.38% 9.66% 6.62% 6.64%
JULY 2006............. 68.09% 68.09% 60.97% 10.46% 10.46% 9.54% 6.60% 6.67%
AUGUST 2006........... 68.03% 68.03% 60.93% 10.52% 10.52% 9.45% 6.56% 6.56%
SEPTEMBER 2006........ 67.91% 67.91% 60.68% 10.64% 10.64% 9.43% 6.65% 6.59%
OCTOBER 2006.......... 67.79% 67.79% 60.56% 10.74% 10.73% 9.29% 6.81% 6.62%
NOVEMBER 2006......... 67.65% 67.65% 60.41% 10.71% 10.70% 9.17% 7.01% 6.65%
DECEMBER 2006......... 67.47% 67.47% 60.22% 10.68% 10.67% 9.08% 7.05% 6.68%
JANUARY 2007.......... 67.32% 67.32% 60.02% 10.64% 10.63% 9.00% 7.05% 6.71%
FEBRUARY 2007......... 67.16% 67.16% 59.83% 10.61% 10.60% 8.92% 6.81% 6.73%
MARCH 2007............ 66.59% 66.59% 59.56% 10.58% 10.56% 8.88% 7.13% 6.76%
APRIL 2007............ 66.43% 66.43% 59.29% 10.55% 10.53% 8.85% 7.15% 6.80%
MAY 2007.............. 66.28% 66.28% 59.06% 10.51% 10.50% 8.78% 7.18% 6.83%
JUNE 2007............. 66.13% 66.13% 58.84% 10.47% 10.46% 8.70% 7.21% 6.86%
JULY 2007............. 65.96% 65.96% 58.62% 10.44% 10.43% 8.64% 7.23% 6.89%
AUGUST 2007........... 65.79% 65.79% 58.43% 10.41% 10.40% 8.60% 7.25% 6.93%
SEPTEMBER 2007........ 65.60% 65.60% 58.25% 10.40% 10.39% 8.56% 7.27% 6.96%
OCTOBER 2007.......... 65.40% 65.40% 58.08% 10.34% 10.33% 8.53% 7.30% 7.00%
NOVEMBER 2007......... 65.20% 65.20% 57.89% 10.28% 10.27% 8.49% 7.33% 7.03%
DECEMBER 2007......... 64.96% 64.96% 57.77% 10.21% 10.20% 8.43% 7.96% 7.06%
JANUARY 2008.......... 64.76% 64.76% 57.54% 10.15% 10.14% 8.40% 7.98% 7.09%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2005......... 5.23% 5.23%
DECEMBER 2005......... 5.23% 5.23%
JANUARY 2006.......... 5.23% 5.23%
FEBRUARY 2006......... 5.23% 5.23%
MARCH 2006............ 5.24% 5.24%
APRIL 2006............ 5.24% 5.24%
MAY 2006.............. 5.24% 5.24%
JUNE 2006............. 5.24% 5.24%
JULY 2006............. 5.24% 5.24%
AUGUST 2006........... 5.24% 5.24%
SEPTEMBER 2006........ 5.25% 5.25%
OCTOBER 2006.......... 5.25% 5.25%
NOVEMBER 2006......... 5.25% 5.25%
DECEMBER 2006......... 5.25% 5.25%
JANUARY 2007.......... 5.26% 5.26%
FEBRUARY 2007......... 5.26% 5.26%
MARCH 2007............ 5.26% 5.26%
APRIL 2007............ 5.27% 5.27%
MAY 2007.............. 5.27% 5.27%
JUNE 2007............. 5.28% 5.28%
JULY 2007............. 5.28% 5.25%
AUGUST 2007........... 5.28% 5.18%
SEPTEMBER 2007........ 5.29% 5.10%
OCTOBER 2007.......... 5.29% 4.99%
NOVEMBER 2007......... 5.30% 4.91%
DECEMBER 2007......... 5.30% 4.77%
JANUARY 2008.......... 5.31% 4.71%
</TABLE>
<PAGE> 183
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 2008......... 64.55% 64.55% 57.37% 10.08% 10.08% 8.35% 8.02% 7.13%
MARCH 2008............ 64.53% 64.34% 57.16% 10.01% 10.01% 8.32% 8.05% 7.16%
APRIL 2008............ 64.41% 64.12% 57.00% 9.94% 9.94% 8.27% 8.08% 7.20%
MAY 2008.............. 64.22% 63.89% 56.82% 9.87% 9.87% 8.23% 8.10% 7.23%
JUNE 2008............. 64.11% 63.66% 56.63% 9.80% 9.80% 8.18% 8.11% 7.27%
JULY 2008............. 63.94% 63.42% 56.40% 9.73% 9.73% 8.14% 8.10% 7.31%
AUGUST 2008........... 63.79% 63.20% 56.22% 9.65% 9.65% 8.09% 8.08% 7.35%
SEPTEMBER 2008........ 63.60% 62.96% 55.95% 9.58% 9.58% 8.05% 8.07% 7.38%
OCTOBER 2008.......... 63.31% 62.60% 55.64% 9.62% 9.62% 8.01% 8.05% 7.42%
NOVEMBER 2008......... 63.01% 62.18% 55.39% 9.67% 9.67% 7.95% 8.02% 7.46%
DECEMBER 2008......... 62.70% 61.74% 55.12% 9.73% 9.73% 7.90% 7.99% 7.50%
JANUARY 2009.......... 62.39% 61.31% 54.96% 9.78% 9.78% 7.85% 7.98% 7.54%
FEBRUARY 2009......... 62.13% 60.86% 54.72% 9.83% 9.83% 7.80% 7.95% 7.58%
MARCH 2009............ 61.91% 60.42% 54.41% 9.88% 9.79% 7.75% 7.92% 7.62%
APRIL 2009............ 61.42% 59.95% 54.08% 9.94% 9.83% 7.70% 7.90% 7.66%
MAY 2009.............. 61.11% 59.49% 53.77% 9.99% 9.87% 7.66% 7.88% 7.65%
JUNE 2009............. 60.72% 59.02% 53.50% 10.05% 9.90% 7.61% 7.85% 7.61%
JULY 2009............. 60.37% 58.53% 53.23% 10.10% 9.94% 7.57% 7.83% 7.58%
AUGUST 2009........... 60.01% 58.05% 52.97% 10.16% 9.98% 7.53% 7.80% 7.53%
SEPTEMBER 2009........ 59.65% 57.54% 52.65% 10.22% 10.02% 7.50% 7.77% 7.50%
OCTOBER 2009.......... 59.29% 57.04% 52.41% 10.27% 10.06% 7.47% 7.75% 7.37%
NOVEMBER 2009......... 58.91% 57.37% 52.09% 10.33% 10.10% 7.44% 7.70% 7.33%
DECEMBER 2009......... 58.64% 57.29% 51.74% 10.26% 10.15% 7.42% 7.68% 7.29%
JANUARY 2010.......... 58.40% 57.11% 51.40% 10.16% 10.15% 7.37% 7.66% 7.25%
FEBRUARY 2010......... 58.30% 56.91% 51.32% 10.06% 10.05% 7.25% 7.64% 7.20%
MARCH 2010............ 58.15% 57.09% 51.06% 10.02% 10.01% 7.25% 7.69% 7.20%
APRIL 2010............ 58.03% 56.87% 50.75% 9.93% 9.91% 7.19% 7.67% 7.16%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
FEBRUARY 2008......... 5.32% 4.60%
MARCH 2008............ 5.32% 4.49%
APRIL 2008............ 5.33% 4.36%
MAY 2008.............. 5.33% 4.24%
JUNE 2008............. 5.34% 4.14%
JULY 2008............. 5.35% 4.05%
AUGUST 2008........... 5.35% 3.93%
SEPTEMBER 2008........ 5.36% 3.89%
OCTOBER 2008.......... 5.37% 3.86%
NOVEMBER 2008......... 5.38% 3.81%
DECEMBER 2008......... 5.39% 3.75%
JANUARY 2009.......... 5.39% 3.58%
FEBRUARY 2009......... 5.40% 3.49%
MARCH 2009............ 5.41% 3.43%
APRIL 2009............ 5.42% 3.42%
MAY 2009.............. 5.43% 3.41%
JUNE 2009............. 5.44% 3.41%
JULY 2009............. 5.45% 3.38%
AUGUST 2009........... 5.46% 3.36%
SEPTEMBER 2009........ 5.47% 3.36%
OCTOBER 2009.......... 5.48% 3.37%
NOVEMBER 2009......... 5.49% 3.37%
DECEMBER 2009......... 5.50% 3.38%
JANUARY 2010.......... 5.52% 3.40%
FEBRUARY 2010......... 5.53% 3.24%
MARCH 2010............ 5.58% 2.94%
APRIL 2010............ 5.59% 2.96%
</TABLE>
<PAGE> 184
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2010.............. 57.80% 56.66% 50.42% 9.83% 9.82% 7.14% 7.66% 7.13%
JUNE 2010............. 57.51% 56.46% 50.14% 9.73% 9.71% 7.06% 7.64% 7.11%
JULY 2010............. 57.26% 56.25% 50.00% 9.62% 9.60% 7.01% 7.63% 7.08%
AUGUST 2010........... 57.26% 56.04% 49.50% 9.51% 9.50% 6.96% 7.63% 7.05%
SEPTEMBER 2010........ 57.11% 55.81% 49.08% 9.43% 9.42% 6.91% 7.61% 7.02%
OCTOBER 2010.......... 57.12% 55.47% 48.96% 9.48% 9.46% 6.84% 7.58% 6.76%
NOVEMBER 2010......... 57.19% 55.82% 48.71% 9.54% 9.51% 6.78% 7.62% 6.62%
DECEMBER 2010......... 57.22% 56.16% 48.47% 9.18% 9.17% 6.71% 7.66% 6.48%
JANUARY 2011.......... 57.37% 56.13% 48.16% 9.13% 9.11% 6.65% 7.69% 6.42%
FEBRUARY 2011......... 57.19% 56.08% 47.92% 9.07% 9.06% 6.59% 7.69% 6.38%
MARCH 2011............ 57.12% 56.05% 47.51% 9.02% 9.00% 6.53% 7.70% 6.35%
APRIL 2011............ 57.15% 56.01% 47.12% 8.95% 8.93% 6.46% 7.70% 6.32%
MAY 2011.............. 57.16% 55.98% 46.76% 8.87% 8.87% 6.37% 7.72% 6.31%
JUNE 2011............. 57.17% 55.95% 46.36% 8.79% 8.79% 6.32% 7.72% 6.30%
JULY 2011............. 57.18% 55.91% 45.93% 8.71% 8.71% 6.23% 7.71% 6.28%
AUGUST 2011........... 57.19% 55.87% 45.60% 8.63% 8.63% 6.16% 7.69% 6.27%
SEPTEMBER 2011........ 57.23% 55.83% 45.17% 8.39% 8.39% 6.08% 7.70% 6.23%
OCTOBER 2011.......... 57.41% 55.67% 44.76% 8.27% 8.27% 6.01% 7.68% 6.21%
NOVEMBER 2011......... 57.69% 56.06% 44.38% 8.33% 8.33% 5.87% 7.75% 6.20%
DECEMBER 2011......... 58.20% 56.56% 43.65% 8.10% 8.10% 5.82% 7.76% 6.19%
JANUARY 2012.......... 58.37% 56.72% 43.15% 7.94% 7.94% 5.75% 7.80% 6.18%
FEBRUARY 2012......... 58.54% 56.87% 42.75% 7.78% 7.78% 5.58% 7.84% 6.16%
MARCH 2012............ 59.17% 57.48% 41.94% 7.68% 7.68% 5.55% 7.93% 6.17%
APRIL 2012............ 59.34% 57.64% 41.45% 7.51% 7.51% 5.45% 7.94% 6.14%
MAY 2012.............. 59.50% 57.81% 41.06% 7.34% 7.34% 5.37% 7.99% 5.98%
JUNE 2012............. 59.67% 57.97% 40.49% 7.15% 7.15% 5.31% 8.01% 5.97%
JULY 2012............. 58.43% 58.13% 40.02% 6.97% 6.97% 5.25% 8.03% 5.85%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2010.............. 5.60% 2.98%
JUNE 2010............. 5.61% 2.96%
JULY 2010............. 5.63% 2.78%
AUGUST 2010........... 5.64% 2.80%
SEPTEMBER 2010........ 5.65% 2.81%
OCTOBER 2010.......... 5.67% 2.83%
NOVEMBER 2010......... 5.68% 2.85%
DECEMBER 2010......... 5.70% 2.87%
JANUARY 2011.......... 5.71% 2.89%
FEBRUARY 2011......... 5.73% 2.91%
MARCH 2011............ 5.75% 2.92%
APRIL 2011............ 5.76% 2.94%
MAY 2011.............. 5.78% 2.91%
JUNE 2011............. 5.80% 2.88%
JULY 2011............. 5.82% 2.90%
AUGUST 2011........... 5.83% 2.79%
SEPTEMBER 2011........ 5.85% 2.81%
OCTOBER 2011.......... 5.87% 2.79%
NOVEMBER 2011......... 5.91% 2.79%
DECEMBER 2011......... 5.99% 2.83%
JANUARY 2012.......... 6.03% 2.85%
FEBRUARY 2012......... 6.06% 2.87%
MARCH 2012............ 6.13% 2.83%
APRIL 2012............ 6.16% 2.85%
MAY 2012.............. 6.18% 2.87%
JUNE 2012............. 6.20% 2.90%
JULY 2012............. 6.22% 2.92%
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2012........... 59.98% 58.25% 38.43% 6.94% 6.94% 5.09% 8.03% 5.94%
SEPTEMBER 2012........ 59.97% 58.39% 37.98% 6.61% 6.61% 4.86% 8.06% 5.93%
OCTOBER 2012.......... 60.03% 58.38% 37.41% 6.42% 6.42% 4.77% 8.07% 5.88%
NOVEMBER 2012......... 60.09% 58.79% 36.91% 6.47% 6.45% 4.67% 8.13% 5.78%
DECEMBER 2012......... 60.16% 59.13% 36.32% 6.51% 6.48% 4.58% 8.14% 5.77%
JANUARY 2013.......... 60.22% 59.28% 35.91% 6.52% 6.50% 4.48% 8.16% 5.56%
FEBRUARY 2013......... 60.50% 59.41% 35.46% 6.52% 6.50% 4.28% 8.18% 5.48%
MARCH 2013............ 60.80% 59.42% 34.27% 6.59% 6.56% 4.17% 8.17% 5.45%
APRIL 2013............ 61.24% 59.55% 33.62% 6.59% 6.58% 4.09% 8.18% 5.41%
MAY 2013.............. 61.21% 59.69% 33.00% 6.59% 6.57% 3.96% 8.19% 5.39%
JUNE 2013............. 61.21% 59.83% 32.34% 6.59% 6.57% 3.88% 8.20% 5.35%
JULY 2013............. 61.37% 59.96% 31.74% 6.58% 6.56% 3.77% 8.21% 5.27%
AUGUST 2013........... 61.31% 60.10% 31.20% 6.58% 6.56% 3.65% 8.19% 5.12%
SEPTEMBER 2013........ 61.36% 60.17% 30.51% 6.47% 6.45% 3.53% 8.20% 5.11%
OCTOBER 2013.......... 61.39% 60.11% 29.85% 6.46% 6.44% 3.42% 8.20% 5.03%
NOVEMBER 2013......... 61.41% 60.13% 29.14% 6.45% 6.43% 3.30% 8.19% 5.00%
DECEMBER 2013......... 61.44% 60.13% 28.39% 6.44% 6.43% 3.19% 8.19% 4.98%
JANUARY 2014.......... 61.47% 60.16% 27.62% 6.43% 6.42% 3.07% 8.20% 4.98%
FEBRUARY 2014......... 61.58% 60.17% 26.88% 6.42% 6.41% 2.95% 8.21% 4.95%
MARCH 2014............ 61.64% 60.19% 26.13% 6.41% 6.40% 2.80% 8.19% 4.93%
APRIL 2014............ 61.67% 60.20% 25.34% 6.40% 6.38% 2.67% 8.20% 4.91%
MAY 2014.............. 61.69% 60.21% 24.66% 6.39% 6.37% 2.55% 8.21% 4.88%
JUNE 2014............. 61.72% 60.22% 23.80% 6.38% 6.36% 2.42% 8.22% 4.82%
JULY 2014............. 61.76% 59.86% 23.20% 6.36% 6.34% 2.29% 8.21% 4.71%
AUGUST 2014........... 61.67% 59.49% 21.70% 6.35% 6.33% 2.15% 8.20% 4.75%
SEPTEMBER 2014........ 61.60% 60.13% 21.33% 6.33% 6.32% 2.06% 8.20% 4.79%
OCTOBER 2014.......... 61.42% 60.53% 19.85% 6.37% 6.30% 2.04% 8.27% 4.83%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2012........... 6.39% 3.01%
SEPTEMBER 2012........ 6.41% 3.03%
OCTOBER 2012.......... 6.44% 3.05%
NOVEMBER 2012......... 6.46% 3.07%
DECEMBER 2012......... 6.48% 3.09%
JANUARY 2013.......... 6.50% 3.12%
FEBRUARY 2013......... 6.53% 3.14%
MARCH 2013............ 6.63% 3.20%
APRIL 2013............ 6.65% 3.22%
MAY 2013.............. 6.68% 3.25%
JUNE 2013............. 6.70% 3.27%
JULY 2013............. 6.73% 3.29%
AUGUST 2013........... 6.75% 3.32%
SEPTEMBER 2013........ 6.78% 3.34%
OCTOBER 2013.......... 6.81% 3.37%
NOVEMBER 2013......... 6.84% 3.40%
DECEMBER 2013......... 6.86% 3.43%
JANUARY 2014.......... 6.89% 3.45%
FEBRUARY 2014......... 6.92% 3.45%
MARCH 2014............ 6.96% 3.45%
APRIL 2014............ 6.99% 3.47%
MAY 2014.............. 7.02% 3.41%
JUNE 2014............. 7.05% 3.56%
JULY 2014............. 7.09% 3.58%
AUGUST 2014........... 7.12% 3.60%
SEPTEMBER 2014........ 7.16% 3.62%
OCTOBER 2014.......... 7.25% 3.65%
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2014......... 61.32% 59.70% 18.84% 6.35% 6.30% 2.03% 8.18% 4.83%
DECEMBER 2014......... 61.22% 57.78% 17.85% 6.33% 6.30% 2.02% 8.16% 4.80%
JANUARY 2015.......... 61.12% 57.37% 16.80% 6.30% 6.28% 2.05% 8.16% 4.77%
FEBRUARY 2015......... 61.03% 56.97% 15.72% 6.28% 6.26% 2.06% 8.15% 4.75%
MARCH 2015............ 60.92% 56.54% 14.65% 6.26% 6.23% 2.09% 8.15% 4.69%
APRIL 2015............ 60.82% 56.12% 13.46% 6.23% 6.21% 2.10% 8.15% 4.74%
MAY 2015.............. 60.74% 55.68% 12.32% 6.21% 6.19% 2.11% 8.14% 4.77%
JUNE 2015............. 60.67% 55.26% 11.14% 6.18% 6.16% 2.13% 8.16% 4.83%
JULY 2015............. 60.60% 54.83% 9.95% 6.16% 6.13% 2.15% 8.15% 4.87%
AUGUST 2015........... 60.45% 55.88% 8.72% 6.13% 6.11% 2.17% 8.14% 4.92%
SEPTEMBER 2015........ 60.30% 53.90% 7.47% 6.10% 6.08% 2.19% 8.14% 4.96%
OCTOBER 2015.......... 60.15% 53.43% 6.10% 6.07% 6.05% 2.21% 8.14% 5.04%
NOVEMBER 2015......... 59.99% 52.95% 4.80% 6.04% 6.02% 2.24% 8.14% 5.09%
DECEMBER 2015......... 59.82% 52.43% 3.47% 6.01% 5.99% 2.26% 8.13% 5.14%
JANUARY 2016.......... 59.66% 51.92% 2.10% 5.98% 5.95% 2.28% 8.14% 5.19%
FEBRUARY 2016......... 59.48% 50.08% 0.62% 5.94% 5.92% 2.28% 8.13% 5.25%
MARCH 2016............ 59.29% 49.33% 0.00% 5.91% 5.88% 1.50% 8.13% 4.65%
APRIL 2016............ 59.12% 48.76% 0.00% 5.87% 5.85% 0.05% 8.12% 3.89%
MAY 2016.............. 58.79% 48.55% 0.00% 5.89% 5.87% 0.00% 8.20% 3.03%
JUNE 2016............. 58.58% 47.35% 0.00% 5.85% 5.81% 0.00% 8.09% 1.79%
JULY 2016............. 57.44% 46.71% 0.00% 5.81% 5.78% 0.00% 8.07% 0.00%
AUGUST 2016........... 57.29% 46.68% 0.00% 6.00% 5.95% 0.00% 8.28% 0.00%
SEPTEMBER 2016........ 56.37% 45.20% 0.00% 4.54% 4.49% 0.00% 8.14% 0.00%
OCTOBER 2016.......... 56.63% 43.73% 0.00% 4.59% 4.52% 0.00% 8.08% 0.00%
NOVEMBER 2016......... 57.17% 42.60% 0.00% 4.58% 4.53% 0.00% 8.06% 0.00%
DECEMBER 2016......... 56.85% 41.88% 0.00% 4.50% 4.47% 0.00% 8.06% 0.00%
JANUARY 2017.......... 54.28% 41.18% 0.00% 4.42% 4.39% 0.00% 8.05% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2014......... 7.29% 3.68%
DECEMBER 2014......... 7.33% 3.79%
JANUARY 2015.......... 7.37% 3.82%
FEBRUARY 2015......... 7.41% 3.86%
MARCH 2015............ 7.45% 3.89%
APRIL 2015............ 7.49% 3.92%
MAY 2015.............. 7.53% 3.96%
JUNE 2015............. 7.58% 4.00%
JULY 2015............. 7.62% 4.04%
AUGUST 2015........... 7.67% 4.07%
SEPTEMBER 2015........ 7.71% 4.11%
OCTOBER 2015.......... 7.76% 4.15%
NOVEMBER 2015......... 7.81% 4.20%
DECEMBER 2015......... 7.87% 4.23%
JANUARY 2016.......... 7.92% 4.28%
FEBRUARY 2016......... 7.97% 4.32%
MARCH 2016............ 8.03% 4.37%
APRIL 2016............ 8.09% 4.41%
MAY 2016.............. 8.23% 4.50%
JUNE 2016............. 8.29% 4.55%
JULY 2016............. 8.35% 4.15%
AUGUST 2016........... 8.76% 0.00%
SEPTEMBER 2016........ 8.82% 0.00%
OCTOBER 2016.......... 9.13% 0.00%
NOVEMBER 2016......... 9.32% 0.00%
DECEMBER 2016......... 9.38% 0.00%
JANUARY 2017.......... 9.44% 0.00%
</TABLE>
<PAGE> 187
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 2017......... 55.82% 39.48% 0.00% 4.48% 4.40% 0.00% 8.00% 0.00%
MARCH 2017............ 54.52% 38.72% 0.00% 4.38% 4.36% 0.00% 8.01% 0.00%
APRIL 2017............ 54.88% 37.53% 0.00% 4.34% 4.30% 0.00% 7.97% 0.00%
MAY 2017.............. 54.50% 36.76% 0.00% 4.24% 4.22% 0.00% 7.98% 0.00%
JUNE 2017............. 54.12% 36.00% 0.00% 4.14% 4.11% 0.00% 7.97% 0.00%
JULY 2017............. 53.72% 35.23% 0.00% 4.03% 4.01% 0.00% 7.98% 0.00%
AUGUST 2017........... 53.32% 34.43% 0.00% 3.92% 3.90% 0.00% 7.98% 0.00%
SEPTEMBER 2017........ 52.92% 33.62% 0.00% 3.81% 3.78% 0.00% 7.99% 0.00%
OCTOBER 2017.......... 52.51% 32.77% 0.00% 3.69% 3.66% 0.00% 7.99% 0.00%
NOVEMBER 2017......... 48.59% 31.90% 0.00% 3.57% 3.54% 0.00% 7.98% 0.00%
DECEMBER 2017......... 49.71% 28.66% 0.00% 3.56% 2.10% 0.00% 7.74% 0.00%
JANUARY 2018.......... 49.28% 27.69% 0.00% 3.44% 1.50% 0.00% 7.73% 0.00%
FEBRUARY 2018......... 49.93% 26.96% 0.00% 3.24% 0.00% 0.00% 7.83% 0.00%
MARCH 2018............ 49.69% 24.90% 0.00% 2.83% 0.00% 0.00% 7.78% 0.00%
APRIL 2018............ 49.42% 23.90% 0.00% 2.53% 0.00% 0.00% 7.73% 0.00%
MAY 2018.............. 49.16% 22.96% 0.00% 1.86% 0.00% 0.00% 7.32% 0.00%
JUNE 2018............. 48.89% 22.09% 0.00% 0.97% 0.00% 0.00% 6.08% 0.00%
JULY 2018............. 48.60% 21.28% 0.00% 0.00% 0.00% 0.00% 4.77% 0.00%
AUGUST 2018........... 48.32% 20.52% 0.00% 0.00% 0.00% 0.00% 3.45% 0.00%
SEPTEMBER 2018........ 48.03% 19.82% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2018.......... 47.73% 19.17% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2018......... 47.40% 18.57% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2018......... 46.89% 18.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2019.......... 46.17% 17.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2019......... 45.42% 16.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2019............ 44.65% 16.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2019............ 43.87% 16.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
FEBRUARY 2017......... 9.83% 0.00%
MARCH 2017............ 9.89% 0.00%
APRIL 2017............ 10.08% 0.00%
MAY 2017.............. 10.14% 0.00%
JUNE 2017............. 10.21% 0.00%
JULY 2017............. 10.27% 0.00%
AUGUST 2017........... 10.34% 0.00%
SEPTEMBER 2017........ 10.41% 0.00%
OCTOBER 2017.......... 10.48% 0.00%
NOVEMBER 2017......... 10.56% 0.00%
DECEMBER 2017......... 10.96% 0.00%
JANUARY 2018.......... 11.03% 0.00%
FEBRUARY 2018......... 11.31% 0.00%
MARCH 2018............ 11.39% 0.00%
APRIL 2018............ 11.47% 0.00%
MAY 2018.............. 11.55% 0.00%
JUNE 2018............. 11.63% 0.00%
JULY 2018............. 11.71% 0.00%
AUGUST 2018........... 11.79% 0.00%
SEPTEMBER 2018........ 10.83% 0.00%
OCTOBER 2018.......... 9.44% 0.00%
NOVEMBER 2018......... 8.00% 0.00%
DECEMBER 2018......... 6.52% 0.00%
JANUARY 2019.......... 4.99% 0.00%
FEBRUARY 2019......... 3.41% 0.00%
MARCH 2019............ 1.78% 0.00%
APRIL 2019............ 0.00% 0.00%
</TABLE>
<PAGE> 188
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2019.............. 43.06% 15.37% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2019............. 42.22% 12.76% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2019............. 41.36% 9.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2019........... 40.56% 8.54% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2019........ 39.73% 7.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2019.......... 38.88% 5.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2019......... 37.98% 4.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2019......... 37.08% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2020.......... 36.14% 1.50% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2020......... 35.13% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2020............ 29.61% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2020............ 28.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2020.............. 27.65% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2020............. 27.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2020............. 27.23% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2020........... 26.98% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2020........ 26.75% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2020.......... 26.46% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2020......... 26.29% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2020......... 19.98% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2021.......... 18.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2021......... 16.91% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2021............ 15.27% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2021............ 13.79% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2021.............. 12.26% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2021............. 10.66% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2021............. 8.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2019.............. 0.00% 0.00%
JUNE 2019............. 0.00% 0.00%
JULY 2019............. 0.00% 0.00%
AUGUST 2019........... 0.00% 0.00%
SEPTEMBER 2019........ 0.00% 0.00%
OCTOBER 2019.......... 0.00% 0.00%
NOVEMBER 2019......... 0.00% 0.00%
DECEMBER 2019......... 0.00% 0.00%
JANUARY 2020.......... 0.00% 0.00%
FEBRUARY 2020......... 0.00% 0.00%
MARCH 2020............ 0.00% 0.00%
APRIL 2020............ 0.00% 0.00%
MAY 2020.............. 0.00% 0.00%
JUNE 2020............. 0.00% 0.00%
JULY 2020............. 0.00% 0.00%
AUGUST 2020........... 0.00% 0.00%
SEPTEMBER 2020........ 0.00% 0.00%
OCTOBER 2020.......... 0.00% 0.00%
NOVEMBER 2020......... 0.00% 0.00%
DECEMBER 2020......... 0.00% 0.00%
JANUARY 2021.......... 0.00% 0.00%
FEBRUARY 2021......... 0.00% 0.00%
MARCH 2021............ 0.00% 0.00%
APRIL 2021............ 0.00% 0.00%
MAY 2021.............. 0.00% 0.00%
JUNE 2021............. 0.00% 0.00%
JULY 2021............. 0.00% 0.00%
</TABLE>
<PAGE> 189
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2021........... 7.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2021........ 3.94% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2021.......... 2.29% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2021......... 0.56% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2021......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2022.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2022............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2022............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2022.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2022............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2022............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2022........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2022........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2022.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2023.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2023............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2023............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2023.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2023............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2023............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2023........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2023........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2023.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2021........... 0.00% 0.00%
SEPTEMBER 2021........ 0.00% 0.00%
OCTOBER 2021.......... 0.00% 0.00%
NOVEMBER 2021......... 0.00% 0.00%
DECEMBER 2021......... 0.00% 0.00%
JANUARY 2022.......... 0.00% 0.00%
FEBRUARY 2022......... 0.00% 0.00%
MARCH 2022............ 0.00% 0.00%
APRIL 2022............ 0.00% 0.00%
MAY 2022.............. 0.00% 0.00%
JUNE 2022............. 0.00% 0.00%
JULY 2022............. 0.00% 0.00%
AUGUST 2022........... 0.00% 0.00%
SEPTEMBER 2022........ 0.00% 0.00%
OCTOBER 2022.......... 0.00% 0.00%
NOVEMBER 2022......... 0.00% 0.00%
DECEMBER 2022......... 0.00% 0.00%
JANUARY 2023.......... 0.00% 0.00%
FEBRUARY 2023......... 0.00% 0.00%
MARCH 2023............ 0.00% 0.00%
APRIL 2023............ 0.00% 0.00%
MAY 2023.............. 0.00% 0.00%
JUNE 2023............. 0.00% 0.00%
JULY 2023............. 0.00% 0.00%
AUGUST 2023........... 0.00% 0.00%
SEPTEMBER 2023........ 0.00% 0.00%
OCTOBER 2023.......... 0.00% 0.00%
</TABLE>
<PAGE> 190
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2024.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2024......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2024............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2024............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2024.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2023......... 0.00% 0.00%
DECEMBER 2023......... 0.00% 0.00%
JANUARY 2024.......... 0.00% 0.00%
FEBRUARY 2024......... 0.00% 0.00%
MARCH 2024............ 0.00% 0.00%
APRIL 2024............ 0.00% 0.00%
MAY 2024.............. 0.00% 0.00%
</TABLE>
<PAGE> 191
APPENDIX 6
POOL FACTORS
The following are the Pool Factors as of May 5, 1999. Such Pool Factors may
be changed by a resolution of the Controlling Trustees in connection with a
refinancing of the notes or the acquisition of additional aircraft.
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Closing........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
June 1999...................................... 100.00% 98.81% 99.71% 100.00% 100.00%
July 1999...................................... 100.00% 98.13% 99.46% 100.00% 100.00%
August 1999.................................... 100.00% 97.45% 99.21% 100.00% 100.00%
September 1999................................. 100.00% 96.36% 98.95% 100.00% 100.00%
October 1999................................... 100.00% 95.66% 98.70% 100.00% 100.00%
November 1999.................................. 100.00% 94.90% 98.70% 100.00% 100.00%
December 1999.................................. 100.00% 93.73% 98.70% 100.00% 100.00%
January 2000................................... 100.00% 92.99% 98.70% 100.00% 100.00%
February 2000.................................. 100.00% 92.24% 98.70% 100.00% 100.00%
March 2000..................................... 100.00% 91.21% 98.70% 100.00% 100.00%
April 2000..................................... 100.00% 90.46% 98.70% 100.00% 100.00%
May 2000....................................... 100.00% 89.54% 98.70% 100.00% 100.00%
June 2000...................................... 100.00% 88.61% 98.70% 100.00% 100.00%
July 2000...................................... 100.00% 87.69% 98.57% 100.00% 100.00%
August 2000.................................... 100.00% 86.92% 98.00% 100.00% 100.00%
September 2000................................. 100.00% 86.24% 97.12% 100.00% 100.00%
October 2000................................... 100.00% 85.37% 96.81% 100.00% 100.00%
November 2000.................................. 100.00% 84.59% 96.26% 100.00% 100.00%
December 2000.................................. 100.00% 83.69% 96.10% 100.00% 100.00%
January 2001................................... 100.00% 82.85% 95.81% 100.00% 100.00%
February 2001.................................. 100.00% 81.95% 95.70% 100.00% 100.00%
March 2001..................................... 100.00% 81.14% 95.22% 100.00% 100.00%
April 2001..................................... 100.00% 80.20% 95.22% 100.00% 100.00%
May 2001....................................... 100.00% 79.22% 95.22% 100.00% 100.00%
June 2001...................................... 100.00% 78.24% 95.22% 100.00% 100.00%
July 2001...................................... 100.00% 77.23% 95.22% 100.00% 100.00%
August 2001.................................... 100.00% 76.23% 95.22% 100.00% 100.00%
September 2001................................. 100.00% 75.36% 94.77% 100.00% 100.00%
October 2001................................... 100.00% 74.52% 94.19% 100.00% 100.00%
November 2001.................................. 100.00% 73.51% 94.19% 100.00% 100.00%
December 2001.................................. 100.00% 72.51% 94.19% 100.00% 100.00%
January 2002................................... 100.00% 71.50% 94.19% 100.00% 100.00%
</TABLE>
<PAGE> 192
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
February 2002.................................. 100.00% 70.49% 94.19% 100.00% 100.00%
March 2002..................................... 100.00% 69.45% 94.19% 100.00% 100.00%
April 2002..................................... 100.00% 68.43% 94.19% 100.00% 100.00%
May 2002....................................... 100.00% 67.99% 94.09% 97.82% 100.00%
June 2002...................................... 100.00% 67.78% 94.09% 94.81% 99.78%
July 2002...................................... 100.00% 67.35% 94.09% 92.61% 99.47%
August 2002.................................... 100.00% 66.49% 94.09% 91.88% 99.47%
September 2002................................. 100.00% 66.34% 93.01% 90.14% 98.85%
October 2002................................... 100.00% 65.48% 92.72% 90.14% 98.17%
November 2002.................................. 100.00% 65.01% 92.61% 88.57% 97.31%
December 2002.................................. 100.00% 64.44% 92.50% 87.07% 96.82%
January 2003................................... 100.00% 63.55% 92.39% 86.68% 96.51%
February 2003.................................. 100.00% 62.81% 92.18% 85.86% 96.19%
March 2003..................................... 100.00% 62.37% 91.88% 83.94% 95.70%
April 2003..................................... 100.00% 61.95% 91.67% 81.81% 95.39%
May 2003....................................... 100.00% 61.36% 91.46% 80.34% 94.89%
June 2003...................................... 100.00% 60.83% 91.16% 78.67% 94.58%
July 2003...................................... 100.00% 60.28% 90.86% 77.00% 94.26%
August 2003.................................... 100.00% 60.07% 90.46% 74.27% 93.77%
September 2003................................. 100.00% 59.91% 89.44% 71.98% 93.45%
October 2003................................... 100.00% 58.85% 89.31% 71.98% 93.14%
November 2003.................................. 100.00% 58.39% 87.31% 71.98% 92.82%
December 2003.................................. 100.00% 57.89% 86.75% 70.50% 92.32%
January 2004................................... 100.00% 57.03% 86.00% 70.50% 92.00%
February 2004.................................. 100.00% 56.12% 85.26% 70.50% 91.68%
March 2004..................................... 100.00% 55.16% 84.52% 70.50% 91.36%
April 2004..................................... 100.00% 54.23% 83.87% 70.50% 90.87%
May 2004....................................... 100.00% 53.17% 83.58% 70.50% 90.72%
June 2004...................................... 100.00% 52.09% 83.28% 70.50% 90.39%
July 2004...................................... 100.00% 50.97% 82.98% 70.50% 90.07%
August 2004.................................... 100.00% 49.90% 82.68% 70.50% 89.57%
September 2004................................. 100.00% 48.92% 82.38% 70.03% 89.25%
October 2004................................... 100.00% 47.95% 82.08% 69.57% 88.75%
November 2004.................................. 100.00% 46.93% 81.77% 69.21% 88.42%
December 2004.................................. 100.00% 45.85% 81.47% 68.85% 88.09%
January 2005................................... 100.00% 44.74% 81.16% 68.69% 87.76%
February 2005.................................. 100.00% 44.37% 80.86% 65.71% 87.43%
March 2005..................................... 100.00% 43.02% 80.86% 65.71% 87.10%
April 2005..................................... 100.00% 41.75% 80.86% 65.71% 86.77%
</TABLE>
<PAGE> 193
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
May 2005....................................... 100.00% 40.45% 80.86% 65.71% 86.44%
June 2005...................................... 100.00% 39.17% 80.86% 65.71% 86.10%
July 2005...................................... 100.00% 37.93% 80.86% 65.45% 85.77%
August 2005.................................... 100.00% 36.86% 80.86% 64.60% 85.43%
September 2005................................. 100.00% 35.66% 80.84% 64.25% 85.09%
October 2005................................... 100.00% 34.37% 80.84% 64.09% 84.76%
November 2005.................................. 100.00% 33.06% 80.84% 64.09% 84.42%
December 2005.................................. 100.00% 31.80% 80.84% 63.77% 84.08%
January 2006................................... 100.00% 30.56% 80.84% 63.41% 83.74%
February 2006.................................. 100.00% 29.30% 80.84% 63.16% 83.39%
March 2006..................................... 100.00% 28.11% 80.25% 62.90% 83.21%
April 2006..................................... 100.00% 27.11% 79.16% 62.90% 82.87%
May 2006....................................... 100.00% 26.11% 77.96% 62.90% 82.52%
June 2006...................................... 100.00% 25.21% 76.68% 62.68% 82.17%
July 2006...................................... 100.00% 24.21% 75.82% 62.23% 81.83%
August 2006.................................... 100.00% 23.46% 74.37% 61.59% 81.48%
September 2006................................. 100.00% 22.19% 73.94% 61.59% 81.28%
October 2006................................... 100.00% 21.25% 72.46% 61.59% 80.93%
November 2006.................................. 100.00% 20.23% 71.26% 61.59% 80.58%
December 2006.................................. 100.00% 19.11% 70.27% 61.59% 80.23%
January 2007................................... 100.00% 17.98% 69.33% 61.59% 80.02%
February 2007.................................. 100.00% 16.87% 68.36% 61.59% 79.67%
March 2007..................................... 100.00% 15.57% 67.74% 61.59% 79.31%
April 2007..................................... 100.00% 14.27% 67.24% 61.59% 79.10%
May 2007....................................... 100.00% 13.07% 66.40% 61.59% 78.74%
June 2007...................................... 100.00% 11.90% 65.49% 61.59% 78.53%
July 2007...................................... 100.00% 10.73% 64.72% 61.59% 77.86%
August 2007.................................... 100.00% 9.64% 64.12% 61.59% 76.47%
September 2007................................. 100.00% 8.57% 63.52% 61.59% 74.93%
October 2007................................... 100.00% 7.53% 63.00% 61.59% 72.93%
November 2007.................................. 100.00% 6.45% 62.41% 61.59% 71.44%
December 2007.................................. 100.00% 5.52% 61.67% 61.59% 69.01%
January 2008................................... 100.00% 4.35% 61.15% 61.59% 67.80%
February 2008.................................. 100.00% 3.32% 60.49% 61.59% 65.95%
March 2008..................................... 100.00% 2.19% 59.98% 61.59% 64.04%
April 2008..................................... 100.00% 1.19% 59.32% 61.59% 61.89%
May 2008....................................... 100.00% 0.14% 58.74% 61.59% 59.84%
June 2008...................................... 99.27% 0.00% 58.09% 61.59% 58.17%
July 2008...................................... 98.37% 0.00% 57.52% 61.59% 56.71%
</TABLE>
<PAGE> 194
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
August 2008.................................... 97.56% 0.00% 56.87% 61.59% 54.74%
September 2008................................. 96.59% 0.00% 56.30% 61.59% 53.81%
October 2008................................... 95.56% 0.00% 55.73% 61.59% 53.22%
November 2008.................................. 94.63% 0.00% 55.03% 61.59% 52.20%
December 2008.................................. 93.67% 0.00% 54.39% 61.59% 51.12%
January 2009................................... 92.91% 0.00% 53.76% 61.59% 48.59%
February 2009.................................. 92.01% 0.00% 53.13% 61.59% 47.05%
March 2009..................................... 90.99% 0.00% 52.51% 61.59% 46.02%
April 2009..................................... 89.95% 0.00% 51.89% 61.59% 45.57%
May 2009....................................... 88.94% 0.00% 51.33% 61.18% 45.26%
June 2009...................................... 88.01% 0.00% 50.72% 60.53% 45.02%
July 2009...................................... 87.08% 0.00% 50.17% 59.95% 44.33%
August 2009.................................... 86.16% 0.00% 49.62% 59.22% 43.79%
September 2009................................. 85.16% 0.00% 49.15% 58.65% 43.54%
October 2009................................... 84.29% 0.00% 48.67% 57.31% 43.44%
November 2009.................................. 83.29% 0.00% 48.20% 56.67% 43.22%
December 2009.................................. 82.25% 0.00% 47.79% 56.03% 43.05%
January 2010................................... 81.23% 0.00% 47.19% 55.45% 43.05%
February 2010.................................. 80.63% 0.00% 46.15% 54.69% 40.87%
March 2010..................................... 79.22% 0.00% 45.57% 54.01% 36.56%
April 2010..................................... 78.27% 0.00% 44.93% 53.39% 36.56%
May 2010....................................... 77.30% 0.00% 44.35% 52.86% 36.56%
June 2010...................................... 76.41% 0.00% 43.59% 52.39% 36.21%
July 2010...................................... 75.74% 0.00% 43.02% 51.85% 33.73%
August 2010.................................... 74.52% 0.00% 42.95% 51.85% 33.73%
September 2010................................. 73.43% 0.00% 42.34% 51.85% 33.73%
October 2010................................... 72.80% 0.00% 41.20% 50.20% 33.73%
November 2010.................................. 71.97% 0.00% 40.59% 48.89% 33.73%
December 2010.................................. 71.17% 0.00% 39.91% 47.46% 33.73%
January 2011................................... 70.26% 0.00% 39.31% 46.46% 33.73%
February 2011.................................. 69.46% 0.00% 38.70% 44.92% 33.73%
March 2011..................................... 68.42% 0.00% 38.10% 44.34% 33.73%
April 2011..................................... 67.41% 0.00% 37.44% 43.79% 33.73%
May 2011....................................... 66.45% 0.00% 36.68% 43.36% 33.22%
June 2011...................................... 65.45% 0.00% 36.15% 43.00% 32.57%
July 2011...................................... 64.40% 0.00% 35.39% 42.61% 32.57%
August 2011.................................... 63.50% 0.00% 34.75% 42.22% 31.18%
September 2011................................. 62.47% 0.00% 34.07% 41.66% 31.18%
October 2011................................... 61.48% 0.00% 33.44% 41.24% 30.69%
</TABLE>
<PAGE> 195
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
November 2011.................................. 60.53% 0.00% 32.43% 40.88% 30.48%
December 2011.................................. 58.75% 0.00% 31.74% 40.29% 30.48%
January 2012................................... 57.67% 0.00% 31.14% 39.97% 30.48%
February 2012.................................. 56.73% 0.00% 30.00% 39.59% 30.48%
March 2012..................................... 54.82% 0.00% 29.39% 38.99% 29.68%
April 2012..................................... 53.80% 0.00% 28.66% 38.58% 29.68%
May 2012....................................... 52.91% 0.00% 28.04% 37.30% 29.68%
June 2012...................................... 51.80% 0.00% 27.52% 36.98% 29.68%
July 2012...................................... 50.83% 0.00% 27.01% 35.93% 29.68%
August 2012.................................... 47.34% 0.00% 25.40% 35.43% 29.68%
September 2012................................. 46.46% 0.00% 24.09% 35.10% 29.68%
October 2012................................... 45.45% 0.00% 23.48% 34.59% 29.68%
November 2012.................................. 44.52% 0.00% 22.82% 33.83% 29.68%
December 2012.................................. 43.50% 0.00% 22.22% 33.43% 29.68%
January 2013................................... 42.70% 0.00% 21.58% 32.00% 29.68%
February 2013.................................. 41.86% 0.00% 20.47% 31.29% 29.68%
March 2013..................................... 39.69% 0.00% 19.57% 30.55% 29.68%
April 2013..................................... 38.66% 0.00% 19.05% 30.11% 29.68%
May 2013....................................... 37.67% 0.00% 18.31% 29.75% 29.68%
June 2013...................................... 36.65% 0.00% 17.81% 29.35% 29.68%
July 2013...................................... 35.70% 0.00% 17.18% 28.67% 29.68%
August 2013.................................... 34.83% 0.00% 16.51% 27.67% 29.68%
September 2013................................. 33.81% 0.00% 15.85% 27.39% 29.68%
October 2013................................... 32.83% 0.00% 15.24% 26.78% 29.68%
November 2013.................................. 31.80% 0.00% 14.59% 26.42% 29.68%
December 2013.................................. 30.74% 0.00% 13.99% 26.11% 29.68%
January 2014................................... 29.67% 0.00% 13.36% 25.87% 29.68%
February 2014.................................. 28.65% 0.00% 12.74% 25.51% 29.47%
March 2014..................................... 27.63% 0.00% 11.99% 25.20% 29.26%
April 2014..................................... 26.57% 0.00% 11.34% 24.95% 29.26%
May 2014....................................... 25.65% 0.00% 10.75% 24.54% 28.45%
June 2014...................................... 24.55% 0.00% 10.18% 24.54% 28.45%
July 2014...................................... 23.73% 0.00% 9.49% 23.33% 28.45%
August 2014.................................... 22.50% 0.00% 9.49% 23.33% 28.45%
September 2014................................. 21.45% 0.00% 8.70% 23.33% 28.45%
October 2014................................... 19.63% 0.00% 8.17% 23.14% 28.45%
November 2014.................................. 18.47% 0.00% 8.06% 22.92% 28.45%
December 2014.................................. 17.35% 0.00% 7.95% 22.56% 28.45%
January 2015................................... 16.18% 0.00% 7.95% 22.25% 28.45%
</TABLE>
<PAGE> 196
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
February 2015.................................. 15.01% 0.00% 7.95% 21.96% 28.45%
March 2015..................................... 13.86% 0.00% 7.95% 21.50% 28.45%
April 2015..................................... 12.63% 0.00% 7.95% 21.50% 28.45%
May 2015....................................... 11.45% 0.00% 7.95% 21.50% 28.45%
June 2015...................................... 10.26% 0.00% 7.95% 21.50% 28.45%
July 2015...................................... 9.07% 0.00% 7.95% 21.50% 28.45%
August 2015.................................... 7.88% 0.00% 7.95% 21.50% 28.45%
September 2015................................. 6.68% 0.00% 7.95% 21.50% 28.45%
October 2015................................... 5.49% 0.00% 7.95% 21.50% 28.45%
November 2015.................................. 4.29% 0.00% 7.95% 21.50% 28.45%
December 2015.................................. 3.10% 0.00% 7.95% 21.50% 28.45%
January 2016................................... 1.89% 0.00% 7.95% 21.50% 28.45%
February 2016.................................. 0.68% 0.00% 7.95% 21.50% 28.45%
March 2016..................................... 0.00% 0.00% 5.80% 21.50% 28.45%
April 2016..................................... 0.00% 0.00% 0.86% 21.50% 28.45%
May 2016....................................... 0.00% 0.00% 0.00% 12.88% 28.45%
June 2016...................................... 0.00% 0.00% 0.00% 7.00% 28.45%
July 2016...................................... 0.00% 0.00% 0.00% 0.00% 26.54%
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%
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%
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%
</TABLE>
<PAGE> 197
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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%
August 2018.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2018................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2018................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2018.................................. 0.00% 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%
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%
</TABLE>
<PAGE> 198
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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%
August 2023.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2023................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2023................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2023.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2023.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2024................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2024..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2024..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2024....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2024...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2024...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2024.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2024................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2024................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 199
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
November 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2025................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2025..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2025..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2025....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2025...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2025...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2025.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2025................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2025................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2026................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2026.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2026..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2026..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 200
APPENDIX 7
EXTENDED POOL FACTORS
The following are the Extended Pool Factors as of May 5, 1999. Such
Extended Pool Factors may be changed by a resolution of the Controlling Trustees
in connection with a refinancing of the notes or the acquisition of additional
aircraft.
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Closing........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
June 1999...................................... 100.00% 99.27% 99.71% 100.00% 100.00%
July 1999...................................... 100.00% 98.86% 99.46% 100.00% 100.00%
August 1999.................................... 100.00% 98.29% 99.21% 100.00% 100.00%
September 1999................................. 100.00% 97.71% 98.95% 100.00% 100.00%
October 1999................................... 100.00% 97.14% 98.70% 100.00% 100.00%
November 1999.................................. 100.00% 96.43% 98.70% 100.00% 100.00%
December 1999.................................. 100.00% 95.75% 98.70% 100.00% 100.00%
January 2000................................... 100.00% 95.07% 98.70% 100.00% 100.00%
February 2000.................................. 100.00% 94.36% 98.70% 100.00% 100.00%
March 2000..................................... 100.00% 93.68% 98.70% 100.00% 100.00%
April 2000..................................... 100.00% 92.97% 98.70% 100.00% 100.00%
May 2000....................................... 100.00% 92.28% 98.70% 100.00% 100.00%
June 2000...................................... 100.00% 91.41% 98.70% 100.00% 100.00%
July 2000...................................... 100.00% 90.31% 98.70% 100.00% 100.00%
August 2000.................................... 100.00% 88.51% 98.70% 100.00% 100.00%
September 2000................................. 100.00% 87.29% 98.70% 100.00% 100.00%
October 2000................................... 100.00% 86.32% 98.70% 100.00% 100.00%
November 2000.................................. 100.00% 85.32% 98.70% 100.00% 100.00%
December 2000.................................. 100.00% 84.45% 98.70% 100.00% 100.00%
January 2001................................... 100.00% 83.76% 98.70% 100.00% 100.00%
February 2001.................................. 100.00% 83.11% 98.70% 100.00% 100.00%
March 2001..................................... 100.00% 83.11% 98.70% 100.00% 100.00%
April 2001..................................... 100.00% 82.82% 98.70% 100.00% 100.00%
May 2001....................................... 100.00% 81.75% 98.70% 100.00% 100.00%
June 2001...................................... 100.00% 80.91% 98.70% 100.00% 100.00%
July 2001...................................... 100.00% 80.03% 98.70% 100.00% 100.00%
August 2001.................................... 100.00% 79.18% 98.70% 100.00% 100.00%
September 2001................................. 100.00% 78.27% 98.70% 100.00% 100.00%
October 2001................................... 100.00% 77.42% 98.70% 100.00% 100.00%
November 2001.................................. 100.00% 77.21% 98.70% 100.00% 100.00%
December 2001.................................. 100.00% 76.63% 98.70% 100.00% 100.00%
</TABLE>
<PAGE> 201
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
January 2002................................... 100.00% 76.08% 98.70% 100.00% 100.00%
February 2002.................................. 100.00% 75.50% 98.70% 100.00% 100.00%
March 2002..................................... 100.00% 75.00% 98.70% 100.00% 100.00%
April 2002..................................... 100.00% 74.42% 98.70% 100.00% 100.00%
May 2002....................................... 100.00% 73.89% 98.70% 100.00% 100.00%
June 2002...................................... 100.00% 73.33% 98.51% 99.92% 100.00%
July 2002...................................... 100.00% 72.73% 96.79% 99.92% 100.00%
August 2002.................................... 100.00% 72.17% 95.09% 99.92% 100.00%
September 2002................................. 100.00% 71.57% 93.01% 99.92% 100.00%
October 2002................................... 100.00% 70.65% 93.01% 99.92% 100.00%
November 2002.................................. 100.00% 70.63% 93.01% 99.92% 100.00%
December 2002.................................. 100.00% 70.29% 92.50% 99.91% 100.00%
January 2003................................... 100.00% 69.95% 92.39% 98.21% 100.00%
February 2003.................................. 100.00% 69.51% 92.18% 96.95% 100.00%
March 2003..................................... 100.00% 69.19% 91.88% 95.21% 100.00%
April 2003..................................... 100.00% 68.78% 91.67% 93.83% 100.00%
May 2003....................................... 100.00% 68.39% 91.46% 92.24% 100.00%
June 2003...................................... 100.00% 68.00% 91.16% 90.80% 100.00%
July 2003...................................... 100.00% 67.57% 90.86% 89.42% 100.00%
August 2003.................................... 100.00% 67.17% 90.46% 88.09% 100.00%
September 2003................................. 100.00% 66.74% 89.44% 87.61% 100.00%
October 2003................................... 100.00% 66.03% 89.31% 87.07% 100.00%
November 2003.................................. 100.00% 66.03% 87.31% 86.15% 100.00%
December 2003.................................. 100.00% 65.46% 86.75% 85.60% 100.00%
January 2004................................... 100.00% 64.93% 86.00% 85.14% 100.00%
February 2004.................................. 100.00% 64.40% 85.26% 84.52% 100.00%
March 2004..................................... 100.00% 63.86% 84.52% 83.71% 100.00%
April 2004..................................... 100.00% 63.29% 83.87% 83.07% 100.00%
May 2004....................................... 100.00% 62.62% 83.58% 82.53% 100.00%
June 2004...................................... 100.00% 61.94% 83.28% 81.83% 100.00%
July 2004...................................... 100.00% 61.25% 82.98% 81.03% 100.00%
August 2004.................................... 100.00% 60.57% 82.68% 80.31% 100.00%
September 2004................................. 100.00% 59.88% 82.38% 79.57% 100.00%
October 2004................................... 100.00% 59.19% 82.08% 78.76% 100.00%
November 2004.................................. 100.00% 58.50% 81.77% 78.02% 100.00%
December 2004.................................. 100.00% 57.81% 81.47% 77.04% 100.00%
January 2005................................... 100.00% 57.11% 81.16% 76.16% 100.00%
February 2005.................................. 100.00% 56.41% 80.86% 75.28% 100.00%
March 2005..................................... 100.00% 55.05% 80.86% 75.28% 100.00%
</TABLE>
<PAGE> 202
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
April 2005..................................... 100.00% 54.32% 80.86% 75.01% 100.00%
May 2005....................................... 100.00% 53.65% 80.86% 73.50% 100.00%
June 2005...................................... 100.00% 52.94% 80.86% 72.20% 100.00%
July 2005...................................... 100.00% 52.21% 80.86% 70.87% 100.00%
August 2005.................................... 100.00% 51.53% 80.86% 69.45% 100.00%
September 2005................................. 100.00% 50.80% 80.84% 68.23% 100.00%
October 2005................................... 100.00% 49.96% 80.84% 67.25% 100.00%
November 2005.................................. 100.00% 49.12% 80.84% 66.36% 100.00%
December 2005.................................. 100.00% 48.20% 80.84% 65.64% 100.00%
January 2006................................... 100.00% 47.33% 80.84% 64.82% 100.00%
February 2006.................................. 100.00% 46.43% 80.84% 64.07% 100.00%
March 2006..................................... 100.00% 45.59% 80.84% 62.90% 100.00%
April 2006..................................... 100.00% 44.67% 80.84% 62.90% 100.00%
May 2006....................................... 100.00% 43.79% 80.84% 62.90% 100.00%
June 2006...................................... 100.00% 42.92% 80.84% 62.68% 100.00%
July 2006...................................... 100.00% 42.00% 80.84% 62.23% 100.00%
August 2006.................................... 100.00% 41.13% 80.84% 61.59% 100.00%
September 2006................................. 100.00% 40.10% 80.84% 61.59% 100.00%
October 2006................................... 100.00% 39.08% 80.84% 61.59% 100.00%
November 2006.................................. 100.00% 38.01% 80.84% 61.59% 100.00%
December 2006.................................. 100.00% 36.84% 80.84% 61.59% 100.00%
January 2007................................... 100.00% 35.75% 80.84% 61.59% 100.00%
February 2007.................................. 100.00% 34.63% 80.84% 61.59% 100.00%
March 2007..................................... 100.00% 32.53% 80.71% 61.59% 100.00%
April 2007..................................... 100.00% 31.42% 80.12% 61.59% 100.00%
May 2007....................................... 100.00% 30.33% 79.45% 61.59% 100.00%
June 2007...................................... 100.00% 29.25% 78.79% 61.59% 100.00%
July 2007...................................... 100.00% 28.12% 78.23% 61.59% 100.00%
August 2007.................................... 100.00% 26.99% 77.73% 61.59% 100.00%
September 2007................................. 100.00% 25.82% 77.39% 61.59% 100.00%
October 2007................................... 100.00% 24.63% 77.03% 61.59% 100.00%
November 2007.................................. 100.00% 23.44% 76.72% 61.59% 100.00%
December 2007.................................. 100.00% 22.16% 76.60% 61.59% 100.00%
January 2008................................... 100.00% 20.97% 76.24% 61.59% 100.00%
February 2008.................................. 100.00% 19.77% 75.92% 61.59% 100.00%
March 2008..................................... 100.00% 19.00% 74.03% 61.59% 100.00%
April 2008..................................... 100.00% 18.00% 73.04% 61.59% 100.00%
May 2008....................................... 100.00% 16.85% 72.48% 61.59% 100.00%
June 2008...................................... 100.00% 15.87% 71.45% 61.59% 100.00%
</TABLE>
<PAGE> 203
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
July 2008...................................... 100.00% 14.76% 70.73% 61.59% 100.00%
August 2008.................................... 100.00% 13.70% 69.92% 61.59% 100.00%
September 2008................................. 100.00% 12.55% 69.36% 61.59% 100.00%
October 2008................................... 100.00% 11.18% 69.36% 61.59% 100.00%
November 2008.................................. 100.00% 9.80% 69.36% 61.59% 100.00%
December 2008.................................. 100.00% 8.40% 69.36% 61.59% 100.00%
January 2009................................... 100.00% 7.00% 69.36% 61.59% 100.00%
February 2009.................................. 100.00% 5.71% 69.36% 61.59% 100.00%
March 2009..................................... 100.00% 4.53% 69.02% 61.59% 100.00%
April 2009..................................... 100.00% 2.77% 69.02% 61.59% 100.00%
May 2009....................................... 100.00% 1.39% 69.02% 61.59% 100.00%
June 2009...................................... 99.89% 0.00% 69.02% 61.59% 100.00%
July 2009...................................... 98.76% 0.00% 69.02% 61.59% 100.00%
August 2009.................................... 97.62% 0.00% 69.02% 61.59% 100.00%
September 2009................................. 96.48% 0.00% 69.02% 61.59% 100.00%
October 2009................................... 95.35% 0.00% 69.02% 61.59% 100.00%
November 2009.................................. 94.19% 0.00% 69.02% 61.59% 100.00%
December 2009.................................. 93.22% 0.00% 69.02% 61.59% 100.00%
January 2010................................... 92.29% 0.00% 69.02% 61.59% 100.00%
February 2010.................................. 91.59% 0.00% 69.02% 61.59% 100.00%
March 2010..................................... 90.21% 0.00% 67.61% 61.59% 100.00%
April 2010..................................... 89.50% 0.00% 66.37% 61.59% 100.00%
May 2010....................................... 88.61% 0.00% 65.81% 61.59% 100.00%
June 2010...................................... 87.64% 0.00% 65.66% 61.59% 100.00%
July 2010...................................... 86.73% 0.00% 65.16% 61.59% 100.00%
August 2010.................................... 86.20% 0.00% 63.17% 61.59% 100.00%
September 2010................................. 85.45% 0.00% 62.07% 61.59% 100.00%
October 2010................................... 84.93% 0.00% 59.92% 61.59% 100.00%
November 2010.................................. 84.50% 0.00% 57.46% 61.59% 100.00%
December 2010.................................. 84.01% 0.00% 55.17% 61.59% 100.00%
January 2011................................... 83.70% 0.00% 53.96% 61.59% 100.00%
February 2011.................................. 82.90% 0.00% 53.26% 61.59% 100.00%
March 2011..................................... 82.26% 0.00% 52.63% 61.59% 100.00%
April 2011..................................... 81.76% 0.00% 51.87% 61.59% 100.00%
May 2011....................................... 81.23% 0.00% 51.07% 61.59% 100.00%
June 2011...................................... 80.71% 0.00% 50.27% 61.59% 100.00%
July 2011...................................... 80.18% 0.00% 49.48% 61.59% 100.00%
August 2011.................................... 79.64% 0.00% 48.69% 61.59% 100.00%
September 2011................................. 79.15% 0.00% 47.01% 61.59% 100.00%
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
October 2011................................... 78.85% 0.00% 46.02% 61.59% 100.00%
November 2011.................................. 78.68% 0.00% 46.02% 61.59% 100.00%
December 2011.................................. 78.34% 0.00% 44.17% 61.59% 100.00%
January 2012................................... 78.01% 0.00% 42.99% 61.59% 100.00%
February 2012.................................. 77.69% 0.00% 41.83% 61.59% 100.00%
March 2012..................................... 76.73% 0.00% 40.67% 61.59% 100.00%
April 2012..................................... 76.07% 0.00% 39.49% 61.59% 100.00%
May 2012....................................... 75.39% 0.00% 38.32% 61.59% 100.00%
June 2012...................................... 74.75% 0.00% 37.06% 61.59% 100.00%
July 2012...................................... 74.07% 0.00% 35.86% 61.59% 100.00%
August 2012.................................... 71.76% 0.00% 34.64% 58.31% 100.00%
September 2012................................. 71.43% 0.00% 32.76% 57.62% 100.00%
October 2012................................... 70.92% 0.00% 31.60% 56.96% 100.00%
November 2012.................................. 70.91% 0.00% 31.52% 52.71% 100.00%
December 2012.................................. 70.82% 0.00% 31.44% 48.82% 100.00%
January 2013................................... 70.48% 0.00% 31.31% 46.91% 100.00%
February 2013.................................. 70.13% 0.00% 31.08% 46.68% 100.00%
March 2013..................................... 68.82% 0.00% 30.78% 45.75% 100.00%
April 2013..................................... 68.47% 0.00% 30.65% 45.48% 100.00%
May 2013....................................... 68.14% 0.00% 30.38% 45.20% 100.00%
June 2013...................................... 67.80% 0.00% 30.16% 44.93% 100.00%
July 2013...................................... 67.45% 0.00% 29.90% 44.65% 100.00%
August 2013.................................... 67.10% 0.00% 29.67% 44.21% 100.00%
September 2013................................. 66.67% 0.00% 28.96% 43.93% 100.00%
October 2013................................... 66.10% 0.00% 28.69% 43.60% 100.00%
November 2013.................................. 65.62% 0.00% 28.43% 43.21% 100.00%
December 2013.................................. 65.11% 0.00% 28.21% 42.88% 100.00%
January 2014................................... 64.63% 0.00% 27.94% 42.59% 100.00%
February 2014.................................. 64.13% 0.00% 27.68% 42.31% 100.00%
March 2014..................................... 63.64% 0.00% 27.41% 41.86% 100.00%
April 2014..................................... 63.13% 0.00% 27.11% 41.58% 100.00%
May 2014....................................... 62.63% 0.00% 26.84% 41.29% 100.00%
June 2014...................................... 62.12% 0.00% 26.58% 41.00% 100.00%
July 2014...................................... 61.31% 0.00% 26.36% 41.00% 100.00%
August 2014.................................... 60.52% 0.00% 26.09% 41.00% 100.00%
September 2014................................. 60.47% 0.00% 25.75% 39.87% 100.00%
October 2014................................... 59.85% 0.00% 25.24% 39.54% 100.00%
November 2014.................................. 59.02% 0.00% 25.22% 39.54% 100.00%
December 2014.................................. 58.25% 0.00% 24.92% 39.54% 100.00%
</TABLE>
<PAGE> 205
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
January 2015................................... 57.50% 0.00% 24.59% 39.54% 100.00%
February 2015.................................. 56.73% 0.00% 24.29% 39.54% 100.00%
March 2015..................................... 55.93% 0.00% 24.00% 39.54% 100.00%
April 2015..................................... 55.18% 0.00% 23.67% 39.54% 100.00%
May 2015....................................... 54.45% 0.00% 23.37% 39.54% 100.00%
June 2015...................................... 53.74% 0.00% 23.04% 39.54% 100.00%
July 2015...................................... 53.01% 0.00% 22.75% 39.54% 100.00%
August 2015.................................... 52.29% 0.00% 22.43% 39.54% 100.00%
September 2015................................. 51.57% 0.00% 22.10% 39.54% 100.00%
October 2015................................... 50.84% 0.00% 21.78% 39.54% 100.00%
November 2015.................................. 50.13% 0.00% 21.46% 39.54% 100.00%
December 2015.................................. 49.40% 0.00% 21.14% 39.54% 100.00%
January 2016................................... 48.67% 0.00% 20.82% 39.54% 100.00%
February 2016.................................. 47.96% 0.00% 20.47% 39.54% 100.00%
March 2016..................................... 47.21% 0.00% 20.15% 39.54% 100.00%
April 2016..................................... 46.48% 0.00% 19.81% 39.54% 100.00%
May 2016....................................... 45.07% 0.00% 19.46% 39.54% 100.00%
June 2016...................................... 44.35% 0.00% 19.12% 39.54% 100.00%
July 2016...................................... 43.62% 0.00% 18.79% 39.54% 100.00%
August 2016.................................... 40.37% 0.00% 18.43% 39.54% 100.00%
September 2016................................. 40.37% 0.00% 13.80% 39.54% 100.00%
October 2016................................... 38.51% 0.00% 13.44% 39.54% 100.00%
November 2016.................................. 37.10% 0.00% 13.08% 39.54% 100.00%
December 2016.................................. 36.51% 0.00% 12.73% 39.54% 100.00%
January 2017................................... 35.93% 0.00% 12.38% 39.54% 100.00%
February 2017.................................. 33.53% 0.00% 12.01% 39.54% 100.00%
March 2017..................................... 32.96% 0.00% 11.63% 39.54% 100.00%
April 2017..................................... 31.75% 0.00% 11.27% 39.54% 100.00%
May 2017....................................... 31.21% 0.00% 10.90% 39.54% 100.00%
June 2017...................................... 30.67% 0.00% 10.54% 39.54% 100.00%
July 2017...................................... 30.13% 0.00% 10.16% 39.54% 100.00%
August 2017.................................... 29.59% 0.00% 9.79% 39.54% 100.00%
September 2017................................. 29.04% 0.00% 9.42% 39.54% 100.00%
October 2017................................... 28.50% 0.00% 9.03% 39.54% 100.00%
November 2017.................................. 27.98% 0.00% 8.64% 39.54% 100.00%
December 2017.................................. 26.05% 0.00% 8.27% 39.54% 100.00%
January 2018................................... 25.56% 0.00% 7.91% 39.54% 100.00%
February 2018.................................. 24.34% 0.00% 7.24% 39.54% 100.00%
March 2018..................................... 24.02% 0.00% 6.26% 39.54% 100.00%
</TABLE>
<PAGE> 206
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
April 2018..................................... 23.64% 0.00% 5.54% 39.54% 100.00%
May 2018....................................... 23.46% 0.00% 4.03% 39.54% 100.00%
June 2018...................................... 23.38% 0.00% 2.08% 39.54% 100.00%
July 2018...................................... 23.32% 0.00% 0.00% 39.54% 100.00%
August 2018.................................... 22.76% 0.00% 0.00% 39.54% 100.00%
September 2018................................. 22.19% 0.00% 0.00% 39.54% 100.00%
October 2018................................... 21.61% 0.00% 0.00% 39.54% 100.00%
November 2018.................................. 21.04% 0.00% 0.00% 39.54% 100.00%
December 2018.................................. 20.46% 0.00% 0.00% 39.54% 100.00%
January 2019................................... 19.88% 0.00% 0.00% 39.54% 100.00%
February 2019.................................. 19.30% 0.00% 0.00% 39.54% 100.00%
March 2019..................................... 18.71% 0.00% 0.00% 39.54% 100.00%
April 2019..................................... 18.17% 0.00% 0.00% 39.54% 100.00%
May 2019....................................... 17.63% 0.00% 0.00% 39.54% 100.00%
June 2019...................................... 17.10% 0.00% 0.00% 39.54% 100.00%
July 2019...................................... 16.60% 0.00% 0.00% 39.54% 100.00%
August 2019.................................... 16.11% 0.00% 0.00% 39.54% 100.00%
September 2019................................. 15.61% 0.00% 0.00% 39.54% 100.00%
October 2019................................... 15.12% 0.00% 0.00% 39.54% 100.00%
November 2019.................................. 14.62% 0.00% 0.00% 39.54% 100.00%
December 2019.................................. 14.15% 0.00% 0.00% 39.54% 100.00%
January 2020................................... 13.67% 0.00% 0.00% 39.54% 100.00%
February 2020.................................. 13.20% 0.00% 0.00% 39.54% 100.00%
March 2020..................................... 12.16% 0.00% 0.00% 39.54% 100.00%
April 2020..................................... 11.41% 0.00% 0.00% 39.54% 100.00%
May 2020....................................... 11.03% 0.00% 0.00% 39.54% 100.00%
June 2020...................................... 10.81% 0.00% 0.00% 39.54% 100.00%
July 2020...................................... 10.54% 0.00% 0.00% 39.54% 100.00%
August 2020.................................... 10.28% 0.00% 0.00% 39.54% 100.00%
September 2020................................. 10.04% 0.00% 0.00% 39.54% 100.00%
October 2020................................... 9.68% 0.00% 0.00% 39.54% 100.00%
November 2020.................................. 9.27% 0.00% 0.00% 39.54% 100.00%
December 2020.................................. 7.14% 0.00% 0.00% 39.54% 100.00%
January 2021................................... 6.50% 0.00% 0.00% 39.54% 100.00%
February 2021.................................. 5.84% 0.00% 0.00% 39.54% 100.00%
March 2021..................................... 5.18% 0.00% 0.00% 39.54% 100.00%
April 2021..................................... 4.60% 0.00% 0.00% 39.54% 100.00%
May 2021....................................... 4.01% 0.00% 0.00% 39.54% 100.00%
June 2021...................................... 3.43% 0.00% 0.00% 39.54% 100.00%
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
July 2021...................................... 2.83% 0.00% 0.00% 39.54% 100.00%
August 2021.................................... 2.32% 0.00% 0.00% 39.54% 100.00%
September 2021................................. 1.16% 0.00% 0.00% 39.54% 100.00%
October 2021................................... 0.66% 0.00% 0.00% 39.54% 100.00%
November 2021.................................. 0.16% 0.00% 0.00% 39.54% 100.00%
December 2021.................................. 0.00% 0.00% 0.00% 39.54% 100.00%
January 2022................................... 0.00% 0.00% 0.00% 36.50% 100.00%
February 2022.................................. 0.00% 0.00% 0.00% 34.79% 100.00%
March 2022..................................... 0.00% 0.00% 0.00% 33.09% 100.00%
April 2022..................................... 0.00% 0.00% 0.00% 27.48% 100.00%
May 2022....................................... 0.00% 0.00% 0.00% 21.95% 100.00%
June 2022...................................... 0.00% 0.00% 0.00% 15.83% 100.00%
July 2022...................................... 0.00% 0.00% 0.00% 4.37% 100.00%
August 2022.................................... 0.00% 0.00% 0.00% 0.00% 100.00%
September 2022................................. 0.00% 0.00% 0.00% 0.00% 100.00%
October 2022................................... 0.00% 0.00% 0.00% 0.00% 100.00%
November 2022.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
December 2022.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
January 2023................................... 0.00% 0.00% 0.00% 0.00% 100.00%
February 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
March 2023..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
April 2023..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
May 2023....................................... 0.00% 0.00% 0.00% 0.00% 100.00%
June 2023...................................... 0.00% 0.00% 0.00% 0.00% 100.00%
July 2023...................................... 0.00% 0.00% 0.00% 0.00% 100.00%
August 2023.................................... 0.00% 0.00% 0.00% 0.00% 100.00%
September 2023................................. 0.00% 0.00% 0.00% 0.00% 100.00%
October 2023................................... 0.00% 0.00% 0.00% 0.00% 100.00%
November 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
December 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
January 2024................................... 0.00% 0.00% 0.00% 0.00% 100.00%
February 2024.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
March 2024..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
April 2024..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
May 2024....................................... 0.00% 0.00% 0.00% 0.00% 100.00%
</TABLE>
<PAGE> 208
APPENDIX 8
ASSUMED PRINCIPAL PAYMENTS ON CLASS C AND CLASS D
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
Closing
June 1999.................................................. 0 0
July 1999.................................................. 0 0
August 1999................................................ 0 0
September 1999............................................. 0 0
October 1999............................................... 0 0
November 1999.............................................. 0 0
December 1999.............................................. 0 0
January 2000............................................... 0 0
February 2000.............................................. 0 0
March 2000................................................. 0 0
April 2000................................................. 0 0
May 2000................................................... 0 0
June 2000.................................................. 0 0
July 2000.................................................. 0 0
August 2000................................................ 0 0
September 2000............................................. 0 0
October 2000............................................... 0 0
November 2000.............................................. 0 0
December 2000.............................................. 0 0
January 2001............................................... 0 0
February 2001.............................................. 0 0
March 2001................................................. 0 0
April 2001................................................. 0 0
May 2001................................................... 0 0
June 2001.................................................. 0 0
July 2001.................................................. 0 0
August 2001................................................ 0 0
September 2001............................................. 0 0
October 2001............................................... 0 0
November 2001.............................................. 0 0
December 2001.............................................. 0 0
January 2002............................................... 0 0
February 2002.............................................. 0 0
March 2002................................................. 0 0
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
April 2002................................................. 0 0
May 2002................................................... 2,314,158 0
June 2002.................................................. 3,183,373 141,542
July 2002.................................................. 2,333,659 197,471
August 2002................................................ 779,909 0
September 2002............................................. 1,842,107 396,710
October 2002............................................... 0 434,998
November 2002.............................................. 1,660,260 551,602
December 2002.............................................. 1,587,764 315,684
January 2003............................................... 412,838 198,767
February 2003.............................................. 878,473 199,356
March 2003................................................. 2,035,570 315,946
April 2003................................................. 2,256,313 200,158
May 2003................................................... 1,552,802 315,990
June 2003.................................................. 1,774,973 200,961
July 2003.................................................. 1,765,860 201,554
August 2003................................................ 2,897,637 316,241
September 2003............................................. 2,425,911 202,358
October 2003............................................... 0 202,952
November 2003.............................................. 0 203,549
December 2003.............................................. 1,566,814 316,693
January 2004............................................... 0 204,355
February 2004.............................................. 0 204,954
March 2004................................................. 0 205,553
April 2004................................................. 0 317,138
May 2004................................................... 0 95,772
June 2004.................................................. 0 207,359
July 2004.................................................. 0 207,964
August 2004................................................ 0 317,971
September 2004............................................. 500,466 208,777
October 2004............................................... 489,326 317,988
November 2004.............................................. 380,311 209,591
December 2004.............................................. 380,296 210,199
January 2005............................................... 165,484 210,808
February 2005.............................................. 3,162,902 211,419
March 2005................................................. 0 212,030
April 2005................................................. 0 212,643
May 2005................................................... 0 213,257
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
June 2005.................................................. 0 213,872
July 2005.................................................. 277,709 214,488
August 2005................................................ 899,125 215,106
September 2005............................................. 374,302 215,724
October 2005............................................... 166,817 216,344
November 2005.............................................. 0 216,966
December 2005.............................................. 338,457 217,588
January 2006............................................... 376,589 218,211
February 2006.............................................. 274,487 218,836
March 2006................................................. 275,272 117,831
April 2006................................................. 0 220,510
May 2006................................................... 0 221,140
June 2006.................................................. 228,351 221,771
July 2006.................................................. 480,856 222,403
August 2006................................................ 678,983 223,036
September 2006............................................. 0 124,582
October 2006............................................... 0 224,734
November 2006.............................................. 0 225,372
December 2006.............................................. 0 226,012
January 2007............................................... 0 129,284
February 2007.............................................. 0 227,727
March 2007................................................. 0 228,372
April 2007................................................. 0 132,951
May 2007................................................... 0 230,101
June 2007.................................................. 0 135,559
July 2007.................................................. 0 430,763
August 2007................................................ 0 892,775
September 2007............................................. 0 979,300
October 2007............................................... 0 1,281,379
November 2007.............................................. 0 957,922
December 2007.............................................. 0 1,552,944
January 2008............................................... 0 773,243
February 2008.............................................. 0 1,187,293
March 2008................................................. 0 1,220,619
April 2008................................................. 0 1,372,156
May 2008................................................... 0 1,313,966
June 2008.................................................. 0 1,072,357
July 2008.................................................. 0 933,603
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
August 2008................................................ 0 1,257,896
September 2008............................................. 0 598,142
October 2008............................................... 0 377,948
November 2008.............................................. 0 648,968
December 2008.............................................. 0 692,539
January 2009............................................... 0 1,622,844
February 2009.............................................. 0 982,210
March 2009................................................. 0 661,052
April 2009................................................. 0 286,000
May 2009................................................... 428,746 200,962
June 2009.................................................. 695,366 148,541
July 2009.................................................. 608,762 444,993
August 2009................................................ 773,658 347,247
September 2009............................................. 604,131 156,452
October 2009............................................... 1,426,486 65,150
November 2009.............................................. 677,601 141,372
December 2009.............................................. 674,755 106,860
January 2010............................................... 612,852 0
February 2010.............................................. 808,581 1,396,026
March 2010................................................. 723,621 2,757,033
April 2010................................................. 650,893 0
May 2010................................................... 568,885 0
June 2010.................................................. 497,584 223,873
July 2010.................................................. 568,643 1,591,769
August 2010................................................ 0 0
September 2010............................................. 0 0
October 2010............................................... 1,747,027 0
November 2010.............................................. 1,395,966 0
December 2010.............................................. 1,508,463 0
January 2011............................................... 1,059,179 0
February 2011.............................................. 1,640,323 0
March 2011................................................. 605,405 0
April 2011................................................. 586,023 0
May 2011................................................... 459,949 321,523
June 2011.................................................. 379,387 419,975
July 2011.................................................. 418,217 0
August 2011................................................ 411,499 888,801
September 2011............................................. 589,484 0
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
October 2011............................................... 448,843 315,115
November 2011.............................................. 376,184 134,272
December 2011.............................................. 633,162 0
January 2012............................................... 329,711 0
February 2012.............................................. 410,471 0
March 2012................................................. 627,841 510,827
April 2012................................................. 438,993 0
May 2012................................................... 1,354,206 0
June 2012.................................................. 337,858 0
July 2012.................................................. 1,113,842 0
August 2012................................................ 532,103 0
September 2012............................................. 350,932 0
October 2012............................................... 537,462 0
November 2012.............................................. 807,685 0
December 2012.............................................. 427,088 0
January 2013............................................... 1,517,346 0
February 2013.............................................. 744,195 0
March 2013................................................. 789,559 0
April 2013................................................. 462,728 0
May 2013................................................... 383,698 0
June 2013.................................................. 428,171 0
July 2013.................................................. 715,698 0
August 2013................................................ 1,065,164 0
September 2013............................................. 298,291 0
October 2013............................................... 642,766 0
November 2013.............................................. 379,363 0
December 2013.............................................. 332,834 0
January 2014............................................... 249,639 0
February 2014.............................................. 387,036 131,749
March 2014................................................. 324,777 134,239
April 2014................................................. 264,491 0
May 2014................................................... 434,840 517,907
June 2014.................................................. 0 0
July 2014.................................................. 1,283,149 0
August 2014................................................ 0 0
September 2014............................................. 0 0
October 2014............................................... 202,627 0
November 2014.............................................. 237,395 0
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
December 2014.............................................. 381,409 0
January 2015............................................... 328,898 0
February 2015.............................................. 301,937 0
March 2015................................................. 491,766 0
April 2015................................................. 0 0
May 2015................................................... 0 0
June 2015.................................................. 0 0
July 2015.................................................. 0 0
August 2015................................................ 0 0
September 2015............................................. 0 0
October 2015............................................... 0 0
November 2015.............................................. 0 0
December 2015.............................................. 0 0
January 2016............................................... 0 0
February 2016.............................................. 0 0
March 2016................................................. 0 0
April 2016................................................. 0 0
May 2016................................................... 9,128,805 0
June 2016.................................................. 6,238,472 0
July 2016.................................................. 7,418,920 1,224,534
August 2016................................................ 0 16,986,033
September 2016............................................. 0 0
October 2016............................................... 0 0
November 2016.............................................. 0 0
December 2016.............................................. 0 0
January 2017............................................... 0 0
February 2017.............................................. 0 0
March 2017................................................. 0 0
April 2017................................................. 0 0
May 2017................................................... 0 0
June 2017.................................................. 0 0
July 2017.................................................. 0 0
August 2017................................................ 0 0
September 2017............................................. 0 0
October 2017............................................... 0 0
November 2017.............................................. 0 0
December 2017.............................................. 0 0
January 2018............................................... 0 0
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
February 2018.............................................. 0 0
March 2018................................................. 0 0
April 2018................................................. 0 0
May 2018................................................... 0 0
June 2018.................................................. 0 0
July 2018.................................................. 0 0
August 2018................................................ 0 0
September 2018............................................. 0 0
October 2018............................................... 0 0
November 2018.............................................. 0 0
December 2018.............................................. 0 0
January 2019............................................... 0 0
February 2019.............................................. 0 0
March 2019................................................. 0 0
April 2019................................................. 0 0
May 2019................................................... 0 0
June 2019.................................................. 0 0
July 2019.................................................. 0 0
August 2019................................................ 0 0
September 2019............................................. 0 0
October 2019............................................... 0 0
November 2019.............................................. 0 0
December 2019.............................................. 0 0
January 2020............................................... 0 0
February 2020.............................................. 0 0
March 2020................................................. 0 0
April 2020................................................. 0 0
May 2020................................................... 0 0
June 2020.................................................. 0 0
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
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
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
August 2023................................................ 0 0
September 2023............................................. 0 0
October 2023............................................... 0 0
November 2023.............................................. 0 0
December 2023.............................................. 0 0
January 2024............................................... 0 0
February 2024.............................................. 0 0
March 2024................................................. 0 0
April 2024................................................. 0 0
May 2024................................................... 0 0
</TABLE>
<PAGE> 216
APPENDIX 9
[LOGO] AIRCRAFT
INFORMATION
SERVICES, INC.
31 December 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Subject: Half Life and Adjusted Base Value Appraisal for Fleet of 36 Aircraft
The Aircraft Finance Trust ("AFT") Portfolio
AISI File number: A9S006BVO
Ref: Data packages -- 08/09 October 1998, 26 October 1998
Ladies and Gentlemen:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to provide our opinion of the half life and adjusted base values of the
Aircraft Finance Trust ("AFT") Portfolio (36 Aircraft) as identified in Table I
and as described in the above referenced data package.
1. METHODOLOGY AND DEFINITIONS
The standard terms of reference for commercial aircraft value are
'half-life base market value' and 'half-life current market value' of an
'average' aircraft. Base value is a theoretical value that assumes a balanced
market while current market value is the value in the real market; both assume a
hypothetical average aircraft condition. AISI value definitions are consistent
with the current definitions of the International Society of Transport Aircraft
Trading (ISTAT), those of 01 January 1994. AISI is a member of that organization
and employs an ISTAT Certified and Senior Certified 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 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', which is synonymous with the older
term '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
Headquarters, 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: [email protected]
<PAGE> 217
31 December 1998
AISI File No. A9S006BVO
Page - 2 -
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.
2. VALUATION
No physical inspection of the Aircraft or their essential records was made
by AISI for the purposes of this report, nor has any attempt been made to verify
information provided to us, which is assumed to be correct and applicable to the
Aircraft.
Our opinion of the adjusted base value of the Aircraft is derived from
information and specifications supplied by GE Capital Aviation Services
("GECAS") (for 34 Aircraft) and UniCapital, Inc. ("UniCapital") (for 2
Aircraft). Adjustments are calculated 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
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 is 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, on aircraft where all engines total cycles
equal the total cycles of the airframe, the engine's life limit TSOs and
overhaul TSOs are assumed to be the same as the total cycles of the airframe.
This is typical of newer aircraft. Where this assumption can not be made, the
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 specification sheet dates
to a common date based on a daily utilization factor calculated for each
aircraft.
The half life and adjusted base values of the AFT portfolio are presented
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.
AISI has no past, present, or anticipated future interest in the subject
aircraft. 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
<PAGE> 218
31 December 1998
AISI File No. A9S006BVO
Page - 3 -
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.
/s/ JOHN D. MCNICOL
---------------------------------------------
John D. McNicol
Vice President
Appraisals &
<PAGE> 219
TABLE I -- AISI FILE A9S006BVO-A
DECEMBER 31, 1998
FLEET VALUATION -- THE AFT PORTFOLIO
<TABLE>
<CAPTION>
HALF LIFE ADJUSTED
BASE VALUE BASE VALUE
TYPE MSN DOM YOB ENGINE MTOW 1998 USDOLLARS 1998 USDOLLARS
- ---- ----- ------ ---- ----------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
A310-300...................... 448 Feb-88 1988 CF6-80C2A2 305,500 31,430,000 31,510,000
A320-200...................... 210 Jul-91 1991 CFM56-5A1 166,500 29,080,000 29,160,000
A320-200...................... 221 Sep-91 1991 CFM56-5A3 169,700 29,610,000 29,790,000
A320-200...................... 222 Oct-91 1991 CFM56-5A3 169,700 29,610,000 29,780,000
A320-200...................... 231 Sep-91 1991 CFM56-5A1 166,500 29,080,000 29,230,000
A320-200...................... 373 Jan-93 1993 V2500-A1 166,500 30,980,000 30,970,000
A320-200...................... 737 Sep-97 1997 CFM56-5B4 169,700 41,610,000 43,190,000
A320-200...................... 749 Sep-97 1997 CFM56-5B4 169,700 41,810,000 43,350,000
B737-300...................... 28333 Aug-96 1996 CFM56-3C1 135,000 33,090,000 33,970,000
B737-300...................... 28548 Dec-97 1997 CFM56-3C1 130,000 35,520,000 37,240,000
B737-300...................... 28554 Dec-96 1996 CFM56-3C1 139,500 33,270,000 34,290,000
B737-300...................... 28557 Mar-97 1997 CFM56-3C1 139,500 35,900,000 37,050,000
B737-300...................... 28558 Apr-97 1997 CFM56-3C1 139,500 35,900,000 36,990,000
B737-300...................... 28559 May-97 1997 CFM56-3C1 138,500 35,860,000 37,210,000
B737-300...................... 28561 Jun-97 1997 CFM56-3C1 135,000 35,720,000 36,430,000
B737-300...................... 28562 Jul-97 1997 CFM56-3C1 135,000 35,720,000 36,460,000
B737-300...................... 28563 Aug-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
B737-300...................... 28564 Nov-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
B737-300...................... 28740 Jun-98 1998 CFM56-3C1 139,500 37,300,000 39,300,000
B737-400...................... 25663 Nov-92 1992 CFM56-3C1 138,500 27,400,000 27,230,000
B737-400...................... 25664 Nov-92 1992 CFM56-3C1 138,500 27,400,000 26,910,000
B737-400...................... 28489 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,740,000
B737-400...................... 28490 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,630,000
B737-400...................... 28491 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,680,000
B767-200ER.................... 23805 Jul-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
B767-200ER.................... 23806 Aug-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
B767-300ER.................... 25221 Aug-91 1991 CF680C2B6F 407,000 66,750,000 67,310,000
B767-300ER.................... 25403 Jan-92 1992 PW4060 407,000 70,620,000 70,440,000
B767-300ER.................... 29617 Mar-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
B767-300ER.................... 30008 May-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
DC-10-30...................... 46584 Feb-80 1980 CF6-50C2 572,000 17,760,000 17,670,000
DC-10-30...................... 48292 Feb-82 1982 CF6-50C2 580,000 20,090,000 20,120,000
MD83.......................... 49398 Nov-86 1986 JT8D-219 160,000 20,190,000 20,640,000
MD83.......................... 49791 Sep-89 1989 JT8D-219 160,000 22,700,000 22,250,000
MD83.......................... 53198 Apr-91 1991 JT8D-219 160,000 24,240,000 23,830,000
MD83.......................... 53199 Mar-92 1992 JT8D-219 160,000 25,100,000 24,830,000
-------------- --------------
Total......................... $1,353,570,000 $1,379,900,000
============== ==============
</TABLE>
<PAGE> 220
BK ASSOCIATES, INC.
1295 NORTHERN BOULEVARD
MANHASSET, NEW YORK 11030
(516) 365-6272 - FAX (516) 365-6287
December 31, 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion of the current Base Value on each of 36 aircraft, the Aircraft Finance
Trust (AFT) Portfolio (Aircraft). The Aircraft are further identified in the
attached Figure 1 by type, serial number, year of manufacture and engine model.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of FMV, to which BK Associates subscribes, the quoted FMV 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. The FMV assumes that the aircraft is valued for its
highest and best use, that the parties to the hypothetical sale transaction are
willing, able, prudent and knowledgeable, and under no unusual pressure for a
prompt sale, and that the transaction would be negotiated in an open and
unrestricted market on an arm's length basis, for cash or equivalent
consideration, and given an adequate amount of time for effective exposure to
prospective buyers, which BK Associates considers to be 12 to 18 months.
BASE VALUE
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 future 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.
VALUE METHODOLOGY
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. BK
Associates has determined from analysis of historic data, a relationship between
aircraft age and its value as a percentage of original value for the average
aircraft. These data form the basis for base value and forecast value
determinations but must be adjusted to reflect the value of engine and gross
weight options and other features of the aircraft. Our maintenance adjusted base
values include appropriate financial adjustments based on our interpretation of
the maintenance status data which GE Capital Aviation Services (GECAS)
<PAGE> 221
Aircraft Finance Trust
December 31, 1998
Page 2
provided, except for Aircraft Serial Numbers 25221 and 373 for which UniCapital,
Inc. (UniCapital) provided maintenance status data.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but
relied upon information supplied by GECAS and UniCapital and from BK's own
database. In determining the base value of an aircraft, the following
assumptions apply to the aircraft:
1. When adequate maintenance status data was not available, we considered
the aircraft has half-time remaining to its next major overhauls or
scheduled shop visit on its airframe, engines, landing gear and
auxiliary power unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the
types and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The Aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current base value and the current maintenance adjusted base
value of each aircraft as of today is as shown in Figure 1 attached hereto.
<PAGE> 222
Aircraft Finance Trust
December 31, 1998
Page 3
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.
/s/ R.L. BRITTON
-----------------------------------------
R.L. Britton
Vice President
ISTAT Certified Appraiser
RLB/kf
Attachment
<PAGE> 223
FIGURE 1
AFT PORTFOLIO CURRENT BASE VALUES
<TABLE>
<CAPTION>
BASE VALUE
AIRCRAFT SERIAL -----------------
ITEM TYPE NUMBER YEAR ENGINE ($ MIL) ($ MIL)
- ---- ---------- ------ ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
1............................. A310-300 448 Feb-88 CF6-80C2A2 37.45 37.63
2............................. A320-200 210 Jul-91 CFM56-5A1 27.40 27.45
3............................. A320-200 221 Sep-91 CFM56-5A3 29.40 29.40
4............................. A320-200 222 Oct-91 CFM56-5A3 29.40 29.40
5............................. A320-200 231 Sep-91 CFM56-5A1 27.40 27.40
6............................. A320-200 737 Sep-97 CFM56-5B4 37.20 37.99
7............................. A320-200 749 Sep-97 CFM56-5B4 37.20 37.64
8............................. A320-200 373 Jan-93 V2500-A1 30.20 30.17
9............................. B737-300 28559 May-97 CFM56-3C1 34.00 34.23
10............................ B737-300 28554 Dec-96 CFM56-3C1 32.75 33.24
11............................ B737-300 28557 Mar-97 CFM56-3C1 34.00 34.64
12............................ B737-300 28558 Apr-97 CFM56-3C1 34.00 34.63
13............................ B737-300 28561 Jun-97 CFM56-3C1 34.00 34.48
14............................ B737-300 28562 Jul-97 CFM56-3C1 34.00 34.54
15............................ B737-300 28563 Aug-97 CFM56-3C1 34.00 34.57
16............................ B737-300 28564 Nov-97 CFM56-3C1 34.00 34.84
17............................ B737-300 28740 Jun-98 CFM56-3C1 35.25 36.35
18............................ B737-300 28548 Dec-97 CFM56-3C1 34.00 34.78
19............................ B737-300 28333 Aug-96 CFM56-3C1 32.75 33.08
20............................ B737-400 28489 Nov-96 CFM56-3C1 33.60 34.10
21............................ B737-400 28490 Nov-96 CFM56-3C1 33.60 34.01
22............................ B737-400 28491 Nov-96 CFM56-3C1 33.60 34.03
23............................ B737-400 25663 Nov-92 CFM56-3C1 27.70 27.34
24............................ B737-400 25664 Nov-92 CFM56-3C1 27.70 27.36
25............................ B767-200ER 23805 Jul-87 CF6-80C2-B2 32.85 31.65
26............................ B767-200ER 23806 Aug-87 CF6-80C2-B2 32.85 31.65
27............................ B767-300ER 29617 Mar-99 CF6-80C2B7F 83.30 85.84
28............................ B767-300ER 25403 Jan-92 PW4060 63.70 63.49
29............................ B767-300ER 30008 May-99 CF6-80C2B7F 83.30 85.84
30............................ B767-300ER 25221 Aug-91 CF6-80C2B6F 60.55 60.37
</TABLE>
<PAGE> 224
<TABLE>
<CAPTION>
BASE VALUE
AIRCRAFT SERIAL -----------------
ITEM TYPE NUMBER YEAR ENGINE ($ MIL) ($ MIL)
- ---- ---------- ------ ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
31............................ MD83 53199 Mar-92 JT8D-219 26.00 26.00
32............................ MD83 49398 Nov-86 JT8D-219 17.75 18.41
33............................ MD83 49791 Sep-89 JT8D-219 21.65 21.65
34............................ MD83 53198 Apr-91 JT8D-219 24.70 24.70
35............................ DC10-30 48292 Feb-82 CF6-50C2 24.30 24.30
36............................ DC10-30 46584 Feb-80 CF6-50C2 21.40 21.40
TOTAL....... 1276.95 1288.60
</TABLE>
<PAGE> 225
MORTEN BEYER & AGNEW
-------------------------
AVIATION CONSULTING FIRM
APPRAISAL OF 36 AIRCRAFT
VALUES AS OF DECEMBER 31, 1998
PREPARED FOR:
Aircraft Finance Trust (AFT)
MARCH 25, 1999
<TABLE>
<S> <C>
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 847 1911 Fax +44 1342 718967
</TABLE>
<PAGE> 226
I. INTRODUCTION AND EXECUTIVE SUMMARY
Morten Beyer and Agnew, Inc. (MBA), has been retained by Aircraft Finance
Trust (AFT) to determine the Current Base Values (CBV) and future lease rates of
a portfolio consisting of the following passenger aircraft:
- (1) Airbus A310,
- (7) Airbus A320-200 aircraft,
- (11) Boeing B737-300s,
- (5) Boeing B737-400s,
- (2) Boeing B767-200ERs,
- (4) Boeing B767-300ERs,
- (2) DC10-30's and
- (4) MD83's
- TOTAL 36 AIRCRAFT
We have been asked to provide the future lease rates per year for 20
(incremental) years based on a five year operating lease for each increment. The
aircraft values of this portfolio are identified at the end of this section.
Base values are calculated as of December 31, 1998.
In performing this valuation we did not inspect the aircraft or their
historical maintenance documentation, but relied solely on information provided
to us by GE Capital Aviation Services (GECAS), with the exception of one
A320-200 (s/n 373) and one B767-300ER (s/n 25221) as that information was
provided by UniCapital, Inc. Their respective individual values, along with the
lease rates for each aircraft, are noted in Section IV.
MBA uses the definition of certain terms, such as CMV and Base Value (BV),
as promulgated by the International Society of Transport Aircraft Trading
(ISTAT), a non-profit association of management personnel from banks, leasing
companies, airlines, manufacturers, appraisers, brokers, and others who have a
vested interest in the commercial aviation industry.
ISTAT defines CMV as the appraiser's opinion of the most likely trading
price that may be generated for an aircraft under market conditions that are
perceived to exist at the time in question. Market Value (MV) assumes that the
aircraft is valued for its highest, best use; that the parties to the
hypothetical sale transaction are willing, able, prudent and knowledgeable and
under no unusual pressure for a prompt sale; and that the transaction would be
negotiated in an open and unrestricted market on an arm's-length basis, for cash
or equivalent consideration, and given an adequate amount of time for effective
exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements
of MV except that the market circumstances are assumed to be in a reasonable
state of equilibrium. Thus, BV pertains to an idealized aircraft and market
combination, but will not necessarily reflect the actual CMV of the aircraft in
<PAGE> 227
question. BV is founded in the historical trend of values and is generally used
to analyze historical values or to project future values.
<TABLE>
<CAPTION>
AIRCRAFT SERIAL DATE OF REGISTRATION
TYPE NUMBER MFG. NUMBER CBV
----------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C>
1.................................. A310-300 448 Feb-88 C-GYRA 35.18
2.................................. A320-200 210 Jul-91 C-GQCA 29.27
3.................................. A320-200 221 Sep-91 OY CNB 30.91
4.................................. A320-200 222 Oct-91 OY-CNC 30.98
5.................................. A320-200 231 Sep-91 C-FPWD 29.72
6.................................. A320-300 373 Oct-92 N304ML 33.03
5.................................. A320-200 737 Nov-97 F-GRSG 41.50
7.................................. A320-200 749 Sep-97 F-GRSH 41.19
9.................................. B-767-200ER 23805 Jul-87 PP-VNR 32.73
10.................................. B-767-200ER 23806 Jul-87 PP-VNS 32.72
11.................................. B-767-300ER 25221 Jul-91 G-BXOP 63.01
12.................................. B-767-300ER 25403 Jan-92 CC-CEU 66.50
13.................................. B-767-300ER 29617 Mar-99 G-OOAL 87.39
14.................................. B-767-300ER 30008 May-99 TBD 87.75
15.................................. B-737-400 25663 Nov-92 VT-JAP 27.34
16.................................. B-737-400 25664 Nov-92 VT-JAQ 27.12
17.................................. B-737-300 28333 Aug-96 OO-VEB 33.97
18.................................. B-737-400 28489 Nov-96 B-18671 34.43
19.................................. B-737-400 28490 Nov-96 B-18672 34.36
20.................................. B-737-400 28491 Nov-96 B-18673 34.37
21.................................. B-737-300 28548 Dec-97 G-OAMS 33.81
22.................................. B-737-300 28554 Dec-96 G-ECAS 32.38
23.................................. B-737-300 28557 Mar-97 G-SMDB 32.99
24.................................. B-737-300 28558 Apr-97 G-OJTW 33.11
25.................................. B-737-300 28559 May-97 PH-OZC 33.42
26.................................. B-737-300 28561 Jun-97 B-2978 33.77
27.................................. B-737-300 28562 Jul-97 B-2979 34.03
28.................................. B-737-300 28563 Aug-97 N306FL 33.84
29.................................. B-737-300 28564 Nov-97 PT-TEP 34.31
30.................................. B-737-300 28740 Jun-98 N1790B 33.74
31.................................. DC10-30 48292 Feb-82 N87070 21.20
32.................................. DC10-30 46584 Feb-80 N15069 19.03
33.................................. MD83 49398 Nov-86 EC-245 20.16
34.................................. MD83 49791 Oct-89 EC-GGV 22.36
35.................................. MD83 53198 Mar-91 SE-DLS 24.02
36.................................. MD83 53199 Mar-92 SE-DLU 23.79
</TABLE>
2
<PAGE> 228
II. AIRCRAFT
The specifications of the aircraft in this portfolio are as follows:
Organized by type of aircraft -- sample seating arrangements are provided
(although may not reflect the characteristics of each respective aircraft)
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ A310-300
Serial Number................................ 448
Registration................................. C-GYRA
Build Year................................... Feb-88
Engine Type.................................. CF6-80C2
Hours Since New.............................. 29494
Cycles Since New............................. 9560
Max Taxi Weight (lbs.)....................... 308,992
MGTOW (lbs.)................................. 306,999
MLW (lbs.)................................... 272,445
MZFW (lbs.).................................. 174,850
OEW (lbs.)................................... NG
Fuel Capacity (US gals.)..................... 107,516
Seating:
Coach........................................ 265
Galleys...................................... 3
Lavatories................................... 5
Aircraft Type................................ A320-200 A320-200 A320-200
Serial Number................................ 210 221 222
Registration................................. C-GQCA OY CNB OY-CNC
Build Year................................... Jul-91 Sep-91 Oct-91
Engine Type.................................. CFM56-5A1 CFM56-5A1 CFM56-5A3
Hours Since New.............................. 25219 19898 19557
Cycles Since New............................. 9278 10764 10456
Max Taxi Weight (lbs.)....................... 167,328 170,635 170,635
MGTOW (lbs.)................................. 166,446 169,753 169,753
MLW (lbs.)................................... 142,198 142,196 142,196
MZFW (lbs.).................................. 133,377 133,377 133,377
OEW (lbs.)................................... 97,162 95,972 91,629
Fuel Capacity (US gals.)..................... 41,473 41,473 41,473
Seating:
Coach........................................ 108 177 177
Business..................................... 24
Galleys...................................... 3 3 3
Lavatories................................... 3 3 3
</TABLE>
3
<PAGE> 229
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ A320-200 A320-200 A320-200
Serial Number................................ 231 373 737
Registration................................. C-FPWD N304ML F-GRSG
Build Year................................... Sep-91 Jan-93 Nov-97
Engine Type.................................. CFM56-5A1 V2500-A1 CFM56-5B4
Hours Since New.............................. 24744 11349 1860
Cycles Since New............................. 9048 6768 922
Max Taxi Weight (lbs.)....................... 167,328 167,329 170,767
MGTOW (lbs.)................................. 166,446 166,447 169,753
MLW (lbs.)................................... 142,198 142,197 141,093
MZFW (lbs.).................................. 133,377 133,378 134,480
OEW (lbs.)................................... 97,073 90,865 92,152
Fuel Capacity (US gals.)..................... 42,223 42,223 42,946
Seating:
Coach........................................ 108 138 156
Business..................................... 24 10 8
Galleys...................................... 3 2 2
Lavatories................................... 3 3 3
Aircraft Type................................ A320-200
Serial Number................................ 749
Registration................................. F-GRSG
Build Year................................... Nov-97
Engine Type.................................. CFM56-5B4
Hours Since New.............................. 14
Cycles Since New............................. 9
Max Taxi Weight (lbs.)....................... 171,573
MGTOW (lbs.)................................. 170,555
MLW (lbs.)................................... 141,760
MZFW (lbs.).................................. NG
OEW (lbs.)................................... NG
Fuel Capacity (US gals.)..................... 42,946
Seating:
Coach........................................ 156
Business..................................... 8
Galleys...................................... 2
Lavatories................................... 3
</TABLE>
4
<PAGE> 230
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28333 28548 28554
Registration................................. OO-VEB G-OAMS G-ECAS
Build Year................................... Aug-96 Dec-97 Dec-96
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 5236 2116 4108
Cycles Since New............................. 3824 1810 4388
Max Taxi Weight (lbs.)....................... 135,500 130,500 140,000
MGTOW (lbs.)................................. 135,000 130,000 139,500
MLW (lbs.)................................... 116,600 114,000 114,000
MZFW (lbs.).................................. 106,500 68,983 105,000
OEW (lbs.)................................... 70,760 NG 70,932
Fuel Capacity (US gals.)..................... 35,584 5,311(kg) 35,584
Seating:
Coach........................................ 149 148 148
Galleys...................................... 3 2 2
Lavatories................................... 2 3 3
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28557 28558 28559
Registration................................. G-SMDB G-OJTW PH-OZC
Build Year................................... Mar-97 Apr-97 May-97
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 2925 2997 4931
Cycles Since New............................. 3245 3386 1901
Max Taxi Weight (lbs.)....................... 140,000 140,000 139,000
MGTOW (lbs.)................................. 139,500 139,500 138,500
MLW (lbs.)................................... 114,000 114,000 114,000
MZFW (lbs.).................................. 105,000 105,000 105,000
OEW (lbs.)................................... 70,667 71,070 71,760
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 148 148 148
Galleys...................................... 2 2 3
Lavatories................................... 3 3 3
</TABLE>
5
<PAGE> 231
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-300 B737-300
Serial Number................................ 28561 28562
Registration................................. B-2978 B-2979
Build Year................................... Jun-97 Jul-97
Engine Type.................................. CFM56-3C1 CFM56-3C1
Hours Since New.............................. 455 175
Cycles Since New............................. 636 102
Max Taxi Weight (lbs.)....................... 135,500 135,500
MGTOW (lbs.)................................. 135,000 135,000
MLW (lbs.)................................... 114,000 114,000
MZFW (lbs.).................................. 105,000 105,000
OEW(lbs.).................................... 71,018 71,132
Fuel Capacity (US gals.)..................... 35,584 35,584
Seating:
Coach........................................ 148 148
Galleys...................................... 2 2
Lavatories................................... 3 3
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28563 28564 28740
Registration................................. N306FL PT-TEP N1790B
Build Year................................... Aug-97 Nov-97 Jun-98
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 3266 1882 880
Cycles Since New............................. 1377 1581 177
Max Taxi Weight (lbs.)....................... 135,500 135,500 140,000
MGTOW (lbs.)................................. 135,000 135,000 139,500
MLW (lbs.)................................... 114,000 116,000 116,600
MZFW (lbs.).................................. 105,000 106,500 109,600
OEW (lbs.)................................... 70,662 68,833 71,921
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 136 148 88
Business..................................... 20
Galleys...................................... 4 2 3
Lavatories................................... 3 3 3
</TABLE>
6
<PAGE> 232
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-400 B737-400
Serial Number................................ 25663 25664
Registration................................. VT-JAP VT-JAQ
Build Year................................... 11-92 11-92
Engine Type.................................. CFM56-3C1 CFM56-3C1
Hours Since New.............................. 13312 12989
Cycles Since New............................. 19413 19241
Max Taxi Weight (lbs.)....................... 138,991 138,997
MGTOW (lbs.)................................. 138,496 138,496
MLW (lbs.)................................... 120,996 120,996
MZFW (lbs.).................................. 112,996 112,996
OEW (lbs.)...................................
Fuel Capacity (US gals.)..................... 35,584 35,584
Seating:
Coach........................................ 112 112
Business..................................... 24 24
Galleys...................................... 3 3
Lavatories................................... 3 3
Aircraft Type................................ B737-400 B737-400 B737-400
Serial Number................................ 28489 28490 28491
Registration................................. B-18671 B-18672 B-18673
Build Year................................... 11-96 Nov-96 Nov-96
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 4347 5405 5291
Cycles Since New............................. 4050 4795 4078
Max Taxi Weight (lbs.)....................... 150,500 150,500 150,500
MGTOW (lbs.)................................. 150,000 150,000 150,000
MLW (lbs.)................................... 124,000 124,000 124,000
MZFW (lbs.).................................. 117,000 117,000 117,000
OEW (lbs.)................................... 76,384 76,294 76,294
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 138 138 138
Business..................................... 8 8 8
Galleys...................................... 3 3 3
Lavatories................................... 3 3 3
</TABLE>
7
<PAGE> 233
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B767-200ER B767-200ER B767-300ER
Serial Number................................ 23805 23806 25221
Registration................................. PP-VNR PP-VNS B-BXOP
Build Year................................... Jul-87 Jul-87 Aug-91
Engine Type.................................. CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B6
Hours Since New.............................. 41019 40925 24056
Cycles Since New............................. 17664 17474 7348
Max Taxi Weight (lbs.)....................... 336,993 336,993 409,000
MGTOW (lbs.)................................. 334,993 334,993 407,000
MLW (lbs.)................................... 277,994 277,994 320,000
MZFW (lbs.).................................. 252,994 252,994 288,000
OEW (lbs.)................................... 182,319 182,319 189,100
Fuel Capacity (US gals.)..................... 137,015 137,015 172,000
Seating:
Coach........................................ 190 172 287
Business..................................... 18 18
Galleys...................................... 6 6 6
Lavatories................................... 6 6 6
Aircraft Type................................ B767-300ER B767-300ER B767-300ER
Serial Number................................ 25403 29617 30008
Registration................................. CC-CEU G-OOAL TBD
Build Year................................... Jan-92 Mar-99 May-99
Engine Type.................................. CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B2
Hours Since New.............................. 25067 N/A N/A
Cycles Since New............................. 6322 N/A N/A
Max Taxi Weight (lbs.)....................... 409,000 413,000 413,000
MGTOW (lbs.)................................. 407,000 412,000 412,000
MLW (lbs.)................................... 320,000 300,000 300,000
MZFW (lbs.).................................. 189,390 278,000 278,000
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 171,394 24,184 24,184
Seating:
Coach........................................ 147 325 NG
Business..................................... 30
First........................................ 13
Galleys...................................... 7 5 5
Lavatories................................... 8 6 6
</TABLE>
8
<PAGE> 234
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ MD83 MD83 MD83
Serial Number................................ 49398 49791 53198
Registration................................. EC-245 EC-GGV SE-DLS
Build Year................................... Nov-86 Oct-89 Mar-91
Engine Type.................................. JT8D-219 JT8D-219 JT8D-219
Hours Since New.............................. 32396 24676 23598
Cycles Since New............................. 15638 11903 10483
Max Taxi Weight (lbs)........................ 161,000 161,000 161,000
MGTOW (lbs.)................................. 160,000 160,000 160,000
MLW (lbs.)................................... 139,500 139,500 139,500
MZFW (lbs.).................................. 122,000 122,000 122,000
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 46,773 47,081 46,773
Seating:
Coach........................................ 170 170 170
Galleys...................................... 4 4 4
Lavatories................................... 3 3 3
Aircraft Type................................ MD83 DC10-30 DC10-30
Serial Number................................ 53199 48292 46584
Registration................................. SE-DLU N87070 N15069
Build Year................................... Mar-92 Feb-82 Feb-80
Engine Type.................................. JT8D-219 CF6-50C2 CF6-50C2
Hours Since New.............................. 19823 69453 74448
Cycles Since New............................. 7905 15034 16838
Max Taxi Weight (lbs.)....................... 161,000 583,000 575,000
MGTOW (lbs.)................................. 160,000 580,000 572,000
MLW (lbs.)................................... 139,500 411,000 411,000
MZFW (lbs.).................................. 122,000 NG NG
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 46,773 251,400 251,400
Seating:
Coach........................................ 165 185 185
Business..................................... 44 44
Galleys...................................... 3 5 5
Lavatories................................... 3 8 8
</TABLE>
III. CURRENT MARKET CONDITIONS
GENERAL
The market for narrowbody used jet aircraft continues to be strong, with
offerings of all but the earlier models being generally snapped-up in short
order. The most recent count shows 122 older narrowbodies (DC-9, B-737-200,
B-727 aircraft) and 26 new models (A319/320/321, B-737-300/-400/-500/-600/-
700/-800, B-757 and MD-80) on the market. This represents about 2.4 percent of
the older types and 0.08 percent of the new types of aircraft currently
available For Sale or Lease. Orders for new models continue to be strong, with
258 new A-319/320/321's, and 189 B-737 NGs being ordered in the first six months
of 1998. Concerns over the Asian financial crisis do not extend to the
narrowbodied aircraft, and order curtailments apply to the widebodies only.
9
<PAGE> 235
The widebody sector is currently holding-up, despite the Asian traffic
downturn. All of the late model widebodies which have been made available by the
Asian-Pacific carriers have been placed. Some of the new aircraft on-order have
been deferred, and those aircraft displaced by the Far East slump, primarily
747-200s, are the ones showing-up on the For Sale/For Lease listings.
[PHOTO] Airbus A310
These are the truncated, longer range models of the A300 series. The
aircraft is now ending its production life, with no new orders coming and only
six outstanding. A total of 261 of all variants have been produced, and
following the chaotic market activity when Pan Am went under, the used market
has been small as few have been offered. FedEx purchased 34 used aircraft and
modified them to cargo, but this has been the only major conversion program. The
A310 has been particularly popular with European and Middle East/Asian carriers
where it has outsold its rival B-767-200.
[PHOTO] Airbus A320-200
Six hundred and forty-two A-320s have been built to date, and new
production is now averaging seven per month, along with ten more sister ships,
the A-319 and A-321. The backlog for the three types totals 841 aircraft. There
are currently 76 operators of one or more of the type. AIRFAX, a current listing
of aircraft for sale or lease shows only two A320's available. Both are brand
new deliveries being offered by ORIX. The market for the A320 is extremely
strong and any available aircraft will sell at or above Base Value.
[PHOTO] Boeing B-737-300
The B-737-300 was launched in 1981 as the Stage 3 successor in the B-737
line. With 18 more seats (three rows), higher gross weight and more range than
the -200, the -300 has become one of the most popular aircraft in the world. The
aircraft is only offered with the CFM56-3 series engines. Production of the -300
is slowing as more and more customers opt for the new -600/-700/-800/-900 series
of upgraded B-737's, which offer a combination of greater range and capacity,
along with more powerful engines.
[PHOTO] Boeing 767-200/ER
10
<PAGE> 236
The Boeing 767 family has been in production since 1982, and has gone
through several iterations and two stretches. Once ETOPS operations were
approved for this semi-widebody twin, it has continuously gained market share in
intercontinental markets. The ERs, or Extended Range models, have taken over
markets once the province of B-747 Combis, DC-10-30s and L-1011s. The standard
configuration is twin-aisle, seven-abreast seating, but European charter
operators squeeze in an eight-abreast configuration, greatly improving the ASM
economics of the aircraft. At seven abreast the aircraft is significantly less
efficient than the old tri-jets, or the B-757. The first of the B-767-200
passenger aircraft are beginning to move into cargo service, with All Nippon
selling its 25 to Airborne, who will operate them without adding a large cargo
door.
With a total of 667 B-767s of all models in passenger service, and UPS
operating 22 new B-767-300ERs in all-cargo configuration, the B-767 has won a
significant share of the market, and is considered to be the banker's favorite
for lease investments. Trying to hold all sectors of its market share, Boeing
agreed to build the -400 stretched version of the B-767 for Delta, but has yet
to win any other orders. The B-777 is the major competitor to the B-767.
[PHOTO] McDonnell Douglas MD-82/-83
The obvious concern with the MD-82/-83 series aircraft is the effect of
Boeing's decision to shut down the line. The only surviving Douglas product is
the renamed MD-95 (B-717). The MD-80 series had been replaced by the V-2500
powered MD-90, and at the end of 1997 there were only ten MD-80's still on
order, so the line was effectively closed anyway. MBA does not believe the
Boeing decision will have a material effect on the value of the MD-80's, which
is principally a function of the fleet size and efficiency of the aircraft. A
total of 1,167 MD-80's of all series will ultimately be built, with the high
gross MD-83 the last model of the series. The MD-82 and 83 have the same
configuration, except that the MGTOW of the -83 is 12,000 pounds greater, giving
it some 1,000 miles additional non-stop range -- a capability not often
utilized. The MD-80 series aircraft got a four-year head start on the B-737-300
entering service in 1980 as opposed to 1984, and gaining a lead of some 300
orders over the B-737. With a maximum of 172 seats, demand for used models has
always been strong, with offerings bought up quickly.
[PHOTO] McDonnell Douglas DC10-30
The DC-10-10 is rapidly being retired by its two major US operators,
American and United, but is being picked up by FedEx for conversion to cargo.
MBA has reduced its estimation of Base Value by 20 percent, and continues
an additional 25 percent reduction in Current Market Price to reflect market
softness. While the majors withdraw, Hawaiian
11
<PAGE> 237
Airlines is having good results with the ones it acquired from American for its
West Coast market. New charter operator OMNI joins Sun Jet in acquiring several.
In the last two to three years Continental and Northwest leased or bought
some 40 DC-10-30s on the open market to supplement their wide body capacity as
they retired B-747's and waited for new deliveries when they could afford them.
Gemini Air Cargo and AOM French Airlines have also been on the acquisition side,
but it now appears the strong demand is decreasing, and continued price erosion
is expected.
The DC-10-40 continues to be an orphan aircraft with only two operators,
JAL and NWA. JAL is planning to retire theirs in the near future. Future values
will depend on whether these aircraft are continued in service, or perhaps
converted for cargo or charter.
IV. VALUATION
In developing the valuations of these aircraft, MBA did not inspect the
aircraft or their respective historical maintenance documentation. Therefore, we
used certain assumptions that are generally accepted industry practice to
calculate the value of an aircraft when more detailed information is not
available. The principal assumptions are as follows (for each aircraft):
1. The aircraft is in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for an aircraft
of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and Service
Bulletins.
7. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting was made for lease obligations or terms of ownership.
The aircraft subject to this appraisal were adjusted from our Base Value by
applying a 'newness factor' which accounts for month of delivery. Additional
adjustments were made to account for the current maintenance status of each
aircraft using the information provided by Lehman Brothers. The lease rates for
the next 20 years assume a five-year term in dollars per month.
12
<PAGE> 238
<TABLE>
<CAPTION>
AIR HOLLAND AIR MADAGASCAR AIR TOURS/PREIMAIR AIR TOURS/PREIMAIR AIR2000 ALITALIA
B737-300 B-767-300ER A320-200 A320-200 B-767-300ER B-767-300ER
28559 25403 221 222 29617 30008
5/1/97 1/15/92 9/1/91 10/1/91 3/15/99 5/1/99
PH-OZC CC-CEU OY CNB OY-CNC G-OOAL TBD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)..... 31.47 62.67 29.92 29.92 86.85 86.85
Newness................... 0.62 0.00 0.95 1.07 0.54 0.90
Gross Wt ADJ.............. 0.83 3.66 0.46 0.46 0.00 0.00
Airframe Adjustment....... 0.22 0.08 0.53 0.48 0.00 0.00
Engine Adjustment......... 0.41 0.09 (0.83) (0.83) 0.00 0.00
Landing Gear.............. 0.00 0.00 0.00 0.00 0.00 0.00
TCAS...................... 0.00 0.00 0.00 0.00 0.00 0.00
Windshear................. (0.13) 0.00 (0.13) (0.13) 0.00 0.00
Total Adjustments......... 0.51 0.17 (0.42) (0.47) 0.00 0.00
Adjusted Base Value....... 33.42 66.50 30.91 30.98 87.39 87.75
- ------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of.... 07/31/98 09/30/98 07/31/98 07/31/98 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998................. 330,000 665,000 315,000 315,000 865,000 865,000
1999...................... 325,000 660,000 310,000 310,000 860,000 860,000
2000...................... 320,000 655,000 305,000 305,000 855,000 855,000
2001...................... 315,000 650,000 300,000 300,000 850,000 850,000
2002...................... 315,000 645,000 300,000 300,000 845,000 845,000
2003...................... 310,000 640,000 295,000 295,000 840,000 840,000
2004...................... 305,000 635,000 290,000 290,000 835,000 835,000
2005...................... 305,000 630,000 290,000 290,000 830,000 830,000
2006...................... 300,000 625,000 285,000 285,000 825,000 825,000
2007...................... 295,000 620,000 280,000 280,000 820,000 820,000
2008...................... 290,000 615,000 275,000 275,000 815,000 815,000
2009...................... 290,000 610,000 275,000 275,000 810,000 810,000
2010...................... 285,000 605,000 270,000 270,000 805,000 805,000
2011...................... 280,000 600,000 265,000 265,000 800,000 800,000
2012...................... 275,000 595,000 260,000 260,000 795,000 795,000
2013...................... 270,000 590,000 255,000 255,000 790,000 790,000
2014...................... 270,000 585,000 250,000 250,000 785,000 785,000
2015...................... 265,000 575,000 250,000 250,000 775,000 775,000
2016...................... 260,000 570,000 245,000 245,000 770,000 770,000
2017...................... 255,000 560,000 240,000 240,000 760,000 760,000
2018...................... 250,000 550,000 235,000 235,000 750,000 750,000
2019...................... 245,000 545,000 230,000 230,000 745,000 745,000
2020...................... 245,000 540,000 230,000 230,000 740,000 740,000
2021...................... 240,000 535,000 225,000 225,000 735,000 735,000
2022...................... 235,000 530,000 220,000 220,000 730,000 730,000
2023...................... 230,000 525,000 215,000 215,000 725,000 725,000
<CAPTION>
AMERICA WEST
B737-300
28740
6/24/98
N1790B
- -------------------------- ------------
<S> <C>
Base Value ($000,000)..... 33.32
Newness................... 0.41
Gross Wt ADJ.............. 0.00
Airframe Adjustment....... 0.00
Engine Adjustment......... 0.00
Landing Gear.............. 0.00
TCAS...................... 0.00
Windshear................. 0.00
Total Adjustments......... 0.00
Adjusted Base Value....... 33.74
- ----------------------------------------
Maintenance Data as of.... 12/01/98
- ---------------------------------------
Forecasted Lease Values
Year 1998................. 335,000
1999...................... 330,000
2000...................... 330,000
2001...................... 325,000
2002...................... 320,000
2003...................... 320,000
2004...................... 315,000
2005...................... 310,000
2006...................... 305,000
2007...................... 305,000
2008...................... 300,000
2009...................... 295,000
2010...................... 295,000
2011...................... 290,000
2012...................... 285,000
2013...................... 280,000
2014...................... 275,000
2015...................... 275,000
2016...................... 270,000
2017...................... 265,000
2018...................... 260,000
2019...................... 255,000
2020...................... 250,000
2021...................... 250,000
2022...................... 245,000
2023...................... 240,000
</TABLE>
13
<PAGE> 239
<TABLE>
<CAPTION>
BRITANNIA BRITISH AIRWAYS BRITISH MIDLAND BRITISH MIDLAND BRITISH MIDLAND CANADIAN
B-767-300ER B737-300 B737-300 B737-300 B737-300 A320-200
25221 28548 28554 28557 28558 210
7/1/91 12/10/97 12/1/96 3/1/97 4/1/97 7/1/91
G-BXOP G-OAMS G-ECAS G-SMDB G-OJTW C-GQCA
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000).......... 59.59 31.47 29.73 31.47 31.47 29.92
Newness........................ 1.54 1.85 1.60 0.31 0.46 0.72
Gross Wt ADJ................... 1.18 0.30 0.89 0.89 0.89 0.26
Airframe Adjustment............ 0.65 0.32 0.28 0.30 0.30 (0.56)
Engine Adjustment.............. 0.00 0.00 0.01 0.15 0.12 (0.83)
Landing Gear................... 0.04 0.00 0.00 0.00 0.00 0.00
TCAS........................... 0.00 0.00 0.00 0.00 0.00 (0.13)
Windshear...................... 0.00 (0.13) (0.13) (0.13) (0.13) (0.13)
Total Adjustments.............. 0.70 0.20 0.17 0.32 0.29 (1.63)
Adjusted Base Value............ 63.01 33.81 32.38 32.99 33.11 29.27
- --------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of......... 01/15/99 01/08/99 07/31/98 07/31/98 07/31/98 07/31/98
- --------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998...................... 620,000 335,000 320,000 325,000 325,000 310,000
1999........................... 615,000 330,000 315,000 320,000 320,000 305,000
2000........................... 610,000 330,000 315,000 320,000 320,000 300,000
2001........................... 605,000 325,000 310,000 315,000 315,000 300,000
2002........................... 600,000 320,000 305,000 310,000 310,000 295,000
2003........................... 595,000 320,000 305,000 310,000 310,000 290,000
2004........................... 590,000 315,000 300,000 305,000 305,000 290,000
2005........................... 585,000 310,000 295,000 300,000 300,000 285,000
2006........................... 580,000 305,000 290,000 295,000 295,000 275,000
2007........................... 575,000 305,000 290,000 295,000 295,000 275,000
2008........................... 570,000 300,000 285,000 290,000 290,000 270,000
2009........................... 565,000 295,000 280,000 285,000 285,000 265,000
2010........................... 560,000 295,000 280,000 280,000 280,000 260,000
2011........................... 555,000 290,000 275,000 280,000 280,000 255,000
2012........................... 550,000 285,000 270,000 275,000 275,000 255,000
2013........................... 545,000 280,000 265,000 270,000 270,000 250,000
2014........................... 540,000 275,000 260,000 265,000 265,000 245,000
2015........................... 535,000 275,000 260,000 260,000 260,000 240,000
2016........................... 530,000 270,000 255,000 260,000 260,000 235,000
2017........................... 525,000 265,000 250,000 255,000 255,000 230,000
2018........................... 520,000 260,000 245,000 250,000 250,000 225,000
2019........................... 515,000 255,000 240,000 245,000 245,000 225,000
2020........................... 510,000 250,000 235,000 240,000 240,000 220,000
2021........................... 505,000 250,000 235,000 240,000 240,000 215,000
2022........................... 500,000 245,000 230,000 235,000 235,000 210,000
2023........................... 495,000 240,000 225,000 230,000 230,000 205,000
<CAPTION>
CANADIAN
A320-200
231
9/1/91
C-FPWD
- ------------------------------- ---------
<S> <C>
Base Value ($000,000).......... 29.92
Newness........................ 0.95
Gross Wt ADJ................... 0.26
Airframe Adjustment............ (0.39)
Engine Adjustment.............. (0.77)
Landing Gear................... 0.00
TCAS........................... (0.13)
Windshear...................... (0.13)
Total Adjustments.............. (1.41)
Adjusted Base Value............ 29.72
- ------------------------------------------
Maintenance Data as of......... 07/31/98
- ------------------------------------------
Forecasted Lease Values
Year 1998...................... 315,000
1999........................... 310,000
2000........................... 305,000
2001........................... 300,000
2002........................... 300,000
2003........................... 295,000
2004........................... 290,000
2005........................... 290,000
2006........................... 285,000
2007........................... 280,000
2008........................... 275,000
2009........................... 275,000
2010........................... 270,000
2011........................... 265,000
2012........................... 260,000
2013........................... 255,000
2014........................... 250,000
2015........................... 250,000
2016........................... 245,000
2017........................... 240,000
2018........................... 235,000
2019........................... 230,000
2020........................... 225,000
2021........................... 225,000
2022........................... 220,000
2023........................... 215,000
</TABLE>
14
<PAGE> 240
<TABLE>
<CAPTION>
CHINA AIRLINES CHINA AIRLINES CHINA GENERAL CHINA GENERAL CONTINENTAL CONTINENTAL
B-737-400 B-737-400 B737-300 B737-300 DC10-30 DC10-30
28490 28491 2856L 28562 46584 48292
11/1/96 11/1/96 6/1/97 7/1/97 2/15/80 2/15/82
B-18672 B-18673 B-2978 B-2979 N15069 N87070
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)............... 32.51 32.51 31.47 31.47 19.62 20.70
Newness............................. 1.21 1.21 0.77 0.93 0.18 0.15
Gross Wt ADJ........................ 0.68 0.68 0.62 0.62 0.00 0.47
Airframe Adjustment................. 0.23 0.24 0.38 0.39 (0.03) 0.17
Engine Adjustment................... (0.02) (0.02) 0.65 0.75 (0.74) (0.29)
Landing Gear........................ 0.00 0.00 0.00 0.00 0.00 0.00
TCAS................................ (0.13) (0.13) 0.00 0.00 0.00 0.00
Windshear........................... (0.13) (0.13) (0.13) (0.13) 0.00 0.00
Total Adjustments................... (0.04) (0.03) 0.91 1.02 (0.77) (0.12)
Adjusted Base Value................. 34.36 34.37 33.77 34.03 19.03 21.20
- ---------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of.............. 01/15/99 01/15/99 08/21/97 08/21/97 12/13/96 12/13/96
- ---------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998........................... 345,000 345,000 330,000 330,000 200,000 220,000
1999................................ 340,000 340,000 325,000 325,000 195,000 215,000
2000................................ 335,000 335,000 325,000 325,000 190,000 210,000
2001................................ 330,000 330,000 320,000 320,000 185,000 205,000
2002................................ 330,000 330,000 315,000 315,000 180,000 200,000
2003................................ 325,000 325,000 315,000 315,000 175,000 195,000
2004................................ 320,000 320,000 310,000 310,000 170,000 190,000
2005................................ 315,000 315,000 305,000 305,000 165,000 185,000
2006................................ 315,000 315,000 300,000 300,000 160,000 180,000
2007................................ 310,000 310,000 295,000 295,000 155,000 175,000
2008................................ 305,000 305,000 290,000 290,000 150,000 170,000
2009................................ 300,000 300,000 285,000 285,000 145,000 165,000
2010................................ 295,000 295,000 280,000 280,000 140,000 160,000
2011................................ 295,000 295,000 280,000 280,000 135,000 155,000
2012................................ 290,000 290,000 275,000 275,000 130,000 150,000
2013................................ 285,000 285,000 270,000 270,000 125,000 145,000
2014................................ 280,000 280,000 265,000 265,000 120,000 140,000
2015................................ 275,000 275,000 260,000 260,000 115,000 135,000
2016................................ 270,000 270,000 260,000 260,000 110,000 130,000
2017................................ 265,000 265,000 255,000 255,000 105,000 125,000
2018................................ 260,000 260,000 250,000 250,000 100,000 120,000
2019................................ 260,000 260,000 245,000 245,000 100,000 115,000
2020................................ 255,000 255,000 240,000 240,000 95,000 110,000
2021................................ 250,000 250,000 240,000 240,000 95,000 105,000
2022................................ 245,000 245,000 235,000 235,000 90,000 100,000
2023................................ 240,000 240,000 230,000 230,000 85,000 100,000
<CAPTION>
EUROFLY
MD83
53199
3/1/92
SE-DLU
- ------------------------------------ --------
<S> <C>
Base Value ($000,000)............... 24.62
Newness............................. 0.21
Gross Wt ADJ........................ 0.00
Airframe Adjustment................. (0.14)
Engine Adjustment................... (0.77)
Landing Gear........................ 0.00
TCAS................................ (0.13)
Windshear........................... 0.00
Total Adjustments................... (1.04)
Adjusted Base Value................. 23.79
- ----------------------------------------------
Maintenance Data as of.............. 07/31/98
- ----------------------------------------------
Forecasted Lease Values
Year 1998........................... 250,000
1999................................ 245,000
2000................................ 245,000
2001................................ 240,000
2002................................ 235,000
2003................................ 230,000
2004................................ 230,000
2005................................ 225,000
2006................................ 220,000
2007................................ 220,000
2008................................ 215,000
2009................................ 215,000
2010................................ 210,000
2011................................ 205,000
2012................................ 205,000
2013................................ 200,000
2014................................ 195,000
2015................................ 195,000
2016................................ 190,000
2017................................ 185,000
2018................................ 180,000
2019................................ 180,000
2020................................ 175,000
2021................................ 175,000
2022................................ 170,000
2023................................ 170,000
</TABLE>
15
<PAGE> 241
<TABLE>
<CAPTION>
FRONTIER JET AIRWAYS JET AIRWAYS MIDWAY ROYAL AVIATION SPANAIR SPANAIR SPANAIR
B737-300 B-737-400 B-737-400 A320-200 A310-300 MD83 MD83 MD83
28563 25663 25664 373 448 49398 49791 53198
8/1/97 11/1/92 11/1/92 1/1/93 2/15/88 11/1/86 10/1/89 3/1/91
N306FL VT-JAP VT-JAQ N304ML C-GYRA EC-245 EC-GGV SE-DLS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)......... 31.47 27.29 27.29 32.85 35.55 19.89 22.83 25.02
Newness....................... 1.08 1.02 1.02 0.00 0.40 0.78 0.80 0.20
Gross Wt ADJ.................. 0.62 (0.00) (0.00) 0.25 (1.36) 0.00 0.00 0.00
Airframe Adjustment........... 0.28 (0.09) (0.31) 0.00 0.15 0.31 (0.20) (0.24)
Engine Adjustment............. 0.51 (0.88) (0.88) 0.00 0.56 (0.83) (0.83) (0.83)
Landing Gear.................. 0.00 0.00 0.00 (0.07) 0.00 0.00 0.00 0.00
TCAS.......................... 0.00 0.00 0.00 0.00 0.00 0.00 (0.13) (0.13)
Windshear..................... (0.13) 0.00 0.00 0.00 (0.13) 0.00 (0.13) 0.00
Total Adjustments............. 0.67 (0.97) (1.19) (0.07) 0.59 (0.51) (1.28) (1.19)
Adjusted Base Value........... 33.84 27.34 27.12 33.03 35.18 20.16 22.36 24.02
- ---------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of........ 07/31/98 07/31/98 07/3l/98 11/10/97 05/13/98 07/31/98 07/31/98 07/31/98
- ---------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998..................... 330,000 285,000 285,000 415,000 345,000 190,000 220,000 235,000
1999.......................... 325,000 280,000 280,000 410,000 340,000 190,000 220,000 235,000
2000.......................... 325,000 275,000 275,000 405,000 335,000 185,000 215,000 230,000
2001.......................... 320,000 275,000 275,000 400,000 330,000 185,000 215,000 230,000
2002.......................... 315,000 270,000 270,000 395,000 325,000 180,000 210,000 225,000
2003.......................... 315,000 265,000 265,000 395,000 320,000 180,000 210,000 225,000
2004.......................... 310,000 265,000 265,000 390,000 315,000 180,000 205,000 220,000
2005.......................... 305,000 260,000 260,000 385,000 310,000 175,000 205,000 215,000
2006.......................... 300,000 255,000 255,000 380,000 305,000 175,000 200,000 215,000
2007.......................... 295,000 255,000 255,000 375,000 300,000 170,000 195,000 210,000
2008.......................... 290,000 250,000 250,000 370,000 295,000 170,000 195,000 210,000
2009.......................... 285,000 245,000 245,000 365,000 290,000 165,000 190,000 205,000
2010.......................... 280,000 245,000 245,000 360,000 285,000 165,000 190,000 205,000
2011.......................... 280,000 240,000 240,000 355,000 280,000 160,000 185,000 200,000
2012.......................... 275,000 235,000 235,000 350,000 275,000 155,000 185,000 l95,000
2013.......................... 270,000 235,000 235,000 345,000 270,000 155,000 180,000 195,000
2014.......................... 265,000 230,000 230,000 340,000 265,000 150,000 175,000 190,000
2015.......................... 260,000 225,000 225,000 335,000 260,000 150,000 175,000 185,000
2016.......................... 260,000 220,000 220,000 330,000 255,000 145,000 170,000 185,000
2017.......................... 255,000 215,000 215,000 325,000 250,000 140,000 165,000 180,000
2018.......................... 250,000 210,000 210,000 320,000 245,000 140,000 165,000 175,000
2019.......................... 245,000 205,000 205,000 315,000 240,000 135,000 160,000 175,000
2020.......................... 240,000 200,000 200,000 315,000 235,000 135,000 160,000 170,000
2021.......................... 240,000 200,000 200,000 310,000 230,000 130,000 155,000 170,000
2022.......................... 235,000 195,000 195,000 305,000 225,000 130,000 155,000 165,000
2023.......................... 230,000 190,000 190,000 300,000 220,000 130,000 150,000 165,000
</TABLE>
16
<PAGE> 242
<TABLE>
<CAPTION>
STAR AIRLINES STAR AIRLINES TRANSBRASIL VARIG VARIG VIRGIN EXPRESS
A320-200 A320-200 B737-300 B-767-200ER B-767-200ER B737-400
737 749 28564 23805 23806 28333
11/1/97 9/1/97 11/1/97 7/1/87 7/1/87 8/1/96
F-GRSG F-GRSH PT-TEP PP-VNR PP-VNS OO-VEB
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)....... 39.59 39.59 31.47 31.52 31.52 32.51
Newness..................... 1.57 1.26 1.54 0.92 0.92 0.85
Gross Wt ADJ................ 0.46 0.46 0.62 (0.59) (0.59) 0.62
Airframe Adjustment......... 0.00 0.00 0.33 (0.33) (0.24) 0.21
Engine Adjustment........... 0.00 0.00 0.47 1.21 1.11 0.03
Landing Gear................ 0.00 0.00 0.00 0.00 0.00 0.00
TCAS........................ 0.00 0.00 0.00 0.00 0.00 (0.13)
Windshear................... (0.13) (0.13) (0.13) 0.00 0.00 (0.13)
Total Adjustments........... (0.13) (0.13) 0.68 0.88 0.87 (0.00)
Adjusted Base Value......... 41.50 41.19 34.31 32.73 32.72 33.97
- ----------------------------------------------------------------------------------------------------------------------
Maintenance Data as of...... 11/10/97 12/10/97 07/31/98 07/31/98 07/31/98 07/31/98
- ----------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998................... 415,000 415,000 335,000 320,000 320,000 315,000
1999........................ 410,000 410,000 330,000 315,000 315,000 310,000
2000........................ 405,000 405,000 330,000 310,000 310,000 305,000
2001........................ 400,000 400,000 325,000 305,000 305,000 300,000
2002........................ 395,000 395,000 320,000 300,000 300,000 300,000
2003........................ 395,000 395,000 320,000 295,000 295,000 295,000
2004........................ 390,000 390,000 315,000 290,000 290,000 290,000
2005........................ 385,000 385,000 310,000 285,000 285,000 285,000
2006........................ 380,000 380,000 305,000 280,000 280,000 280,000
2007........................ 375,000 375,000 305,000 275,000 275,000 280,000
2008........................ 370,000 370,000 300,000 270,000 270,000 275,000
2009........................ 365,000 365,000 295,000 265,000 265,000 270,000
2010........................ 360,000 360,000 295,000 255,000 255,000 265,000
2011........................ 355,000 355,000 290,000 250,000 250,000 265,000
2012........................ 350,000 350,000 285,000 245,000 245,000 260,000
2013........................ 345,000 345,000 280,000 235,000 235,000 255,000
2014........................ 340,000 340,000 275,000 230,000 230,000 250,000
2015........................ 335,000 335,000 275,000 220,000 220,000 245,000
2016........................ 330,000 330,000 270,000 215,000 215,000 245,000
2017........................ 325,000 325,000 265,000 205,000 205,000 240,000
2018........................ 320,000 320,000 260,000 195,000 195,000 235,000
2019........................ 315,000 315,000 255,000 190,000 190,000 230,000
2020........................ 315,000 315,000 250,000 180,000 180,000 230,000
2021........................ 310,000 310,000 250,000 175,000 175,000 225,000
2022........................ 305,000 305,000 245,000 170,000 170,000 220,000
2023........................ 300,000 300,000 240,000 165,000 165,000 215,000
<CAPTION>
VIRGIN EXPRESS/CHINA
B-737-400
28489
11/1/96
B-18671
- ---------------------------- --------------------
<S> <C>
Base Value ($000,000)....... 32.51
Newness..................... 1.21
Gross Wt ADJ................ 0.68
Airframe Adjustment......... 0.28
Engine Adjustment........... (0.00)
Landing Gear................ 0.00
TCAS........................ (0.13)
Windshear................... (0.13)
Total Adjustments........... 0.03
Adjusted Base Value......... 34.43
- --------------------------------------------------
Maintenance Data as of...... 07/31/98
- --------------------------------------------------
Forecasted Lease Values
Year 1998................... 345,000
1999........................ 340,000
2000........................ 335,000
2001........................ 330,000
2002........................ 330,000
2003........................ 325,000
2004........................ 320,000
2005........................ 315,000
2006........................ 315,000
2007........................ 310,000
2008........................ 305,000
2009........................ 300,000
2010........................ 295,000
2011........................ 295,000
2012........................ 290,000
2013........................ 285,000
2014........................ 280,000
2015........................ 275,000
2016........................ 270,000
2017........................ 265,000
2018........................ 260,000
2019........................ 255,000
2020........................ 255,000
2021........................ 250,000
2022........................ 245,000
2023........................ 240,000
</TABLE>
17
<PAGE> 243
A310-300 (S/N 448)
Aircraft C-GYRA was delivered in February, 1988 and is awarded a 'newness'
adjustment of $400,000. The Airframe is adjusted at a rate of $18.75 per
hour -- for a positive adjustment of $150,000 for a recently completed
maintenance check. The Engines are adjusted at a rate of $200 per hour for a
cumulative 2814 hours variance from half-time of 6,000 hours. This is a positive
adjustment of $560,000. A negative adjustment was made of $130,000 for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 210)
Aircraft C-GQCA was delivered in July, 1991 and is awarded a 'newness'
adjustment of $720,000. The Airframe is adjusted at a rate of $479 per day for a
1,161 day variance from half-time of 1,461 days. This is a negative adjustment
of $560,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hours variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
A320-200 (S/N 221)
Aircraft OY CNB was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $479 per day for a
1,101 day variance from half-time of 1,461 days. This is a positive adjustment
of $530,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 222)
Aircraft OY-CNC was delivered in October, 1991 and is awarded a 'newness'
adjustment of $1,070,000. The Airframe is adjusted at a rate of $639 per day for
a 756 day variance from half-time of 1,096 days. This is a positive adjustment
of $480,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 231)
Aircraft C-FPWD was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $426 per day for a
913 day variance from half-time of 1,644 days. This is a negative adjustment of
$390,000. The Engines are adjusted at a rate of $103 per hour for a cumulative
7,513 hour variance from half-time of 4,000 hours. This is a negative adjustment
of $770,000. A negative adjustment was made of $260,000 for no TCAS and
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 373)
Aircraft N3O4ML was delivered in January, 1993. A positive adjustment was
made of $250,000 for increased MTOW. Engines were assumed to be at half-time. A
negative adjustment of $300,000 was made for C-Check Status -- less than
half-time. A negative adjustment of $77,000 was made for landing gear status.
APU was assumed to be at half-time.
A320-200 (S/N 737)
Aircraft F-GRSG was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,570,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of
18
<PAGE> 244
$130,000 was made for no Windshear. No current data was provided for the
airframe, engines, landing gear and the APU, therefore it was assumed to be at
half time.
A320-200 (S/N 749)
Aircraft F-GRSH was delivered in September, 1997 and is awarded a 'newness'
adjustment of $1,260,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of $130,000 was made for no Windshear. No
current data was provided for the airframe, engines, landing gear and the APU,
therefore it was assumed to be at half time.
B737-300 (S/N 28740)
Aircraft N335AW was delivered in June, 1998 and is awarded a 'newness'
adjustment of $410,000. Due to its relatively new vintage no adjustments were
made on this aircraft.
B737-300 (S/N 28333)
Aircraft OO-VEB was delivered in August, 1996 and is awarded a 'newness'
adjustment of $850,000. The Airframe is adjusted at a rate of $36 per day for a
5,964 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $210,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 344 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $30,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
B737-300 (S/N 28548)
Aircraft G-OAMS was delivered in December, 1997 and is awarded a 'newness'
adjustment of $1,850,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28554)
Aircraft G-ECAS was delivered in December, 1996 and is awarded a 'newness'
adjustment of $1,600,000. The Airframe is adjusted at a rate of $33 per day for
a 8,356 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 132 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $10,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28557)
Aircraft G-SMDB was delivered in March, 1997 and is awarded a 'newness'
adjustment of $310,000. The Airframe is adjusted at a rate of $33 per day for a
9,075 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,510 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $150,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28558)
Aircraft G-OJTW was delivered in April, 1997 and is awarded a 'newness'
adjustment of $460,000. The Airframe is adjusted at a rate of $33 per day for a
9,003 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,228 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $120,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
19
<PAGE> 245
B737-300 (S/N 28559)
Aircraft PH-OZC was delivered in May, 1997 and is awarded a 'newness'
adjustment of $620,000. The Airframe is adjusted at a rate of $36 per day for a
6,269 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $220,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 4,198 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $410,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28561)
Aircraft B-2978 was delivered in June, 1997 and is awarded a 'newness'
adjustment of $770,000. The Airframe is adjusted at a rate of $36 per day for a
10,745 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $380,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 6,728 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $650,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28562)
Aircraft B-2979 was delivered in July, 1997 and is awarded a 'newness'
adjustment of $930,000. The Airframe is adjusted at a rate of $36 per day for a
11,025 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $390,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 7,723 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $750,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28563)
Aircraft N3O6FL was delivered in August, 1997 and is awarded a 'newness'
adjustment of $1,080,000. The Airframe is adjusted at a rate of $36 per day for
a 7,934 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 5,246 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $510,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28564)
Aircraft PT-TEP was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,540,000. The Airframe is adjusted at a rate of $36 per day for
a 9,318 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $330,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 4,838 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $470,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-400 (S/N 28490)
Aircraft serial number 28490 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,375 hour variance from half-time of 20,000 hours. This is a
positive adjustment of $270,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 152 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $10,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
20
<PAGE> 246
B737-400 (S/N 28491)
Aircraft serial number 28491 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,375 hour variance from half-time of 20,000 hours. This is a
positive adjustment of $270,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 152 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $10,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
B737-400 (S/N 25663)
Aircraft VT-JAP was delivered new in November, 1992 and is awarded a
'newness' adjustment of $1,020,000. The Airframe is adjusted at a rate of $45
per hour for a 2,112 hour variance from half-time of 11,200 hours. This is a
negative adjustment of $90,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 8,000 hour variance from half-time of 4,000 hours. This is
a negative adjustment of $88,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B737-400 (S/N 28664)
Aircraft VT-JAQ was delivered new in November, 1992 and is awarded a
'newness' adjustment of $1,020,000. The Airframe is adjusted at a rate of $63
per hour for a 4,989 hour variance from half-time of 8,000 hours. This is a
negative adjustment of $310,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 8,000 hour variance from half-time of 4,000 hours. This is
a negative adjustment of $780,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B737-400 (S/N 28489)
Aircraft serial number 28489 was delivered in November, 1996 and is awarded
a 'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,653 hour variance from half-time of 10,000 hours. This is a
positive adjustment of $280,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 18 hour variance from half-time of 4,000 hours. There is
no adjustment to the engines. No data was provided for the landing gear and the
APU, therefore it was assumed to be at half time.
B767-200ER (S/N 23805)
Aircraft PP-VNR was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per cycle for
a 1,584 cycle variance from half-time of 1,500 cycles. This is a negative
adjustment of $330,000. The Engines are adjusted at a rate of $170 per hour for
a cumulative 7,125 hour variance from half-time of 5,000 hours. This is a
positive adjustment of $1,210,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B767-200ER (S/N 23806)
Aircraft PP-VNS was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per cycle for
a 1,150 cycle variance from half-time of 1,500 cycles. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $170 per hour for
a cumulative 6,553 hour variance from half-time of 5,000 hours. This is a
positive adjustment of $1,150,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B767-300ER (S/N 25221)
Aircraft G-BXOP was delivered in August, 1991. The Airframe is adjusted at
a rate of $133.33 per cycle for a 509 cycle variance from half-time of 1,500
hours. This is a positive adjustment of $68,000. Plus an additional $584,000 for
D Check. The engines are assumed to be at half-time. A positive adjustment for
21
<PAGE> 247
$1,000,000 was made for increased MTOW. A positive adjustment was made of
$44,000 for landing gear status. APU was assumed to be at half-time.
B767-300ER (S/N 25403)
Aircraft CC-CEU was delivered in January, 1992. The Airframe is adjusted at
a rate of $58.33 per hour for a 10,647 hour variance from half-time of 12,000
hours. This is a positive adjustment of $80,000. The Engines are adjusted at a
rate of $170 per cycle for a cumulative 541 cycle variance from half-time of
5,000 cycles. There is an adjustment of $90,000. No data was provided for the
landing gear and the APU, therefore it was assumed to be at half time.
B767-300ER (S/N 29617)
This aircraft will be delivered new in March of 1999. A newness adjustment
was made of $540,000 to reflect delivery.
B767-300ER (S/N 30008)
This aircraft will be delivered new in May of 1999. A newness adjustment
was made of $900,000 to reflect delivery.
MD83 (S/N 49398)
Aircraft EC-245 was delivered in November, 1986 and is awarded a 'newness'
adjustment of $780,000. The Airframe is adjusted at a rate of $15 per hour for a
17,396 hour variance from half-time of 15,000 hours. This is a positive
adjustment of $310,000. The Engines are adjusted at a rate of $103 per hour for
a cumulative 8,000 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
MD83 (S/N 49791)
Aircraft EC-CGV was delivered in October, 1989 and is awarded a 'newness'
adjustment of $800,000. The Airframe is adjusted at a rate of $13 per hour for a
9,676 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $200,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment was made of $260,000 for no TCAS
and Windshear. No data was provided for the landing gear and the APU, therefore
it was assumed to be at half time.
MD83 (S/N 53198)
Aircraft SE-DLS was delivered in March, 1991 and is awarded a 'newness'
adjustment of $200,000. The Airframe is adjusted at a rate of $12 per hour for a
8,598 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
MD83 (S/N 53199)
Aircraft SE-DLU was delivered in March, 1992 and is awarded a 'newness'
adjustment of $210,000. The Airframe is adjusted at a rate of $28 per hour for a
4,823 hour variance from half-time of 15,000 hour days. This is a negative
adjustment of $140,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 7,511 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $770,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
DC1O-30 (S/N 46584)
Aircraft N15069 was delivered in February, 1980 and is awarded a 'newness'
adjustment of $180,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 307 hour variance from half-time of 2640 hour days. This is a negative
adjustment of $29,000. The Engines are adjusted at a rate of $150 per hour for a
22
<PAGE> 248
cumulative 4932 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $740,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
DC10-30 (S/N 48292)
Aircraft N87070 was delivered in February, 1982 and is awarded a 'newness'
adjustment of $150,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 1824 hour variance from half-time of 2640 hour days. This is a positive
adjustment of $170,000. The Engines are adjusted at a rate of $150 per hour for
a cumulative 1956 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $290,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
V. COVENANTS
This report has been prepared for the exclusive use of Aircraft Finance
Trust and shall not be provided to other parties by MBA without the express
consent of Aircraft Finance Trust. MBA certifies that this report has been
independently prepared and that it fully and accurately reflects MBA's opinion
as to the Current Fair Market Values and Lease Rates. MBA further certifies that
it does not have, and does not expect to have, any financial or other interest
in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Fair Market
Values and Lease Rates of the subject aircraft and is intended to be advisory
only in nature. Therefore, MBA assumes no responsibility or legal liability for
any actions taken or not taken by Aircraft Finance Trust or any other party with
regard to the subject aircraft. By accepting this report, all parties agree that
MBA shall bear no such responsibility or legal liability.
This report has been prepared by:
/s/ BRYSON P. MONTELEONE
---------------------------------------------
Bryson P. Monteleone
Manager of Operations
Reviewed by:
/s/ MORTEN S. BEYER
---------------------------------------------
Morten S. Beyer
Chairman and CEO
ISTAT Certified Senior Appraiser/Fellow
March 25, 1999
23
<PAGE> 249
- ------------------------------------------------------
- ------------------------------------------------------
AIRCRAFT FINANCE HAS NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE BY THIS PROSPECTUS AND YOU
MUST NOT RELY ON ANY SUCH INFORMATION OR REPRESENTATIONS AS HAVING BEEN
AUTHORIZED BY AIRCRAFT FINANCE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AIRCRAFT FINANCE SINCE THE DATE AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION.
-------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999, ALL BROKER DEALERS THAT EFFECT TRANSACTIONS IN
THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE BROKER-DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO ANY UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$1,145,000,000
AIRCRAFT FINANCE TRUST
-------------------------
PROSPECTUS
-------------------------
OFFER TO EXCHANGE
CLASS A-1 FLOATING RATE ASSET BACKED
NOTES, SERIES 1999-1, CLASS A-2
FLOATING RATE ASSET BACKED NOTES,
SERIES 1999-1, CLASS B FLOATING RATE
ASSET BACKED NOTES, SERIES 1999-1
AND CLASS C FIXED RATE ASSET BACKED
NOTES, SERIES 1999-1
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE> 250
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Trust Agreement (the "Trust Agreement") of
Aircraft Finance Trust dated as of May 4, 1999 provides that Aircraft Finance
Trust will indemnify, to the fullest extent permitted by Delaware law, each
trustee (and the officers, directors, employees, heirs, executors or
administrators of each trustee) 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
or suit by or in the right of Aircraft Finance Trust to procure a judgment in
its favor by reason of the fact that such person is or was a trustee of Aircraft
Finance Trust or is or was serving at the request of Aircraft Finance Trust as a
trustee, director or officer of another trust, corporation, partnership, joint
venture or other enterprise. Aircraft Finance Trust also agreed to indemnify, to
the fullest extent permitted by Delaware law, each trustee of Aircraft Finance
Trust from any and all losses, liabilities or expenses that may be imposed on,
incurred by or asserted against any of them arising out of, in connection with
or related to their performance under the Trust Agreement.
ITEM 21. EXHIBITS
(a) Exhibits
The following is a list of exhibits to this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
3.1 Certificate of Trust of Aircraft Finance Trust.
3.2 Amended and Restated Trust Agreement of Aircraft Finance
Trust dated as of May 4, 1999.
4.1 Indenture dated as of May 5, 1999 between Aircraft Finance
Trust, Resource/Phoenix, Inc. and Bankers Trust Company.
4.2 Form of Global Note (included in Exhibit 4.1).
4.4 Registration Rights Agreement dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Inc.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP as to the
legality of the securities being registered hereby.
5.2 Opinion of Morris, James, Hitchens & Williams as to the
legality of the securities being registered hereby.
8. Opinion of Milbank, Tweed, Hadley & McCloy LLP as to certain
U.S. Federal income tax matters (included in Exhibit 5.1).
10.1 Master Aircraft Purchase Agreement, dated as of May 5, 1999
among General Electric Capital Corporation, Aircraft Finance
Trust, the Sellers listed on Annex A thereto and AFT
Trust-Sub I.
10.2 Security Trust Agreement dated as of May 5, 1999 between
Aircraft Finance Trust, Bankers Trust Company, AFT Trust-Sub
I and Aircraft Finance Trust Ireland, Limited.
10.3 Servicing Agreement dated as of May 5, 1999 among GE Capital
Aviation Services, Limited and Aircraft Finance Trust.
10.4 Administrative Agency Agreement dated as of May 5, 1999
between Bankers Trust Company, Aircraft Finance Trust,
ReSource/Phoenix, Inc., AFT Trust-Sub I and Aircraft Finance
Trust Ireland, Limited.
</TABLE>
II-1
<PAGE> 251
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.5 Reference Agency Agreement dated as of May 5, 1999 between
Bankers Trust Company, Aircraft Finance Trust and
ReSource/Phoenix, Inc.
10.6 Master Swap Agreement and Schedule dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Financial
Products Inc.
12. Statement re Computation of Ratio of Earnings to Fixed
Charges.
21. Subsidiaries of Aircraft Finance Trust.
23.1 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
Exhibit 5.1).
23.2 Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2).
23.3 Consent of Aircraft Information Services, Inc.
23.4 Consent of BK Associates, Inc.
23.5 Consent of Morton, Beyer & Agnew.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Weil, Gotshal & Manges LLP.
23.8 Consent of Simat, Helliesen & Eichner.
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of Bankers Trust Company of New York under the
Trust Indenture Act of 1939.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients; Form of Instructions to
Registered Holder and/or Book-Entry Transfer Facility
Participant from Aircraft Finance Trust.
99.4 Appraisal of Aircraft Information Services, Inc.
99.5 Appraisal of BK Associates, Inc.
99.6 Appraisal of Morton, Beyer & Agnew.
</TABLE>
ITEM 22. UNDERTAKINGS.
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 foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
II-2
<PAGE> 252
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.
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.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually, or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE> 253
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Aircraft
Finance Trust has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
AIRCRAFT FINANCE TRUST
by Wilmington Trust Company,
not in its individual capacity but
solely
as the Owner Trustee
By: /s/ DONALD G. MACKELCAN
------------------------------------
Name: Donald G. Mackelcan
Title: Vice-President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of Aircraft Finance Trust and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ DAVID H. TREITEL Controlling Trustee July 2, 1999
- ---------------------------------------------------
David H. Treitel
/s/ RICHARD E. CAVANAGH Controlling Trustee July 2, 1999
- ---------------------------------------------------
Richard E. Cavanagh
/s/ WAYNE D. LIPPMAN Controlling Trustee July 2, 1999
- ---------------------------------------------------
Wayne D. Lippman
/s/ CHARISSE L. RODGERS Owner Trustee July 2, 1999
- ---------------------------------------------------
Wilmington Trust Company, not in its individual
capacity but as the Owner Trustee
</TABLE>
II-4
<PAGE> 254
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
3.1 Certificate of Trust of Aircraft Finance Trust.
3.2 Amended and Restated Trust Agreement of Aircraft Finance
Trust dated as of May 4, 1999.
4.1 Indenture dated as of May 5, 1999 between Aircraft Finance
Trust, Resource/Phoenix, Inc. and Bankers Trust Company.
4.2 Form of Global Note (included in Exhibit 4.1).
4.4 Registration Rights Agreement dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Inc.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP as to the
legality of the securities being registered hereby.
5.2 Opinion of Morris, James, Hitchens & Williams as to the
legality of the securities being registered hereby.
8. Opinion of Milbank, Tweed, Hadley & McCloy LLP as to certain
U.S. Federal income tax matters (included in Exhibit 5.1).
10.1 Master Aircraft Purchase Agreement dated as of May 5, 1999
among General Electric Capital Corporation, Aircraft Finance
Trust, the Sellers listed on Annex A thereto and AFT
Trust-Sub I.
10.2 Security Trust Agreement dated as of May 5, 1999 between
Aircraft Finance Trust, Bankers Trust Company, AFT Trust-Sub
I and Aircraft Finance Trust Ireland, Limited.
10.3 Servicing Agreement dated as of May 5, 1999 among GE Capital
Aviation Services, Limited and Aircraft Finance Trust.
10.4 Administrative Agency Agreement dated as of May 5, 1999
between Bankers Trust Company, Aircraft Finance Trust,
ReSource/Phoenix, Inc., AFT Trust-Sub I and Aircraft Finance
Trust Ireland, Limited.
10.5 Reference Agency Agreement dated as of May 5, 1999 between
Bankers Trust Company, Aircraft Finance Trust and
ReSource/Phoenix, Inc.
10.6 Master Swap Agreement and Schedule dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Financial
Products Inc.
12. Statement re Computation of Ratio of Earnings to Fixed
Charges.
21. Subsidiaries of Aircraft Finance Trust.
23.1 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
Exhibit 5.1).
23.2 Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2).
23.3 Consent of Aircraft Information Services, Inc.
23.4 Consent of BK Associates, Inc.
23.5 Consent of Morton, Beyer & Agnew.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Weil, Gotshal & Manges LLP.
23.8 Consent of Simat, Helliesen & Eichner.
</TABLE>
<PAGE> 255
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of Bankers Trust Company of New York under the
Trust Indenture Act of 1939.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients; Form of Instructions to
Registered Holder and/or Book-Entry Transfer Facility
Participant from Aircraft Finance Trust.
99.4 Appraisal of Aircraft Information Services, Inc.
99.5 Appraisal of BK Associates, Inc.
99.6 Appraisal of Morton, Beyer & Agnew.
</TABLE>
<PAGE> 1
Exhibit 3.1
TRUST AGREEMENT
OF
AIRCRAFT FINANCE TRUST
This TRUST AGREEMENT, dated as of April 13, 1999 (this "Agreement"),
is by and between UNICAPITAL AFT-I, INC. and UNICAPITAL AFT-II INC., each a
Delaware corporation, as grantors (collectively the "Depositor"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation (the "Trustee"). The Depositor and
the Trustee hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as
"Aircraft Finance Trust," in which name the Trust may conduct business, make and
execute contracts, and sue and be sued.
2. Wilmington Trust Company is hereby appointed trustee of the Trust
and hereby accepts such appointment. The Depositor hereby sells, assigns,
transfers, conveys and sets over to the Trustee, as of the date hereof, the sum
of one dollar ($1.00). The Trustee hereby acknowledges receipt in trust of such
amount from the Depositor as of the date hereof and hereby declares that it will
hold such amount in trust upon and subject to the conditions set forth herein
for the use and benefit of the Depositor, as the sole beneficiary of the Trust.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under the Delaware Business Trust Act, 12 Del. Code
ss. 3801 et seq. (the "Business Trust Statute"), and that this document
constitute the governing instrument of the Trust. The business and purpose of
the Trust shall be to directly or indirectly acquire a portfolio of aircraft and
related leases and to securitize the lease receivables. The Trustee is hereby
authorized and directed by the Depositor to file a certificate of trust with the
Office of the Secretary of State of the State of Delaware, pursuant to the
Business Trust Statute.
3. The Trustee shall be the trustee required to 12 Del. Code ss.
3807(a), shall have only the rights, obligations and liabilities specifically
provided for herein and in the Business Trust Statute and shall have no implied
rights, obligations or liabilities with respect to the affairs of the Trust.
Unless and to the extent specifically directed by the Depositor and consented to
in writing by the Trustee, the Trustee shall not participate in any decisions
relating to, or possess any authority independently to manage or control, the
business and affairs of the Trust. Pursuant to Section 3806 of the Business
Trust Statute, the Trust shall be managed, and the Trust's business shall be
controlled and conducted, solely at the direction of the Depositor in accordance
with this Agreement. In no event shall the trustee have liability for any acts
or omissions of, or taken at the direction of, the Depositor. The Trustee shall
have the power and authority to take such actions, to execute, deliver,
acknowledge and file all necessary documents and to maintain all necessary
records on behalf of the Trust as required by the Business Trust Statute and
this Agreement or as directed in writing by the
<PAGE> 2
Depositor. The Trustee shall provide notice to the Depositor of its performance
of any of the foregoing. The Depositors shall reasonably keep the Trustee
informed of any actions taken by the Depositor with respect to the Trust that
affect the rights, obligations or liabilities of the Trustee hereunder or under
the Business Trust Statute. In no way limiting any of the foregoing, the Trust
is hereby expressly authorized to apply for and purchase directors and officers
insurance in such amounts and at such terms as the Depositor may instruct the
Trustee, and may form such subsidiaries, and settle such trusts, as the
Depositor may instruct the Trustee.
4. The Depositor is hereby specifically empowered, authorized and
directed to execute, deliver and perform on behalf of the Trust, such
instruments, agreements, deeds, conveyances and other documents as the Depositor
determines are necessary or desirable in connection with the Trust's business or
purposes, such determination to be conclusively, but not exclusively, evidenced
in each case by the execution and delivery of such instruments, agreements,
deeds, conveyances or other documents by the Depositor.
5. To the fullest extent permitted by law, the Depositor and the
Trust shall defend and indemnify the Trustee for, and hold it harmless against,
any and all losses and liabilities, obligations, damages, penalties, taxes
(excluding any taxes payable by the Trustee on or measured by any compensation
for services rendered by the Trustee under this Agreement), claims, actions,
suits or out-of-pocket expenses or costs of any kind and nature whatsoever
incurred or arising out of or in connection with the acceptance or
administration of this Trust (each, a "Claim"), including the reasonable costs
and out-of-pocket expenses of the Trustee defending itself against any Claim,
except to the extent that the same may be incurred or arise out of the bad
faith, gross negligence or willful misconduct of such Trustee. The foregoing
indemnification obligations shall survive the termination of this Agreement.
6. The Depositor and the Trustee will enter into an amended and
restated trust agreement, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby, which agreement shall amend
and restate this Agreement in its entirety.
7. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to principles or rules
of conflicts of laws).
8. This Agreement may be executed and delivered in any number of
counterparts, each of which shall be an original, with the same effect as if all
signatures were on the same instrument.
[THE REMAINDER OF THIS PAGE IS BLANK
INTENTIONALLY; THE NEXT PAGE IS THE
SIGNATURE PAGE]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
WILMINGTON TRUST COMPANY
By: /s/ Patricia A. Evans
-------------------------------------
Name: Patricia A. Evans
-------------------------------
Title: Financial Services Officer
------------------------------
UNICAPITAL AFT-I, INC.
By: /s/ Daniel M. Chait
-------------------------------------
Name: Daniel M. Chait
-------------------------------
Title: VP
-------------------------------
UNICAPITAL AFT-II, INC.
By: /s/ Daniel M. Chait
-------------------------------------
Name: Daniel M. Chait
-------------------------------
Title: VP
-------------------------------
<PAGE> 1
Exhibit 3.2
EXECUTION COPY
AMENDED AND RESTATED TRUST AGREEMENT
OF
AIRCRAFT FINANCE TRUST
Dated as of May 4, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS.......................................................................1
Section 1.01. Definitions and Construction..........................................1
ARTICLE II GENERAL MATTERS..................................................................2
Section 2.01. Organizational Matters................................................2
Section 2.02. Management by the Controlling Trustees; Authority of the Owner
Trustee...............................................................3
Section 2.03. Objects...............................................................4
Section 2.04. Prohibition and Limitation of Actions by AFT and the Trustees.........5
Section 2.05. Limitation on the Issuance, Delivery and Sale of Equity
Interests.............................................................8
Section 2.06. Independent Business..................................................8
Section 2.07. Duration of AFT.......................................................9
Section 2.08. Trust for Benefit of Holders of AFT Debt Securities...................9
ARTICLE III THE BENEFICIAL INTEREST CERTIFICATES...........................................10
Section 3.01. Issuance of Beneficial Interest Certificates; Terms; Form;
Execution and Delivery...............................................10
Section 3.02. Restrictive Legends..................................................11
Section 3.03. Register.............................................................12
Section 3.04. Method of Payment....................................................12
Section 3.05. Transfer and Exchange; Cancellation..................................13
Section 3.06. Mutilated, Destroyed, Lost or Stolen Beneficial Interest
Certificates.........................................................13
Section 3.07. Payments of Transfer Taxes...........................................13
Section 3.08. Additional Certificates..............................................14
Section 3.09. Special Transfer Provisions..........................................14
Section 3.10. CUSIP, CINS and ISIN Numbers.........................................16
Section 3.11. Distributions........................................................16
Section 3.12. Subordination of the Securities......................................16
Section 3.13. Additional Capital...................................................16
ARTICLE IV TRUSTEES........................................................................17
Section 4.01. Number and Status....................................................17
Section 4.02. Owner Trustee........................................................17
Section 4.03. Controlling Trustees.................................................18
Section 4.04. Quorum; Meetings.....................................................19
Section 4.05. Controlling Trustees' Resolution.....................................20
Section 4.06. Notice of Meetings...................................................20
Section 4.07. Voting...............................................................20
Section 4.08. Resolutions..........................................................21
Section 4.09. Delegation...........................................................22
Section 4.10. Vacancies............................................................22
Section 4.11. Effect of Replacement................................................22
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.12. Effect of Vacancies..................................................22
Section 4.13. Transactions with Trustees...........................................22
Section 4.14. Interests of Trustees................................................23
Section 4.15. Confidentiality Obligations of Trustees..............................23
Section 4.16. Contract with Trustee................................................23
Section 4.17. Validity of Acts.....................................................23
Section 4.18. Minute Book..........................................................24
Section 4.19. Fees and Remuneration; Directors and Officers Insurance..............24
Section 4.20. Trustees May Rely....................................................24
Section 4.21. Trustees Act Solely as Trustees......................................25
Section 4.22. No Expenses for the Trustees.........................................25
Section 4.23. No Representations or Warranties as to Certain Matters...............25
ARTICLE V INDEMNIFICATION OF TRUSTEES......................................................25
Section 5.01. Liability and Indemnity..............................................25
Section 5.02. Agents...............................................................26
Section 5.03. Insurance............................................................26
Section 5.04. Non-Exclusive Rights.................................................26
Section 5.05. Survival.............................................................26
ARTICLE VI TERMINATION OF AFT..............................................................26
Section 6.01. Termination of AFT...................................................26
ARTICLE VII AMENDMENTS.....................................................................27
Section 7.01. Amendments...........................................................27
ARTICLE VIII MISCELLANEOUS.................................................................28
Section 8.01. Notices..............................................................28
Section 8.02. Governing Law........................................................29
Section 8.03. Jurisdiction.........................................................29
Section 8.04. Counterparts.........................................................30
Section 8.05. Agreement............................................................30
Section 8.06. Table of Contents; Headings..........................................30
</TABLE>
ii
<PAGE> 4
EXHIBITS
--------
Exhibit A - Form of Beneficial Interest Certificate
Exhibit B - Form of Affidavit of Citizenship
Exhibit C - Form of Certificate to be Delivered in Connection with Transfers
to Non-QIB Accredited Investors
iii
<PAGE> 5
This AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"),
dated as of May 4, 1999, is made between UNICAPITAL AFT-I, INC. and UNICAPITAL
AFT-II, INC., each a Delaware corporation (the "Depositors") and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as the Person accepting
appointment as the Owner Trustee under this Trust Agreement.
Pursuant to that certain Trust Agreement dated April 13, 1999, the
parties created a business trust under the Business Trust Act (the "Original
Trust Agreement") and by this instrument intend to amend and restate such
agreement such that this Amended and Restated Trust Agreement shall constitute
the governing instrument of that business trust. Accordingly, the parties agree
that the Original Trust Agreement is hereby amended and restated in its entirety
to read as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions and Construction. For purposes of this
Trust Agreement, the following terms shall have the meanings indicated below.
Capitalized terms used but not defined in this Trust Agreement shall have the
meaning given to such terms in the Indenture. The rules of construction
contained in Section 1.02 of the Indenture shall apply to this Trust Agreement.
A "subsidiary" of any Person shall include a trust of which such Person is the
holder of the beneficial interest.
"AFT" has the meaning given to such term in Section 2.01(a) hereof.
"Basic Terms Modification" has the meaning given to such term in
Section 7.01 hereof.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq.
"Citizen of the United States" has the meaning given to the term
"citizen of the United States" in Section 40102(a)(15) of the Federal Aviation
Act.
"Controlling Trustee" means each Person appointed, at the time of
determination, as a controlling trustee under this Trust Agreement. The initial
Controlling Trustees are identified in Section 4.03 hereof.
"Depositors" has the meaning given to such term in the introductory
paragraph of this Trust Agreement.
"Eligibility Requirements" has the meaning given to such term in
Section 4.02 hereof.
"Equity Trustee" means the Person appointed, at the time of
determination, as the Trustee appointed by the Certificateholders under this
Trust Agreement. The initial Equity Trustee is identified in Section 4.03
hereof.
<PAGE> 6
"Indenture" means the Trust Indenture between AFT, ReSource/Phoenix,
Inc. and Bankers Trust Company.
"Indenture Trustee" means the "Trustee" as defined in the Indenture.
"Independent Controlling Trustee" means the Controlling Trustees
appointed, at the time of determination, as the Independent Controlling Trustees
under this Trust Agreement. The initial Independent Controlling Trustees are
identified in Section 4.03 hereof.
"Original Trust Agreement" has the meaning given to such term in the
second introductory paragraph of this Trust Agreement.
"Owner Trustee" means the Person appointed, at the time of
determination, as the owner trustee under this Trust Agreement. The initial
Owner Trustee is Wilmington Trust Company.
"Private Placement Legend" means the legend initially set forth on
the Beneficial Interest Certificates in the form set forth in Section 3.02
hereof.
"Register" has the meaning given to such term in Section 3.03
hereof.
"Trustee" means any of or in its plural form all of the Owner
Trustee and the Controlling Trustees.
"Trust Agreement" has the meaning given to such term in the
introductory paragraph of this Trust Agreement.
"Trust Property" means any and all property in which AFT at any time
has any right, title or interest.
ARTICLE II
GENERAL MATTERS
Section 2.01. Organizational Matters.
(a) The name of the business trust that is the subject of this Trust
Agreement is "Aircraft Finance Trust". If the Controlling Trustees determine
that the use of the name "Aircraft Finance Trust" is not practicable or
desirable, they may change the name and use any other designation or name for
such business trust. To the extent practicable, the Trustees shall conduct the
activities of Aircraft Finance Trust ("AFT"), execute and deliver all documents
and cause AFT to sue or be sued under its name. Any reference to AFT shall be a
reference to the business trust created hereby and not to any of the Trustees
individually, to the officers, agents or employees of AFT, to the Depositors or
to any other Certificateholders or other holders of a beneficial interest in
AFT.
(b) The principal office of AFT, and such additional offices as the
Controlling Trustees may determine to establish, shall be located at such place
or places inside or outside the State of Delaware as the Controlling Trustees
may designate from time to time. The principal
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office of AFT is initially located c/o Wilmington Trust Company, Attention:
Corporate Trust Administrator, at 1100 North Market Street, Rodney Square North,
Wilmington, DE 19890-0001.
(c) AFT is a "business trust", the Trustees are the "trustees" and
each Certificateholder is a "beneficial owner", within the meaning of the
Business Trust Act. AFT shall not be deemed to be a general partnership, limited
partnership, limited liability company, joint venture, joint shares company or a
corporation. It is intended that AFT shall be treated for tax purposes as a
partnership (and not a publicly traded partnership) under the United States
Internal Revenue Code of 1986.
(d) Legal title to all Trust Property shall be vested in AFT as a
separate legal entity, except that the Controlling Trustees may cause legal
title to any Trust Property to be held by or in the name of any other Person as
a nominee and in furtherance thereof, legal title to any Aircraft may be held in
the name of the Owner Trustee or the owner trustee under any trust established
by and for the benefit of AFT. No Certificateholder or other owner of a
beneficial interest in AFT shall be deemed to have a severable ownership
interest in or any right of partition or possession to any part of the Trust
Property.
(e) The Owner Trustee hereby declares that it will hold the Trust
Property upon the terms set forth in this Trust Agreement. Each successor Owner
Trustee shall succeed to the right, title and interest of the Owner Trustee in
the Trust Property automatically upon its due succession or due acceptance of
appointment as the Owner Trustee without the need for any conveyancing documents
as to all or any part of the Trust Property. Subject to the right of the
Controlling Trustees to direct the Owner Trustee as to the transfer or
encumbering of all or any part of the Trust Property, all documents effecting
any transfer or encumbering of all or any part of the Trust Property shall be
executed and delivered exclusively by the Owner Trustee.
Section 2.02. Management by the Controlling Trustees; Authority of
the Owner Trustee.
(a) The Controlling Trustees shall have the exclusive and full
authority to manage the Trust Property and affairs of AFT, subject to the terms
and provisions of this Trust Agreement. By acceptance of its appointment, each
Controlling Trustee agrees to manage the Trust Property and the affairs of AFT
in accordance with the terms of this Trust Agreement and specifically, so long
as any debt securities of AFT remain outstanding, to take no action with respect
to all or any part of the Trust Property that contravenes or conflicts with any
provision of the Indenture or other instrument governing such debt securities.
(b) The Owner Trustee shall have the exclusive authority to (i)
accept legal process served on AFT in the State of Delaware, (ii) execute any
certificates that the Owner Trustee is required to execute under Section 3811 of
the Business Trust Act and file such certificates with the Delaware Secretary of
State, (iii) subject to the direction of the Controlling Trustees, receive funds
from the Indenture Trustee and distribute them in accordance herewith, (iv)
subject to the direction of the Controlling Trustees, send to the
Certificateholders a copy of each notice or other communication received by the
Owner Trustee under the Indenture for or on behalf of one or more of the
Certificateholders as provided herein, (v) subject to the direction of
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the Controlling Trustees, send to the Indenture Trustee a copy of each notice,
request or other communication for or on behalf of one or more
Certificateholders as provided herein or in the Indenture, (vi) subject to the
direction of the Controlling Trustees, execute and send to the Indenture Trustee
in the name of and on behalf of AFT such notices, requests or other
communications as the Indenture requires on the part of AFT or as the
Controlling Trustees shall direct and (vii) execute and deliver in the name of
and on behalf of AFT such Related Documents as are to be executed and delivered
on the Initial Closing Date or as the Controlling Trustees shall direct and any
amendments or supplements to any Related Documents and any other certificates,
instruments, documents or other papers (including documents of transfer or
encumbrance) as the Controlling Trustees shall direct. Each such action shall be
taken by the Owner Trustee in its capacity as such and not in its individual
capacity, and any papers so executed may so state. The Owner Trustee shall not
be required to take any such action if the Owner Trustee shall determine, or
shall be advised by counsel, that such action is likely to result in personal
liability or is contrary to Applicable Law or any agreement to which AFT or the
Owner Trustee is a party.
Section 2.03. Objects. AFT is formed for the following objects only:
(a) to enter into and to perform the Asset Purchase Agreement, the
Indenture, the Security Trust Agreement, any of the other Related Documents, and
any other agreements as are required by the terms of the Related Documents or as
the Controlling Trustees determine to be appropriate for the objects of and the
proper conduct of the affairs of AFT;
(b) to acquire, directly or indirectly through any subsidiary or
other intermediary, aircraft and related assets pursuant to the Asset Purchase
Agreement or from time to time pursuant to other Acquisition Agreements or
otherwise;
(c) to own, hold, convert, maintain, modify, manage, operate, lease,
re-lease and sell or otherwise dispose of any aircraft or related assets and
enter into all agreements and engage in all related activities incidental
thereto (in each case directly or indirectly through any subsidiary or other
intermediary), including from time to time accepting, exchanging, holding or
permitting any of its subsidiaries to accept, exchange or hold 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;
(d) to provide loans to or guarantee or otherwise support the
obligations and liabilities of any of its subsidiaries on such terms and in such
manner as the Controlling Trustees see fit and (whether or not AFT or any of its
subsidiaries shall derive a benefit therefrom) so long as such loans,
guarantees, or other supports are provided for the purposes set forth in
paragraphs 2.03(a), (b) or (c) hereof; provided that no such loan, guarantee or
other support of the obligations or liabilities of any of its subsidiaries shall
be provided if it would materially adversely affect the holders of any debt
securities of AFT;
(e) to finance and refinance the activities described in paragraphs
2.03(a), (b) or (c) above through the offer, sale and issuance of any securities
of AFT, including the Initial Notes, the Additional Notes, the Refinancing
Notes, the Exchange Notes, the Beneficial Interest
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Certificates and the Additional Certificates, upon such terms and conditions as
the Controlling Trustees see fit, for cash or in payment or in partial payment
for any property purchased or otherwise acquired by AFT or any of its
subsidiaries and to encumber, by grant of a security interest, mortgage or other
charge (including the Security Trust Agreement), all or any part of the Trust
Property whether now or hereinafter acquired and to permit its subsidiaries to
do all or any of the foregoing;
(f) to engage 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 AFT's or any of its
subsidiaries' property or assets, within limits determined by the Controlling
Trustees from time to time and submitted to the Rating Agencies, including
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 other
instruments as are similar to, or derivatives of, any of the foregoing;
(g) to establish, promote and aid in promoting, constituting,
forming or organizing companies, trusts, syndicates, partnerships or other
entities of all kinds in any part of the world for the purposes set forth in
paragraph 2.03(a), (b), (c) or (d) hereof and to acquire, hold or exercise
rights with respect to and dispose of shares, securities and other interests in
any Person who is or becomes thereby a subsidiary or causing the disposition of
the assets of, or the dissolution of, any existing subsidiary;
(h) to take out, acquire, surrender, assign or exercise rights with
respect to and pay premiums on policies of insurance and assurances with any
insurance company or companies and permit its subsidiaries to do so, all as the
Controlling Trustees may think fit ; and
(i) to do all such things as may be deemed incidental or conducive
to the attainment of all or any of the above objects.
For the avoidance of doubt, AFT is authorized to, and to permit its
subsidiaries to, engage in any activity or other undertaking expressly required
or authorized by the Indenture.
Section 2.04. Prohibition and Limitation of Actions by AFT and the
Trustees.
(a) Prohibited Activity. AFT (and its subsidiaries) shall not, and
the Trustees shall not cause AFT (or its subsidiaries) to engage in any activity
other than as required or authorized by Section 2.03 hereof or any other
provision of this Trust Agreement. Any party to this Trust Agreement, any
Certificateholder and, for so long as any debt securities of AFT remain
outstanding, any holders of such debt securities (or any trustee or other
representative thereof), may bring a proceeding to set aside and enjoin the
performance of any act or acts by AFT that are not required or authorized by
Section 2.03 hereof or any other provision of this Trust Agreement.
(b) Limitations on New Subsidiaries. The organizational documents of
each direct or indirect subsidiary of AFT formed or acquired on or after the
date hereof shall limit
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such subsidiary's activities to those permitted under Section 5.02(e) of the
Indenture and shall provide that, except to the extent otherwise required by
Applicable Law, such subsidiary may not commence a voluntary bankruptcy or
similar proceeding except with the consent of all of the trustees or directors,
as applicable, of such subsidiary (other than a statutory trustee), at least one
of whom shall be an individual who is an Independent Controlling Trustee under
this Trust Agreement.
(c) Limitation on Employees. AFT shall not, and AFT shall not permit
any of its subsidiaries to, employ or maintain any employees other than as
required by any provisions of local law; provided that the Trustees (or any
Person serving on any committee thereof) and the trustees and directors of each
of AFT's subsidiaries shall not be deemed to be employees for purposes of this
Section 2.04(c).
(d) Limitation on Indebtedness. AFT shall not, and AFT shall 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. The Beneficial Interest Certificates shall not
constitute Indebtedness.
Notwithstanding the foregoing, AFT and any of its subsidiaries may
incur each and all of the following:
(i) Indebtedness in respect of any Initial Notes issued on the
Initial Closing Date;
(ii) Indebtedness in respect of any Refinancing Notes or other
Indebtedness described in the proviso to Section 5.02(c)(iii) of the Indenture;
provided that (A) such Refinancing Notes or other Indebtedness receive ratings
from the Rating Agencies at the close of such Refinancing or repurchase equal to
or higher than those of the subclass being refinanced or repurchased (determined
at the date of incurrence), (B) taking into account such Refinancing or
repurchase, a Rating Agency Confirmation is obtained prior to such Refinancing
or repurchase and (C) the net proceeds of any such Refinancing or other
Indebtedness shall be used only to repay the Outstanding Principal Balance of
the subclass of Notes being so refinanced or repurchased (plus any premium and
transaction expenses relating thereto) and to fund any Cash Collateral Account
and/or Reserved Cash in the Collections Account in respect of such Refinancing
Notes;
(iii) Indebtedness in respect of any Exchange Notes issued pursuant
to the Indenture and the Registration Rights Agreement;
(iv) Indebtedness in respect of any Additional Notes the proceeds of
which are applied to finance a Permitted Additional Aircraft Acquisition;
provided that (A) a Rating Agency Confirmation is obtained prior to the
incurrence of such Indebtedness and (B) the net proceeds of such Indebtedness
shall be used only to finance such Permitted Additional Aircraft Acquisition
(plus transaction expenses relating thereto) and to fund any Cash Collateral
Account and/or Reserved Cash in the Collections Account in respect of such
Additional Notes and (C)
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such Additional Notes will be cross-collateralized with all Outstanding Notes by
the Collateral under the Security Trust Agreement;
(v) Indebtedness in respect of guarantees by any Issuer Group Member
of any other Issuer Group Member; provided that no such Indebtedness shall be
incurred if it would materially adversely affect the Holders;
(vi) obligations to each Seller under each Acquisition Agreement and
any related lease assignment and assumption agreements and the documents related
thereto;
(vii) Indebtedness under any agreements between any Issuer Group
Member and any other Issuer Group Member (each, an "Intercompany Loan");
provided that such Indebtedness shall be evidenced by promissory notes and
written notice shall have been given to each Rating Agency of the incurrence of
such Indebtedness; and
(viii) Indebtedness of any Issuer Group Member under any Credit
Facility or Swap Agreement.
(e) Limitation on Consolidation, Merger and Transfer of Assets. AFT
shall not, and AFT shall not permit any of its subsidiaries 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 AFT or any of its subsidiaries,
unless (i) the resulting entity is a special purpose entity, the organizational
document of which is substantially similar to this Trust Agreement or the
equivalent organizational document of such Issuer Group Member, 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 and the
Certificateholders do not give rise to any withholding tax payments less
favorable to the Holders or the Certificateholders than the amount of any
withholding tax payments that would have been required had such event not
occurred and such entity is not subject to taxation as a corporation or an
association or publicly traded partnership taxable as a corporation, (ii) in the
case of any consolidation, merger or transfer by AFT, the Beneficial Interest
Certificates remain outstanding or new Ownership Interests having substantially
the same terms and conditions as the exchanged Beneficial Interest Certificates
are issued in exchange therefor and the surviving successor or transferee entity
expressly assumes all of the obligations of AFT under the Indenture, the
Securities and each other Related Document to which AFT is then a party, (iii) a
Rating Agency Confirmation is obtained with respect to such merger, sale,
conveyance, transfer, lease or disposition, (iv) immediately after giving effect
to such transaction, no Event of Default has occurred and is continuing, (v)
such transaction does not result in the recognition of gain or loss by the
Holders for U.S. federal income tax purposes, and (vi) AFT delivers to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel, in each
case stating that such consolidation, merger or transfer and such assumption
documents comply with the above criteria and, if applicable, Section 5.02(g) of
the Indenture 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 (1) within and between AFT and any of its
subsidiaries and any other Issuer Group Member if such consolidation, merger,
sale, conveyance,
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transfer, lease or disposition, as the case may be, would not materially
adversely affect the Holders and the Certificateholders, (2) complying with the
terms of Section 5.02(g) of the Indenture or (3) effected as part of a single
transaction providing for the redemption or defeasance of Securities in
accordance with Section 3.10 or Article XI, respectively, of the Indenture.
Section 2.05. Limitation on the Issuance, Delivery and Sale of
Equity Interests. AFT shall not (a) issue, deliver or sell any shares,
interests, participations or other equity equivalents (however designated,
whether voting or non-voting, other than beneficial interests, shares,
participations or other equivalents existing on the Initial Closing Date) or (b)
sell, or permit any subsidiary, directly or indirectly, to issue, deliver or
sell, any shares, interests, participations or other equity equivalents (however
designated, whether voting or non-voting, other than beneficial interests,
shares, participations or other equivalents existing on the Initial Closing
Date), except (i) the issuance, sale, delivery, transfer or pledge of Ownership
Interests in any Issuer Group Member to or for the benefit of any other Issuer
Group Member, (ii) issuances or sales of any Additional Certificates the
proceeds of which are applied to finance a Permitted Additional Aircraft
Acquisition and as provided in Section 2.04(d)(iv) hereof in accordance with the
provisions of Section 2.11 of the Indenture, provided that (A) a Rating Agency
Confirmation is obtained prior to such issuance and (B) the net proceeds of such
issuance shall be used only to finance such Permitted Additional Aircraft
Acquisition and as provided in Section 2.04(d) (iv) hereof; (iii) issuances or
sales of shares of Ownership Interests in 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 Controlling Trustees to avoid adverse tax
consequences in any such jurisdiction, (iv) the pledge of the Pledged Stock and
Pledged Beneficial Interest or pledge of any other Ownership Interest pursuant
to the Security Trust Agreement, (v) the sale or other disposition of any
Ownership Interest in an Issuer Subsidiary in order to effect the sale of all
Aircraft owned by such Issuer Subsidiary in compliance with Section 5.02(g) of
the Indenture, (vi) contributions to the capital of AFT by the
Certificateholders for the purpose of exercising AFT's rights under Section 3.13
of the Indenture, for the purpose of an Optional Redemption of any subclass of
Notes or for the purpose of discharging the Notes upon their Acceleration and
(vii) the issuance of certificates in replacement for, or upon transfer or
exchange of, then Outstanding Beneficial Interest Certificates in accordance
with the terms hereof.
Section 2.06. Independent Business. AFT will conduct its activities,
and will cause each of its subsidiaries to conduct its business such that it is
a separate and readily identifiable business from, and independent of, any
Certificateholder and any of its Affiliates (it being understood that any
Certificateholder and its Affiliates may publish financial statements that
consolidate those of AFT 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
AFT's subsidiaries may file consolidated tax returns with any Certificateholder
and its Affiliates for tax purposes). Without limiting the foregoing, AFT:
(a) will observe, and will cause its subsidiaries to observe, all
formalities necessary to remain legal entities separate and distinct from each
Certificateholder and any of its Affiliates;
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(b) will maintain, and will cause its subsidiaries to maintain, each
of their respective assets and liabilities separate and distinct from those of
each Certificateholder and any of its Affiliates;
(c) will maintain, and will cause its subsidiaries to maintain,
records, books, accounts, and minutes separate from those of each
Certificateholder and any of its Affiliates;
(d) will pay its obligations, and will cause its subsidiaries to pay
each of their respective obligations in the ordinary course of business as legal
entities separate from each Certificateholder and any of its Affiliates;
(e) will keep, and will cause its subsidiaries to keep, each of
their respective funds separate and distinct from any funds of each
Certificateholder and any of its Affiliates, and will receive, deposit, withdraw
and disburse such funds separately from any funds of each Certificateholder and
any of its Affiliates;
(f) will conduct its activities, and will cause each of its
respective subsidiaries to conduct their respective businesses in their own
name, and not in the name of any Certificateholder or any of its Affiliates;
(g) will not agree, and will cause its subsidiaries not to agree, to
pay or become liable for any debt of any Certificateholder or any of its
Affiliates;
(h) will not hold out, and will cause its subsidiaries not to hold
out, that any of them is a division of any Certificateholder or any of its
Affiliates or that any Certificateholder or any of its Affiliates is a division
of any of them;
(i) will not induce, and will cause its subsidiaries not to induce,
any third party to rely on the creditworthiness of any Certificateholder or any
of its Affiliates in order that such third party will contract with it; and
(j) will not enter into, and will cause its subsidiaries not to
enter into, any transaction between any of them and any Certificateholder or any
of its Affiliates that are more favorable to such Certificateholder and its
Affiliates than transactions that AFT and its subsidiaries 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 or any
transactions permitted pursuant to the Indenture.
For the avoidance of doubt, AFT is authorized to, and to permit its
subsidiaries to, engage in any activity or other undertaking expressly required
or authorized by the Indenture.
Section 2.07. Duration of AFT. AFT, unless terminated pursuant to
the provisions of Article VI hereof, shall have a perpetual existence.
Section 2.08. Trust for Benefit of Holders of AFT Debt Securities.
(a) This Trust Agreement has been entered into, and AFT has been
created, in part to induce the Holders to purchase their respective Notes. Each
Certificateholder (by
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accepting a Beneficial Interest Certificate) and the Trustees agree that the
Holders from time to time are third party beneficiaries hereof, and shall be
entitled to enforce the terms of this Trust Agreement to the same extent as if
they were parties hereto, subject, however, to the provisions of the documents
governing the Notes.
(b) Neither the bankruptcy, insolvency or other incapacity of any
Certificateholder, nor any transfer, by operation of law or otherwise, by it of
any interest in AFT or the Trust Property, shall (i) operate to terminate this
Trust Agreement or the existence of AFT, (ii) entitle any Certificateholder or
its legal representatives or transferees to claim an accounting or to take any
action in any court for a partition of all or any part of the Trust Property or
for the winding up of AFT or (iii) otherwise affect the rights, duties and
liabilities of the parties hereto.
ARTICLE III
THE BENEFICIAL INTEREST CERTIFICATES
Section 3.01. Issuance of Beneficial Interest Certificates; Terms;
Form; Execution and Delivery.
(a) AFT is hereby authorized to issue the Initial Certificates and
such Additional Certificates as are authorized in a Controlling Trustees'
Resolution; provided that any Additional Certificates shall be issued in
accordance with Section 2.05 hereof and Section 2.11 of the Indenture.
On the Initial Closing Date, AFT shall issue to each Depositor
in consideration of and against receipt of the initial contribution of such
Depositor in the amount set forth in a Controlling Trustees' Resolution and
against receipt from such Depositor of affidavits in the form of Exhibits B and
C to this Trust Agreement, Beneficial Interest Certificates representing the
percentage beneficial interest of such Depositor in the Trust Property and AFT
specified in such Controlling Trustees' Resolution, such percentages
representing in the aggregate for both Depositors all of the beneficial interest
in the Trust Property and AFT.
(b) Each Beneficial Interest Certificate to be issued on any Closing
Date (including any Additional Certificates) shall be issued and delivered to,
and registered in the name of, the relevant Certificateholder in registered
form, in the form of a permanent certificated certificate and substantially in
the form set forth in Exhibit A to this Trust Agreement, with such appropriate
insertions, omissions, substitutions and other variations as are required by
this Trust Agreement or as are, consistently herewith, set forth in a
Controlling Trustees' Resolution 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 conform to any usage in respect
thereof or as may, consistently herewith, be prescribed by a Controlling
Trustees' Resolution.
Beneficial Interest Certificates shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner, all as determined by a Controlling Trustees' Resolution.
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(c) The Beneficial Interest Certificates shall be executed on behalf
of AFT by the manual or facsimile signature of any Responsible Officer of the
Owner Trustee, such execution to constitute the authentication thereof.
(d) Each Beneficial Interest Certificate bearing the manual or
facsimile signature of any individual who at the time such Beneficial Interest
Certificate was executed was a Responsible Officer of the Owner Trustee shall
bind AFT, notwithstanding that any such individual has ceased to hold such
office or to be a Responsible Officer prior to the delivery of such Beneficial
Interest Certificate or any payment thereon or at any time thereafter.
(e) No Beneficial Interest Certificate shall be entitled to any
benefit under this Trust Agreement or be valid or obligatory for any purpose,
unless it shall have been executed on behalf of AFT and authenticated as
provided in clause (c) above. The signature of a Responsible Officer of the
Owner Trustee on any Beneficial Interest Certificate shall be conclusive
evidence that such Beneficial Interest Certificate has been duly executed and
authenticated under this Trust Agreement. Each Beneficial Interest Certificate
shall be dated the date of its execution.
Section 3.02. Restrictive Legends. Each Beneficial Interest
Certificate shall bear the following legends on the face thereof:
THIS BENEFICIAL INTEREST CERTIFICATE 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 CERTIFICATEHOLDER (1)
REPRESENTS THAT IT IS EITHER (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) AND A "CITIZEN OF THE
UNITED STATES" (AS DEFINED IN SECTION 40102(a)(15) OF PART A OF SUBTITLE
VII OF TITLE 49, UNITED STATES CODE AND IN THE FEDERAL AVIATION
REGULATIONS) OR (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3), (7) OR (8) OF REGULATION D UNDER THE SECURITIES
ACT) AND A "CITIZEN OF THE UNITED STATES" (AS DEFINED IN SECTION
40102(a)(15) OF PART A OF SUBTITLE VII OF TITLE 49, UNITED STATES CODE AND
IN THE FEDERAL AVIATION REGULATIONS), (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 BENEFICIAL INTEREST
CERTIFICATE, RESELL OR OTHERWISE TRANSFER THIS BENEFICIAL INTEREST
CERTIFICATE EXCEPT (A) TO AIRCRAFT FINANCE TRUST, A DELAWARE BUSINESS
TRUST ESTABLISHED UNDER THE BELOW REFERRED TO TRUST AGREEMENT DATED AS OF
APRIL 13, 1999 AS AMENDED AND RESTATED UNDER THE AMENDED AND RESTATED
TRUST AGREEMENT DATED AS OF MAY 4, 1999 (THE "AGREEMENT"), OR ANY
SUBSIDIARY THEREOF THAT IS A CITIZEN OF THE UNITED STATES, (B) TO A
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QUALIFIED INSTITUTIONAL BUYER THAT IS A CITIZEN OF THE UNITED STATES IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT IS A CITIZEN OF THE UNITED STATES
IN COMPLIANCE WITH SECTION 3.09 OF THE TRUST AGREEMENT, (D) TO A CITIZEN
OF THE UNITED STATES, 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 BENEFICIAL INTEREST CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
BENEFICIAL INTEREST CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE CERTIFICATEHOLDER MUST SUBMIT THIS BENEFICIAL INTEREST CERTIFICATE TO
THE OWNER TRUSTEE. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
OWNER TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS BENEFICIAL
INTEREST CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
REFERENCE IS ALSO MADE TO THE PROVISIONS OF SECTION 3.09 OF
THE TRUST AGREEMENT AS TO ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS
BENEFICIAL INTEREST CERTIFICATE.
Section 3.03. Register. With respect to each of the Beneficial
Interest Certificates, the Owner Trustee shall at all times be the Person at
whose office in the location set forth in Section 8.01 hereof the Beneficial
Interest Certificates may be presented or surrendered for registration of
transfer or for exchange and for payment thereof and where notices and demands
to or upon AFT in respect of the Beneficial Interest Certificates may be served.
The Owner Trustee shall keep a register of the Beneficial Interest Certificates
and of their transfer and exchange (the "Register").
Section 3.04. Method of Payment. On (i) each Payment Date to the
extent received by it under Section 3.08 of the Indenture and (ii) upon receipt
by it of any Excluded Payments, the Owner Trustee shall pay to the
Certificateholders all distributions with respect to the Beneficial Interest
Certificates to which they are entitled in accordance with the provisions
hereof; provided, that in the event and to the extent receipt of any payment is
not confirmed by the Owner Trustee by 1:00 p.m. (New York time) on such Payment
Date or any Business Day thereafter or on the date of the Owner Trustee's
receipt of any Excluded Payments, as applicable, distribution thereof shall be
made on the Business Day following the Business Day such payment is received.
Each payment on any Payment Date of amounts received under Section 3.08 of the
Indenture with respect to any Beneficial Interest Certificates shall be made by
the Owner Trustee to the Certificateholders as of the Record Date for such
Payment Date, and each payment of any Excluded Payment shall be made to the
Certificateholders on the date of payment.
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(a) Payments under Section 3.04(a) hereof shall be made by check
mailed to each Certificateholder on the applicable Record Date or, in the case
of Excluded Payments, on the date of payment, at its address appearing on the
Register. Alternatively, in the case of the Depositor or upon application in
writing to the Controlling Trustee, not later than the applicable Record Date,
by any other Certificateholder (which may be granted or denied in the discretion
of the Controlling Trustees), any such payments shall be made by wire transfer
to an account designated by such Certificateholder at a financial institution in
the United States of America.
Section 3.05. Transfer and Exchange; Cancellation. A
Certificateholder may transfer a Beneficial Interest Certificate only by written
application to the Owner Trustee stating the name of the proposed transferee and
otherwise complying with the terms of this Trust Agreement. No such transfer
shall be effective until, and such transferee shall succeed to the rights of a
Certificateholder only upon, final acceptance and registration of the transfer
by the Owner Trustee in the Register.
Prior to the due presentment for registration of transfer of a
Beneficial Interest Certificate, AFT and the Owner Trustee may deem and treat
the applicable registered Certificateholder as the absolute owner and
Certificateholder of such Beneficial Interest Certificate for the purpose of
receiving payment of all amounts payable with respect to such Beneficial
Interest Certificate and for all other purposes and shall not be affected by any
notice to the contrary. The Owner Trustee shall promptly notify the Controlling
Trustees of each request for a registration of transfer of a Beneficial Interest
Certificate.
Section 3.06. Mutilated, Destroyed, Lost or Stolen Beneficial
Interest Certificates. If any Beneficial Interest Certificate shall become
mutilated, destroyed, lost or stolen, AFT shall, upon the written request of the
Certificateholder thereof and presentation of the Beneficial Interest
Certificate or satisfactory evidence of destruction, loss or theft thereof to
the Owner Trustee, issue, and the Owner Trustee shall authenticate and the
deliver in exchange therefor or in replacement thereof, a new Beneficial
Interest Certificate in the name of such Certificateholder and in the same
percentage of residual interest and dated the date of its authentication. If the
Beneficial Interest Certificate being replaced has become mutilated, such
Beneficial Interest Certificate shall be surrendered to the Owner Trustee and
forwarded to AFT by the Owner Trustee. If the Beneficial Interest Certificate
being replaced has been destroyed, lost or stolen, the Certificateholder thereof
shall furnish to AFT or the Owner Trustee (i) such security or indemnity as may
be required by them to save AFT and the Owner Trustee harmless and (ii) evidence
satisfactory to AFT and the Owner Trustee of the destruction, loss or theft of
such Beneficial Interest Certificate and of the ownership thereof. The
applicable Certificateholder 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 Owner Trustee)
connected therewith.
Section 3.07. Payments of Transfer Taxes. Upon the transfer of any
Beneficial Interest Certificate pursuant to Section 3.06 hereof, AFT or the
Owner Trustee may require from the party requesting such new Beneficial Interest
Certificate payment of a sum to reimburse AFT or the Owner Trustee for, or to
provide funds for the payment of, any transfer tax or similar governmental
charge payable in connection therewith.
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Section 3.08. Additional Certificates. (a) Subject to Section 2.11
of the Indenture and Section 5.02(f)(iv) of the Indenture, AFT may issue
Additional Certificates pursuant to this Trust Agreement the proceeds of which
in each case shall be used to acquire Additional Aircraft (each, an "Additional
Issuance"). Each issuance of any Additional Certificates shall be authorized
pursuant to one or more Controlling Trustees' Resolutions and shall be effected
only following a Rating Agency Confirmation. Each Additional Certificate shall
be designated generally as a "Beneficial Interest Certificate" for all purposes
under this Trust Agreement and shall constitute a beneficial interest
representing a percentage residual interest in AFT pari passu with all of the
Beneficial Interest Certificates. Upon the issuance of any such Additional
Certificates, the percentage of the residual interest of AFT represented by each
then outstanding Beneficial Interest Certificate shall be adjusted to the
percentage determined by dividing the capital contribution represented by such
Beneficial Interest Certificate by the total capital contribution represented by
all Beneficial Interest Certificates then issued and Outstanding (after giving
effect to such Additional Certificates).
Section 3.09. Special Transfer Provisions.
(a) The Owner Trustee shall register the transfer of a Beneficial
Interest Certificate if such transfer is being made by a proposed transferor who
has (A) checked the box provided for on the Form of Beneficial Interest
Certificate attached hereto as Exhibit A stating, or has otherwise advised AFT
and the Owner Trustee in writing, that the sale has been made in compliance with
the provisions of Rule 144A and (B) provided AFT and the Owner Trustee an
affidavit in the form attached hereto as Exhibit B certifying, or has otherwise
advised AFT and the Owner Trustee in writing, that it is a "citizen of the
United States" as defined in Section 40102(a)(15) of the Federal Aviation Act to
a transferee who has (X) signed the certification provided for on the Form of
Beneficial Interest Certificate attached hereto as Exhibit A stating, or has
otherwise advised AFT and the Owner Trustee in writing, that it is purchasing
the Beneficial Interest for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account are
QIBs within the meaning of Rule 144A, that it is aware that the sale to it or
such account is being made in reliance on Rule 144A and that it acknowledges
that it has received such information regarding AFT as it has requested pursuant
to Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the foregoing representations in order
to claim the exemption from registration provided by Rule 144A and (Y) provided
AFT and the Owner Trustee an affidavit in the form attached hereto as Exhibit B
certifying, or has otherwise advised AFT and the Owner Trustee in writing, that
it is a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act. No transfer of a Beneficial Interest Certificate or
issuance of any Additional Certificates will be registered by the Owner Trustee
if such transfer would cause AFT to lose the benefits of the safe harbor from
"publicly traded partnership taxable as a corporation for federal income tax
purposes" status provided by Treasury Regulation Section 1.7704-1 or any other
available exemption from such status, determined as if the Class D Notes
evidenced partnership interests in AFT.
(b) The Owner Trustee shall register the transfer of a Beneficial
Interest Certificate by the proposed transferor who has (A) checked the box
provided for on the form of Beneficial Interest Certificate attached hereto as
Exhibit A stating that the Beneficial Interest Certificate is being transferred
other than in accordance with the exemption from registration
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under the Securities Act provided by Rule 144A thereunder and (B) provided AFT
and the Owner Trustee an affidavit in the form attached hereto as Exhibit B
certifying, or has otherwise advised AFT and the Owner Trustee in writing, that
it is a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act to a transferee who has delivered to the Owner Trustee (X)
an affidavit in the form attached hereto as Exhibit B certifying, or has
otherwise advised AFT and the Owner Trustee in writing, that it is a "citizen of
the United States" as defined in Section 40102(a)(15) of the Federal Aviation
Act, (Y) a certificate substantially in the form of Exhibit C hereto and (Z) an
Opinion of Counsel acceptable to the Controlling Trustees that such transfer is
in compliance with the Securities Act. No transfer of a Beneficial Interest
Certificate will be permitted if such transfer would cause AFT to lose the
benefits of the safe harbor from "publicly traded partnership taxable as a
corporation for federal income tax purposes" status provided by Treasury
Regulation Section 1.7704-1 or any other available exemption from such status,
determined as if the Class D Notes evidenced partnership interests in AFT.
(c) Without the consent of each Certificateholder, which consent may
be withheld in such holder's sole discretion, no Certificateholder may transfer
a Beneficial Interest Certificate (i) to a Person that is a "tax-exempt entity"
within the meaning of Section 168(h)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision thereto, (ii) to a Person that
is not a "United States person" within the meaning of Code Section 7701(a)(30)
or any successor provision thereto or (iii) if such transfer would result in a
termination of AFT as a partnership pursuant to Section 708 of the Code, or any
successor provision thereto, determined as if the Class D Notes evidenced
partnership interests in AFT.
(d) Absent a Rating Agency Confirmation, no Beneficial Interest
Certificate may be transferred to or held by any Seller, UniCapital Corporation,
any other direct or indirect seller of any Aircraft to the Issuer Group, or any
Affiliate of any thereof other than a Person whose organic documents restrict
its purposes and powers in a manner analagous to the restriction on the purposes
and powers of the Depositors contained in their respective organic documents.
(e) By its acceptance of any Beneficial Interest Certificate, each
Certificateholder of such Beneficial Interest Certificate acknowledges the
restrictions on transfer of such Beneficial Interest Certificate set forth in
this Trust Agreement and in the Private Placement Legend and agrees that it will
transfer such Beneficial Interest Certificate only as provided in this Trust
Agreement. The Owner Trustee shall not register a transfer of any Beneficial
Interest Certificate unless such transfer complies with the restrictions on
transfer of such Beneficial Interest Certificate set forth in this Trust
Agreement. In connection with any transfer of Beneficial Interest Certificates,
each Certificateholder agrees by its acceptance of the Beneficial Interest
Certificates to furnish the Owner 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. The Owner Trustee shall not be required to determine (but
may rely on a determination made by the Controlling Trustees with respect to)
the sufficiency of any such legal opinions.
The Owner Trustee shall retain copies of all letters, notices and
other written communications received pursuant to this Section 3.09. The
Controlling Trustees shall have the
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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 Owner Trustee.
Section 3.10. CUSIP, CINS and ISIN Numbers. The Owner Trustee in
issuing the Beneficial Interest Certificates shall, if so requested by the
Equity Trustee, use such "CUSIP", "CINS", "ISIN" or other identification numbers
as are then generally in use and, if so requested, the Owner Trustee shall use
CUSIP numbers, CINS numbers, ISIN numbers or other identification numbers, as
the case may be, in notices of exchange as a convenience to Certificateholders;
provided that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Beneficial Interest
Certificates or as contained in any notice of exchange and that reliance may be
placed only on the other identification numbers printed on the Beneficial
Interest Certificates; provided further, that any failure to use "CUSIP",
"CINS", "ISIN" or other identification numbers in any notice of exchange shall
not affect the validity or sufficiency of such notice.
Section 3.11. Distributions. On the date of the receipt of any
Excluded Payments and, to the extent and only to the extent of any payment
received pursuant to Section 3.08 of the Indenture on each Payment Date, the
Owner Trustee shall distribute the amounts so received pro rata to each
Certificateholder (subject to the final sentence of Section 3.04(a) hereof)
based upon the percentage residual interest represented by its Beneficial
Interest Certificates.
Section 3.12. Subordination of the Securities. Each
Certificateholder (by holding a Beneficial Interest Certificate) hereby
expressly acknowledges and agrees that (i) its right, if any, to receive
dividends or other distributions of Trust Property is subordinate to the rights
of the Holders as provided in the Indenture and (ii) it may not withdraw from
AFT or obtain possession of, or otherwise exercise legal or equitable remedies
with respect to, all or any part of the Trust Property prior to the payment in
full of the principal and interest of, and any other amount owing with respect
to, the Notes from time to time outstanding other than as expressly provided in
the Indenture. Each Certificateholder further acknowledges that the AFT has
agreed, on behalf of the Certificateholders, to the terms of Article X of the
Indenture and confirms that AFT is authorized to do so and that such
Certificateholder is bound thereby.
Section 3.13. Additional Capital. In the event that any
Certificateholder determines that it wishes, by itself or together with one or
more other Certificateholder, to provide funds for AFT either (i) to make any
Issuer Cure Amount payments under Section 3.13 of the Indenture, (ii) to provide
for an Optional Redemption of any subclass of Notes or (iii) following the
Acceleration of the Notes to discharge the Notes in full in accordance with the
Indenture, such Certificateholders shall give notice of such election to the
Trustee and shall provide the requisite funds to the Owner Trustee, who shall
thereupon apply such funds accordingly. Upon the receipt by the Owner Trustee of
any such funds in respect of the discharge of the Notes, the percentage
beneficial interests of all the Certificateholders shall be adjusted to reflect
such funds. Notwithstanding anything to the contrary in this Agreement, any
funds received by the Owner Trustee as reimbursement under the Indenture of an
Issuer Cure Amount shall be distributed only to those Certificateholders who
provided funds for the purpose of making the Issuer Cure Amount payments being
reimbursed, pro rata in proportion to the
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amount so provided. Nothing in this Section 3.13 shall impose or be deemed to
impose any obligation on any Certificateholder to provide any such funds.
ARTICLE IV
TRUSTEES
Section 4.01. Number and Status. The number of Trustees shall be at
least four, and at all times, there shall be three Controlling Trustees (two of
whom shall be Independent Controlling Trustees and one of whom shall be the
Equity Trustee) and the Owner Trustee; provided that the vacancy in the position
of any Trustee pending the replacement of such Trustee shall not prevent any of
the other Trustees from taking such actions as they would be entitled to the
take in accordance with the terms of this Trust Agreement without the approval
of the Trustee whose position is vacant; provided that any and all votes of the
Trustees shall be in accordance with Section 4.07 hereof and no vacancy shall
result in the number of votes required thereby being diminished in any way. The
Owner Trustee and, by its acceptance of its appointment hereunder, each of the
other Trustees accepts the trust created hereby and agrees to perform its duties
in accordance with all of the terms and conditions contained in this Trust
Agreement. Neither the Owner Trustee nor any Controlling Trustee shall have any
duties or responsibilities under this Trust Agreement except to the extent
explicitly set forth in this Trust Agreement or any other Related Document.
Notwithstanding any other provision of this Agreement, each Trustee shall at all
times be a Citizen of the United States.
Section 4.02. Owner Trustee.
(a) Wilmington Trust Company is hereby appointed, and it hereby
accepts appointment as, the Owner Trustee under this Trust Agreement. The Owner
Trustee is entering into this Trust Agreement is to satisfy the requirements of
Section 3807(a) of the Business Trust Act, and it shall have only such duties
and responsibilities as are expressly set forth in this Trust Agreement. Except
as otherwise expressly provided herein, the Owner Trustee shall act only at the
direction of the Controlling Trustees, the Owner Trustee shall have no
responsibility for performing or overseeing the duties of the Controlling
Trustees and the Owner Trustee shall have no liability for following in good
faith any direction of the Controlling Trustees given to it in accordance with
this Trust Agreement or for the acts or ommission of any other Trustee.
(b) The Owner Trustee represents that it is, as required under the
Business Trust Act, an entity that has its principal place of business in the
State of Delaware and otherwise meets the requirements of Applicable Law of the
State of Delaware and that it is a Citizen of the United States. Any successor
to or permitted assigns of the Owner Trustee shall be:
(i) an entity that has its principal place of business in the State
of Delaware, and otherwise meets the requirements of Applicable Law; and
(ii) a Person that is a bank or trust company, 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
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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),
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 and a Citizen of the United States (such requirements, the
"Eligibility Requirements").
(c) The Owner Trustee may resign upon 30 days prior written notice
to AFT, such resignation to be effective upon the appointment of a successor
Owner Trustee meeting the requirements of Section 4.02(b) hereof. If no
successor has been appointed within such 30-day period, the Owner Trustee may,
at the expense of AFT, petition a court to appoint a successor Owner Trustee
meeting the Eligibility Requirements. The Controlling Trustees may at time upon
30 days prior notice to the Owner Trustee and shall promptly in the event the
Owner Trustee resigns or the office of the Owner Trustee is deemed vacant
replace the Owner Trustee by appointing a successor meeting the foregoing
requirements, such replacement to be effective upon the acceptance of
appointment by the successor Owner Trustee. The successor Owner Trustee shall
notify the Indenture Trustee of its appointment.
(d) Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, any corporation resulting from
any merger, consolidation or conversion to which the Owner Trustee shall be a
party or any corporation succeeding to the corporate trust business of the Owner
Trustee shall be the successor of the Owner Trustee, if such successor
corporation otherwise meets the Eligibility Requirements, without the need for
the execution or filing of any paper or any further act on the part of the
parties hereto or the Owner Trustee or such successor corporation.
Section 4.03. Controlling Trustees.
(a) The following individual is hereby appointed as the Equity
Trustee and a Controlling Trustee under this Trust Agreement:
Wayne D. Lippman
and the following two individuals are hereby appointed as the Independent
Controlling Trustees:
David H. Treitel
Richard E. Cavanagh
The Controlling Trustees shall have the duties and authority
provided for in this Trust Agreement and shall direct the affairs of AFT.
(b) Each Independent Controlling Trustee, by its acceptance of its
appointment, represents that it is not at the time of its appointment and has
not been for the twenty-four months prior to its appointment as a Trustee an
employee, officer or director of General Electric Capital Corporation, the
Depositor or any Affiliate of any such Person and agrees that it will not at any
time during its service as a Trustee be such an employee, officer or
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director, provided that an Independent Controlling Trustee may serve as a
trustee or director of another special purpose vehicle another trustee or
director of which has been appointed by General Electric Capital Corporation (or
any of its other Affiliates) as the holder of any indebtedness of such special
purpose vehicle.
(c) Any Controlling Trustee may resign upon 30 days prior written
notice to the Owner Trustee, the other Controlling Trustees and the
Certificateholders, such resignation to be effective upon the appointment of a
successor Controlling Trustee. If no successor has been appointed within such
30-day period, such Controlling Trustee may, at the expense of AFT, petition a
court to appoint a successor Controlling Trustee. The Certificateholders holding
a majority by percentage of the residual interest of AFT may, with or without
cause, by 30 days prior notice delivered to each Trustee, at any time and from
time to time and shall, if the Equity Trustee resigns or the office of the
Equity Trustee is deemed vacant promptly by notice to the other Trustees,
replace the Equity Trustee, such replacement to be effective upon the acceptance
of appointment by the successor Equity Trustee specified by such
Certificateholders in such notice. An Independent Controlling Trustee shall, if
the other Independent Controlling Trustee resigns or the office of such other
Independent Controlling Trustee is deemed vacant, promptly by notice to the
other Trustees replace such Independent Controlling Trustee, such replacement to
be effective upon the acceptance of appointment by the successor Independent
Controlling Trustee specified by such notifying Independent Controlling Trustee
in such notice. In the event both Independent Controlling Trustees resign or the
offices of both Independent Controlling Trustees are deemed vacant, the Equity
Trustee (subject to a Rating Agency Confirmation with respect thereto) shall
appoint successor Independent Controlling Trustees meeting the qualifications
set forth in Section 4.03(b). Any Controlling Trustee who gives notice of
resignation, whose office is deemed vacant or who is the subject of any
replacement notice by the Certificateholders as provided above shall not be
entitled to vote on any matters hereunder. For the avoidance of doubt, the
Equity Trustee may not remove an Independent Controlling Trustee.
Section 4.04. Quorum; Meetings. (a) A meeting of the Controlling
Trustees at which a majority of the Controlling Trustees (or, if less, the
number of Controlling Trustees required by Section 4.07 hereof for the approval
of the matter considered at such meeting) is present shall be competent to
exercise all powers and discretion for the time being exercisable by the
Controlling Trustees. The quorum necessary for the transaction of the business
specified in Section 4.07 shall be the number of Trustees required by the
applicable provision of Section 4.07 A Controlling Trustee, notwithstanding his
interest, may be counted in the quorum present at any meeting at which he is
appointed to hold office or at which the terms of his appointment are arranged,
but he may not vote on his own appointment or the terms thereof.
(b) The Controlling Trustees shall meet together for the dispatch of
business on a quarterly basis, and may adjourn, convene additional meetings and
otherwise regulate their meetings as they think fit. At such meetings the
Controlling Trustees shall review financial information presented to them by the
Administrative Agent, review filings made or to be made with the Commission,
review the provisions of any existing or proposed Swap Agreements and the
performance of any Swap Providers, appoint or dismiss auditors and conduct such
other business as they shall deem appropriate or advisable. Subject to Section
4.07 hereof, questions arising at any meeting shall be determined by a majority
of the Controlling Trustees. A
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Controlling Trustee may, at any time, request a meeting of the Controlling
Trustees by giving each other Controlling Trustee 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 a majority of all the Controlling Trustees
shall approve; provided further, that, notwithstanding the provisions of Section
8.01 hereof, unless otherwise resolved by the Controlling Trustees, notices of
Controlling Trustees' meetings need not be in writing.
(c) If a Trustee is by any means in communication with one or more
other Trustees so that each Trustee participating in the communication can hear
what is said by any other of them, each Trustee so participating in the
communication is deemed to be present at a meeting with the other Trustees so
participating, notwithstanding that all the Trustees so participating are not
present together in the same place.
Section 4.05. Controlling Trustees' Resolution. Each action taken at
a meeting of the Controlling Trustees under Section 4.04 hereof by the requisite
Trustee or requisite number of Trustees (as applicable) shall be reflected in
writing as, and each action taken without a meeting under Section 4.08 hereof by
the requisite Trustee or requisite number of Trustees (as applicable) shall
constitute, a Controlling Trustees' Resolution.
Section 4.06. Notice of Meetings. Any notice of any meeting to be
given to or by any Trustee pursuant to this Trust Agreement shall be in writing,
save as provided in Section 4.05 hereof. Any Trustee present in person at any
meeting of Trustees 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.
Section 4.07. Voting. The Controlling Trustees shall possess and be
entitled in their discretion to exercise all rights and power to vote with
respect to any lawful action to be taken by the Controlling Trustees, except as
otherwise provided herein. For so long as any amount is outstanding or payable
under any debt securities of AFT, the Trustees shall not have the power to take
any action in their capacities as Trustees that would cause AFT or any of its
subsidiaries to be in violation of the terms governing any such debt securities.
Each Controlling Trustee shall have the power to vote an equal portion of all of
the voting rights of AFT. Except as provided below, the vote of at least two of
the Controlling Trustees shall be sufficient.
Notwithstanding any other provision herein to the contrary:
(a) The unanimous affirmative vote of the Controlling Trustees shall
be required to:
(i) cause AFT or any subsidiary of AFT to take any action with
respect to the institution of any proceeding by AFT or any subsidiary of AFT
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of its 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 it or any substantial part of its property, or seeking
termination of AFT's existence other than pursuant to Section 6.01 or the
existence of any subsidiary of AFT;
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(ii) in the case of any such proceeding instituted against AFT or
any subsidiary of AFT (but not instituted by it), cause AFT or any subsidiary of
AFT to take any action to authorize 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 AFT or any
subsidiary of AFT, or any substantial part of its property, or that of any
subsidiary); and
(iii) cause AFT or any subsidiary of AFT to take any action with
respect to any merger, consolidation, amalgamation, or reorganization of AFT or
any subsidiary of AFT, with or into any other Person, or any conveyance,
transfer or other disposal of (whether in one transaction or a series of
transactions) all or substantially all of the assets of AFT or any subsidiary of
AFT; provided, however, that such unanimous approval is not required so long as
the organizational documents of the resulting Person provide for the unanimous
approval of the Independent Controlling Trustees for the events contemplated by
this Section 4.07 and Section 7.01 hereof;
(b) the affirmative vote of at least two of the Controlling
Trustees, one of whom is an Independent Controlling Trustee and one of whom is
the Equity Trustee, shall be required to approve (i) any action under Section
7.04 of the Servicing Agreement, (ii) any reduction in the amount of the Senior
Note Blockage Amount, the Mezzanine Note Blockage Amount, the Junior Note
Blockage Amount or the Subordinate Note Blockage Amount, (iii) any Sale,
directly or indirectly, of any Aircraft pursuant to clause (v) of Section
5.02(g) of the Indenture and to provide the confirmation required thereby, and
(iv) any Additional Servicing Agreement with UniCapital or any of its
Affiliates;
(c) the affirmative vote of the Equity Trustee shall be sufficient
to approve (i) the purchase or other acquisition, directly or indirectly, of any
Additional Aircraft from any Certificateholder or any of its Affiliates or GECC
or any of its Affiliates, (ii) (A) the issuance by AFT of Additional Notes
pursuant to Section 2.04(d)(iv) hereof and (B) any related increase in the
Senior Note Blockage Amount, the Mezzanine Note Blockage Amount, the Junior Note
Blockage Amount or the Subordinate Note Blockage Amount or (iii) any action
under clause (ii) or (vi) of Section 2.05 hereof, provided that, with respect to
clauses (i) and (ii)(A) above, the Equity Trustee has provided reasonable prior
notice to the Independent Controlling Trustees of such proposed issuance of
Additional Notes and/or purchase of Additional Aircraft by AFT and agreed to
consult with the Independent Controlling Trustees prior to any such issuance of
Additional Notes or purchase of Additional Aircraft; and
(d) the affirmative vote of the Trustees specified in Section 7.01
hereof shall be required for any action under such section.
Section 4.08. Resolutions. A resolution in writing signed by the
requisite Trustee or number of Trustees pursuant to Section 4.07 hereof (as the
case may be) shall be valid and effectual as if it had been passed at a meeting
of the Controlling Trustees duly convened and held. Such resolution (when to be
adopted by more than one Trustee) may consist of two or more documents in like
form each signed by at least one of the number of Trustees.
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Section 4.09. Delegation. Except as otherwise provided in Section
4.07 hereof, the Controlling Trustees may delegate any of their powers to
committees consisting of any one or more or such Controlling Trustees or such
other Persons as they think fit. 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 Controlling Trustees. The meetings and proceedings of any such committee
consisting of one or more persons shall be governed by the provisions of this
Trust Agreement regulating the meetings and proceedings of the Controlling
Trustees, so far as the same are applicable and are not superseded by any
regulations made by the Trustees under this Trust Agreement.
Section 4.10. Vacancies. The office of a Trustee shall be deemed
vacated if:
(a) in the case of an Independent Controlling Trustee, such Trustee
ceases to meet the criteria set forth in Section 4.03(b) hereof;
(b) such Trustee dies or is unable or refuses to act;
(c) such Trustee is the subject of any Insolvency Proceeding; or
(d) in the case of the Owner Trustee, the Owner Trustee ceases to
meet the requirements of Section 3807(a) of the Business Trust Act or of Section
4.02(b) hereof.
Section 4.11. Effect of Replacement. Any successor Trustee, however
appointed, shall execute and deliver to the Controlling Trustees 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 the predecessor Trustee in the trusts hereunder with like
effect as if originally named as such Trustee herein; but nevertheless, upon the
written request of such successor Trustee, such predecessor Trustee shall
execute and deliver an instrument transferring to such successor Trustee, upon
the trusts herein expressed, all the estates, properties, rights, powers and
trusts of such predecessor Trustee.
Section 4.12. Effect of Vacancies. (a) Neither the death,
resignation, retirement, removal, bankruptcy, dissolution, liquidation,
incompetence or incapacity of a Trustee (except, with respect to the Owner
Trustee, as otherwise required by Applicable Law of the State of Delaware) shall
operate to terminate this Trust Agreement or AFT. Any notice or document served
on a Trustee shall, notwithstanding that such Trustee be then incompetent,
disabled, dead or bankrupt and whether or not AFT has notice of his
incompetence, disability, death or bankruptcy, be deemed to have been duly
served on such Trustee. Notwithstanding any of the provisions of this Trust
Agreement, any notice to be given by AFT to a Trustee may be given in any manner
agreed in advance by any such Trustee.
(b) If there is at any time a vacancy in the position of a Trustee,
it is understood that the Certificateholders may not exercise the voting power
of the vacant Trustee position and that such voting power will accordingly
remain suspended during such vacancy.
Section 4.13. Transactions with Trustees. A Trustee may hold any
other office with respect of AFT (other than the office of auditor) in
conjunction with his office of Trustee
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and may act in a professional capacity to AFT on such terms as to tenure of
office, remuneration and otherwise as the Controlling Trustees may determine.
Section 4.14. Interests of Trustees. Subject to Applicable Law of
the State of Delaware, and provided that it has disclosed to the Controlling
Trustees the nature and extent of any of its material interests, a Trustee
notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction
or arrangement with AFT or in which AFT is otherwise interested;
(b) 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
body corporate promoted by General Electric Capital Corporation or by any
Affiliate of any Depositor or in which General Electric Capital Corporation or
any Affiliate of any Depositor is otherwise interested or that engages in
transactions similar to those engaged in by AFT and might present a conflict of
interest for such Trustee in discharging his duties (provided that nothing in
this clause (b) shall be construed to limit any Trustee's acting in a like
capacity for any other Issuer Group Member); provided that each Independent
Controlling Trustee must comply with Section 4.03(b) hereof; and
(c) shall not, by reason of his office, be accountable to AFT or any
Certificateholder for any benefit which he derives from any such office or
employment or from any such transaction or arrangement or from any interest in
such body corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
Section 4.15. Confidentiality Obligations of Trustees. Each
Controlling Trustee will provide a written undertaking to AFT and the Servicer
to substantially the effect that such Controlling Trustee (a) will not provide
to any Person (other than as required by law or, subject to clause (c) below,
another Controlling Trustee) competitively sensitive information that it may
receive from the Servicer pursuant to the Servicing Agreement, (b) will not use
any such competitively sensitive information for any purpose other than in
performing its duties and responsibilities as set forth in this Trust Agreement
and (c) will not provide to any other Controlling Trustee, to the extent that
such other Controlling Trustee is involved in any other business activities that
are competitive with those of the Servicer, any competitively sensitive
information that may be requested by such Controlling Trustee beyond the
information that is normally provided to the Controlling Trustees as a group
pursuant to this Trust Agreement.
Section 4.16. Contract with Trustee. A Controlling Trustee,
notwithstanding its interest, may be counted in the quorum present at any
meeting at which any contract or arrangement in which such Trustee is interested
is considered and, subject to the provisions of Sections 4.15 and 4.17 hereof,
may vote in respect of any such contract or arrangement.
Section 4.17. Validity of Acts. All acts done bona fide by any
meeting of Trustees or by a committee appointed by the Controlling Trustees or
by any Person acting as a Trustee shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any such Trustee,
committee or Person so acting or that they or any of them
23
<PAGE> 28
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 Trustee or a member of a committee appointed by the Trustees
and had been entitled to vote.
Section 4.18. Minute Book. The Trustees shall cause all resolutions
in writing passed by them in accordance with Section 4.08 hereof and minutes of
proceedings at all meetings of the Trustees and of committees appointed by the
Controlling Trustees to be entered in books kept for the purpose. Any minutes of
a meeting shall be evidence of the proceedings.
Section 4.19. Fees and Remuneration; Directors and Officers
Insurance. The Trustees shall be paid out of the funds of AFT their reasonable
traveling and (subject to the limitation on counsel fees and expenses set forth
in the immediately succeeding sentence) other expenses properly and necessarily
expended by them in attending meetings of the Trustees or otherwise in the
affairs of AFT. Each Independent Controlling Trustee shall be paid by way of
remuneration for its services a sum of $60,000 per annum plus $20,000 per annum
after the Closing Date of each issuance of Additional Notes, subject to a
maximum annual total of $100,000 per Independent Controlling Trustee, which
shall be deemed to accrue from day to day and shall be paid monthly in advance
on each Payment Date and, for the period commencing on the Initial Closing Date
and ending on (but excluding) the first Payment Date, the Initial Closing Date.
The Independent Controlling Trustees shall be entitled to reimbursement for
reasonable fees and expenses of counsel incurred by them in connection with each
issuance of Exchange Notes or Additional Securities, not to exceed (without the
unanimous consent of all Controlling Trustees) $50,000 in the aggregate for both
Independent Controlling Trustees per issuance. The Independent Controlling
Trustees and the Equity Trustee may (but shall not be obligated to), at any
time, agree to increase any of the fees set forth above for inflation, the
acquisition by the Issuer Group of Additional Aircraft, or otherwise. The Owner
Trustee shall be paid such fees as shall be agreed upon in a separate fee
agreement to be entered into by the Owner Trustee and AFT. The Equity Trustee
shall not be entitled to any such compensation or reimbursement from AFT. Unless
the Controlling Trustees shall otherwise unanimously agree, AFT shall maintain,
on behalf of the Controlling Trustees, directors and officers insurance with a
minimum coverage of $40,000,000 and on terms no less favorable than the policy
in effect on the date hereof.
Section 4.20. Trustees May Rely. No Trustee shall incur any
liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably and in good faith believed by it to be genuine and
signed by the proper party or parties thereto. The Trustees may accept a copy of
a resolution of the board of directors of any corporate entity, certified by the
secretary, an assistant secretary or any other officer of the said entity, as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been adopted by said board and is in full force and effect. As to
any fact or matter, the manner of ascertainment of which is not specifically
described herein, the Trustees may for all purposes hereof rely on a
certificate, signed by or on behalf of the party executing such certificate, as
to such fact or matter, and such certificate shall constitute full protection of
the Trustees for any action taken or omitted to be taken by them in good faith
in reliance thereon. The Trustees may (a) exercise their powers and perform
their duties by or through such attorneys and agents as they shall appoint with
due care, and they shall not be liable for the acts or omissions of such
attorneys and agents and (b) consult with counsel, accountants and other
experts, and the Trustees shall be entitled to rely upon the
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<PAGE> 29
advice of counsel, accountants and other experts selected by them with due care
and shall be protected by the advice of such counsel in anything done or omitted
to be done in accordance with such advice. In particular, no provision of this
Trust Agreement shall be deemed to impose any duty on any Trustee to take any
action if such Trustee shall have been advised by counsel that such action would
expose it to personal liability or is contrary to the terms hereof, or is
contrary to law. The Owner Trustee and each Independent Controlling Trustee
shall not incur any liability to any Person for any action taken, or any failure
to take action, by the Equity Trustee pursuant to Section 4.07(c).
Section 4.21. Trustees Act Solely as Trustees. In accepting and
performing the trusts created hereby, each Trustee acts solely as trustee
hereunder and not in any individual capacity, and all persons having any claims
against any Trustee by reason of the transactions contemplated hereby shall not
have any recourse to such Trustee in its individual capacity and shall look only
to the property of AFT for payment or satisfaction thereof. The Trustees shall
not be liable for the acts or omissions of any Depositor or Certificateholder.
Section 4.22. No Expenses for the Trustees. No Trustee shall have
any obligation by virtue of this Trust Agreement to spend any of its own funds,
or to take any action which could, in the discretion of such Trustee, result in
any cost or expense being incurred by the Trustee, other than in connection with
its own obligations hereunder.
Section 4.23. No Representations or Warranties as to Certain
Matters. NONE OF THE TRUSTEES, EITHER WHEN ACTING HEREUNDER IN ITS CAPACITY AS
TRUSTEE OR IN ITS INDIVIDUAL CAPACITY, MAKES OR SHALL BE DEEMED TO HAVE MADE (A)
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH
SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR
A PARTICULAR PURPOSE OF THE AIRCRAFT OWNED BY AFT, AS TO THE ABSENCE OF LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THOSE AIRCRAFT OR ANY
PART THEREOF.
ARTICLE V
INDEMNIFICATION OF TRUSTEES
Section 5.01. Liability and Indemnity.
(a) The Trustees shall not be liable to AFT or the
Certificateholders for monetary or other damages for breach of fiduciary duty as
a Trustee; such exculpation shall be to the fullest extent permitted by Delaware
law.
(b) Each Trustee (and the officers, directors, employees, heirs,
executors or administrators of such Trustee) 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 or suit by or in the right of AFT to
25
<PAGE> 30
procure a judgment in its favor by reason of the fact that such Person is or was
a Trustee of AFT or is or was serving at the request of AFT as a trustee,
director or officer of another trust, corporation, partnership, joint venture or
other enterprise, shall be indemnified and held harmless by AFT to the fullest
extent permitted by Delaware law.
(c) AFT does hereby assume liability for and agree to indemnify,
reimburse and hold harmless each of the Trustees from any and all losses,
liabilities or expenses that may be imposed on, incurred by or asserted against
any of them arising out of, in connection with or related to their performance
under this Trust Agreement, including any resignation of any Trustee as provided
hereby, and such indemnification shall be to the fullest extent permitted by
Delaware law.
(d) The right to indemnification conferred in this Article 5 shall
also include the right to be paid by AFT the expenses incurred in connection
with any such proceeding in advance of its final disposition to the fullest
extent authorized by Delaware law. The right to indemnification conferred in
this Article 5 shall be a contract right.
Section 5.02. Agents. AFT may, by action of its Controlling
Trustees, provide indemnification to such of the agents of AFT to such extent
and to such effect as the Controlling Trustees shall determine to be appropriate
and authorized by Delaware law.
Section 5.03. Insurance. AFT shall have power to purchase and
maintain insurance on behalf of any Person who is or was a Trustee or agent of
AFT, or is or was serving at the request of AFT as a trustee, director, officer,
employee or agent of another trust, corporation, partnership, joint venture 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 AFT
would have the power to indemnify him against such liability under Delaware law.
Section 5.04. Non-Exclusive Rights. The rights and authority
conferred in this Article V shall not be exclusive of any other right which any
Person may otherwise have or hereafter acquire.
Section 5.05. Survival. Neither the amendment nor repeal of this
Trust Agreement, nor, to the fullest extent permitted by Delaware law, any
adoption or modification of law, shall eliminate or reduce the effect of this
Article 5 in respect of any acts or omissions occurring prior to such amendment,
repeal, adoption or modification.
ARTICLE VI
TERMINATION OF AFT
Section 6.01. Termination of AFT.
(a) AFT shall dissolve only (i) upon satisfaction in full by AFT of
all debt securities issued by AFT in accordance with their respective terms and
(ii) with the consent of all of the Controlling Trustees.
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(b) As soon as is practicable after the occurrence of the events
referred to in Section 6.01(a) above, the Controlling Trustees shall, after
paying or making provision for the payment of all obligations of AFT in
accordance with Applicable Law, file a certificate of cancellation with the
Secretary of State of the State of Delaware, and thereupon AFT shall terminate.
(c) The provisions of Article 5 shall survive termination of AFT.
ARTICLE VII
AMENDMENTS
Section 7.01. Amendments.
(a) Subject always to the provisions of the Indenture and any debt
securities of AFT, this Trust Agreement and the Beneficial Interest Certificates
may only be amended or modified with the consent of the majority in interest of
the Certificateholders, and then only by a written instrument approved and
executed by:
(i) a majority of the Controlling Trustees, one of whom shall be the
Equity Trustee;
(ii) if the amendment affects the rights, powers, duties or
obligations of the Owner Trustee, the Owner Trustee; and
(iii) if the amendment affects (A) the rights, powers, duties or
obligations, including the events contemplated by Section 4.07 hereof, of any
Independent Controlling Trustee, (B) any organizational documents of any Issuer
Subsidiary, to the extent such amendment would affect the rights, powers or
duties of any Independent Controlling Trustee or directors of such subsidiary
comparable to those in Sections 4.07 and 7.01 hereof or (C) any of the
provisions of Sections 2.02(b), 2.07 or 7.01, the Independent Controlling
Trustees,
provided, however, that no such amendment may modify the provisions of this
Trust Agreement or the Beneficial Interest Certificates setting forth the
frequency or the currency of payment of, or the method of calculation of the
amount of, any distribution payable in respect of any Beneficial Interest
Certificates, or reduce the percentage of the Certificateholders required to
approve any amendment or waiver of this Section 7.01 or alter the manner or
priority of payment of the Beneficial Interest Certificates without the consent
of each affected Certificateholder and, so long as any Notes are Outstanding, no
such amendment may modify the provisions of this Trust Agreement relating to the
maintenance of AFT's status as a partnership (and not a publicly traded
partnership taxable as a corporation) for federal income tax purposes (each, a
"Basic Terms Modification").
(b) It shall not be necessary for the consent of the
Certificateholders under this Section 7.01 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
Certificateholders will be binding on all Certificateholders.
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<PAGE> 32
(c) Notice of each amendment to this Trust Agreement shall be given
to each of the Rating Agencies.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. 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 ten 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 the Owner Trustee:
Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Fax: (302) 651-8882
If to the Equity Trustee, to:
Wayne D. Lippman
c/o UniCapital Air Group, Inc.
9420 S.W. 77th Avenue
Miami, Florida 33156
Fax: (305) 271-1339
If to the Independent Controlling Trustees, to:
David H. Treitel
Simat, Helliesen & Eichner, Inc.
90 Park Avenue
27th Floor
New York, NY 10016
Fax: (212) 986-1825
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<PAGE> 33
and
Richard E. Cavanagh
The Conference Board, Inc.
845 Third Avenue
New York, NY 10022
Fax: (212) 339-0333
If to the Certificateholders, to:
Unicapital AFT-I, Inc., / Unicapital AFT-II, Inc.
c/o UniCapital Air Group, Inc.
9420 S.W. 77th Avenue
Miami, Florida 33156
Attention: Wayne D. Lippman
Fax: (305) 271-1339
From time to time any Trustee may designate a new address or number
for purposes of notice hereunder by notice to each of the other Trustee.
Section 8.02. Governing Law. This Trust Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
Section 8.03. Jurisdiction. By holding a Beneficial Interest
Certificate, each Certificateholder hereby submits to the jurisdiction of the
Courts of Delaware or the United States Federal Courts sitting therein, in any
action or proceeding brought to enforce or otherwise arising out of or relating
to this Trust Agreement. By holding a Beneficial Interest Certificate, each
Certificateholder irrevocably appoints Corporation Service Corporation, with an
office on the date hereof at 1013 Centre Road, Wilmington, County of New Castle,
Delaware 19805, as its agent for service of process to receive on behalf of such
Certificateholder service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding. Such service may
be made by mailing or delivering a copy of such process to each
Certificateholder in care of such process agent, at the address of such process
agent stated above, and each Certificateholder, by holding a Beneficial Interest
Certificate, hereby irrevocably authorizes and directs such process agent to
accept such service on its behalf. As an alternative method of service of
process, each Certificateholder, by holding a Beneficial Interest Certificate,
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to such Certificateholder by registered
or certified mail at its address designated in Section 8.01. In addition, each
Certificateholder, by holding a Beneficial Interest Certificate, hereby
irrevocably waives to the fullest extent permitted by law any objection which it
may now or hereafter have to the laying of venue in any such action or
proceeding in the Courts of the State of Delaware or the United States Federal
Courts sitting therein, and hereby further irrevocably waives any claim that any
such forum is an inconvenient forum.
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<PAGE> 34
Section 8.04. Counterparts. This Trust 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.
Section 8.05. Agreement. The terms of this Trust Agreement shall be
binding upon and inure to the benefit of and shall be enforceable by the
Depositors and the Trustees and their respective successors and assigns.
Section 8.06. Table of Contents; Headings. The table of contents and
headings of the various articles, sections and other subdivisions of this Trust
Agreement are for convenience of reference only and shall not modify, define or
limit any of the terms or provisions of such agreement.
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their respective
officer hereunto duly authorized, as of the day and year first above written.
WILMINGTON TRUST COMPANY
By: /s/ Donald G. MacKelcan
-----------------------------------------
Name: Donald G. MacKelcan
------------------------------------
Title: Vice President
-----------------------------------
UNICAPITAL AFT-I, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-II, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
The undersigned hereby confirm their acceptance of appointment
As the Equity Trustee and a Controlling Trustee:
- ---------------------------------------
Wayne D. Lippman
As the Independent Controlling Trustees:
- ---------------------------------------
David H. Treitel
- ---------------------------------------
Richard E. Cavanagh
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their respective
officer hereunto duly authorized, as of the day and year first above written.
WILMINGTON TRUST COMPANY
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-I, INC.
By: /s/ Wayne D. Lippman
-----------------------------------------
Name: Wayne D. Lippman
------------------------------------
Title: Vice President
-----------------------------------
UNICAPITAL AFT-II, INC.
By: /s/ Wayne D. Lippman
-----------------------------------------
Name: Wayne D. Lippman
------------------------------------
Title: Vice President
-----------------------------------
The undersigned hereby confirm their acceptance of appointment
As the Equity Trustee and a Controlling Trustee:
/s/ Wayne D. Lippman
- ---------------------------------------
Wayne D. Lippman
As the Independent Controlling Trustees:
- ---------------------------------------
David H. Treitel
- ---------------------------------------
Richard E. Cavanagh
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their respective
officer hereunto duly authorized, as of the day and year first above written.
WILMINGTON TRUST COMPANY
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-I, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-II, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
The undersigned hereby confirm their acceptance of appointment
As the Equity Trustee and a Controlling Trustee:
- ---------------------------------------
Wayne D. Lippman
As the Independent Controlling Trustees:
/s/ David H. Treitel
- ---------------------------------------
David H. Treitel
- ---------------------------------------
Richard E. Cavanagh
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their respective
officer hereunto duly authorized, as of the day and year first above written.
WILMINGTON TRUST COMPANY
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-I, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNICAPITAL AFT-II, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
The undersigned hereby confirm their acceptance of appointment
As the Equity Trustee and a Controlling Trustee:
- ---------------------------------------
Wayne D. Lippman
As the Independent Controlling Trustees:
- ---------------------------------------
David H. Treitel
/s/ Richard E. Cavanagh
- ---------------------------------------
Richard E. Cavanagh
<PAGE> 39
EXHIBIT A
FORM OF BENEFICIAL INTEREST CERTIFICATE
THIS BENEFICIAL INTEREST CERTIFICATE 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 CERTIFICATEHOLDER (1) REPRESENTS THAT IT IS EITHER (A) A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) AND A "CITIZEN OF THE UNITED STATES" (AS DEFINED IN SECTION 40102(a)(15) OF
PART A OF SUBTITLE VII OF TITLE 49, UNITED STATES CODE AND IN THE FEDERAL
AVIATION REGULATIONS) OR (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3), (7) OR (8) OF REGULATION D UNDER THE SECURITIES
ACT) AND A "CITIZEN OF THE UNITED STATES" (AS DEFINED IN SECTION 40102(a)(15) OF
PART A OF SUBTITLE VII OF TITLE 49, UNITED STATES CODE AND IN THE FEDERAL
AVIATION REGULATIONS), (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 BENEFICIAL INTEREST CERTIFICATE, RESELL OR OTHERWISE TRANSFER THIS
BENEFICIAL INTEREST CERTIFICATE EXCEPT (A) TO AIRCRAFT FINANCE TRUST, A DELAWARE
BUSINESS TRUST ESTABLISHED UNDER THE BELOW REFERRED TO TRUST AGREEMENT DATED AS
OF APRIL 13, 1999 AS AMENDED AND RESTATED UNDER THE AMENDED AND RESTATED TRUST
AGREEMENT DATED AS OF MAY 4, 1999 (THE "AGREEMENT"), OR ANY SUBSIDIARY THEREOF
THAT IS A CITIZEN OF THE UNITED STATES, (B) TO A QUALIFIED INSTITUTIONAL BUYER
THAT IS A CITIZEN OF THE UNITED STATES IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS A CITIZEN OF
THE UNITED STATES IN COMPLIANCE WITH SECTION 3.09 OF THE TRUST AGREEMENT, (D) TO
A CITIZEN OF THE UNITED STATES, 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 BENEFICIAL INTEREST
CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS BENEFICIAL INTEREST CERTIFICATE WITHIN
THE TIME PERIOD REFERRED TO ABOVE, THE CERTIFICATEHOLDER MUST SUBMIT THIS
BENEFICIAL INTEREST CERTIFICATE TO THE OWNER TRUSTEE. THE TRUST AGREEMENT
CONTAINS A PROVISION REQUIRING THE
<PAGE> 40
OWNER TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS BENEFICIAL INTEREST
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
REFERENCE IS ALSO MADE TO THE PROVISIONS OF SECTION 3.09 OF THE
TRUST AGREEMENT AS TO ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS BENEFICIAL
INTEREST CERTIFICATE.
2
<PAGE> 41
EXHIBIT A
AIRCRAFT FINANCE TRUST
BENEFICIAL INTEREST CERTIFICATE
No. ____ {CUSIP}{ISIN}{CCN}
$____________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of
the State of Delaware (the "Issuer"), certifies that ________________________ is
the owner of a beneficial interest equal to _____% (______ per cent) or such
lower percentage as is determined as provided below of the residual interest in
the Issuer, issued pursuant to the Trust Agreement dated as of April 13, 1999 as
amended and restated under the Amended and Restated Trust Agreement dated as of
May 4, 1999 (the "Trust Agreement") between UniCapital AFT-I, Inc. and
UniCapital AFT-II, Inc., each a Delaware corporation (the "Depositors"), and
Wilmington Trust Company, a Delaware banking corporation (the "Owner Trustee").
This Beneficial Interest Certificate is one of a duly authorized
issue of Beneficial Interest Certificates, issued under the Trust Agreement. All
capitalized terms used in this Beneficial Interest Certificate and not defined
herein shall have the respective meanings assigned to such terms in the Trust
Agreement. Reference is made to the Trust Agreement and all agreements
supplemental thereto for a statement of the respective rights and obligations
thereunder of AFT, the Trustees and the Certificateholders. This Beneficial
Interest Certificate is subject to all terms of the Trust Agreement.
The Trust Agreement provides for the issuance from time to time of
Additional Certificates. Upon the issuance of any such Additional Certificates,
the percentage of the residual interest of the Issuer represented by this
Beneficial Interest Certificate shall be adjusted to the percentage determined
by dividing the capital contribution represented by this Beneficial Interest
Certificate by the total capital contribution represented by all Beneficial
Interest Certificates then issued and Outstanding (after giving effect to such
Additional Certificates). Such percentage may also be adjusted as provided in
Section 3.13 of the Trust Agreement.
This Beneficial Interest Certificate is, to the extent and in the
manner provided in the Trust Agreement, subordinate and subject in right of
payment to the prior payment in full of all Senior Claims (as defined in the
Indenture), and this Beneficial Interest Certificate is issued subject to such
provisions. Each Certificateholder of this Beneficial Interest Certificate, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Owner Trustee on his behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
the Trust Agreement and (c) appoints the Owner Trustee his attorney-in-fact for
such purpose.
<PAGE> 42
Subject to and in accordance with the terms of the Trust Agreement,
there will be distributed, on the date of the receipt of any Excluded Payment,
and monthly on each Payment Date commencing on June 15, 1999 to the Person in
whose name this Beneficial Interest Certificate is registered at the close of
business on the Record Date with respect to such Payment Date, in the manner
specified in Section 3.04 of the Trust Agreement, such Person's pro rata share
(based on the percentage of the residual interest in the Issuer then represented
by this Beneficial Interest Certificate) of the aggregate amount distributable
to all Certificateholders on such date or Payment Date.
Payments under Section 3.04(a) of the Trust Agreement shall be made
by check mailed to each Certificateholder on the applicable Record Date or, in
the case of Excluded Payments, on the date of payment, at its address appearing
on the Register. Alternatively, in the case of the Depositors or upon
application in writing to the Controlling Trustees, not later than the
applicable Record Date, by any other Certificateholder (which may be granted or
denied in the discretion of the Controlling Trustees), any such payments shall
be made by wire transfer to an account designated by such Certificateholder at a
financial institution in the United States of America.
The Certificateholder of this Beneficial Interest Certificate
agrees, by acceptance hereof, to pay over to the Administrative Agent any money
paid to it in respect of this Beneficial Interest Certificate in the event that
the Administrative Agent, acting in good faith, determines subsequently that
such monies were not paid in accordance with the priority of payment provisions
of the Trust Agreement or as a result of any other mistake of fact or law on the
part of the Administrative Agent in making such payment.
This Beneficial Interest Certificate is issuable only in registered
form. A Certificateholder may transfer this Beneficial Interest Certificate only
by written application to the Owner Trustee stating the name of the proposed
transferee and otherwise complying with the terms of the Trust Agreement. No
such transfer shall be effected until, and such transferee shall succeed to the
rights of a Certificateholder only upon, final acceptance and registration of
the transfer by the Owner Trustee in the Register. When this Beneficial Interest
Certificate is presented to the Owner Trustee with a request to register the
transfer or to exchange it for a Beneficial Interest Certificate having the same
percentage residual interest, the Owner Trustee 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 Beneficial Interest Certificate
is duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee duly executed by the Certificateholder thereof
or by an attorney who is authorized in writing to act on behalf of the
Certificateholder). No service charge shall be made for any registration of
transfer or exchange of this Beneficial Interest Certificate, but the party
requesting such new Beneficial Interest Certificate or Beneficial Interest
Certificates 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 Beneficial Interest
Certificate, the Issuer and the Owner Trustee may deem and treat the Person in
whose name this Beneficial Interest Certificate (as of the day of determination
or as of such other date as may be specified in the Trust Agreement) is
registered as the absolute owner and Certificateholder hereof for the purpose
2
<PAGE> 43
of receiving payment of all amounts payable with respect to this Beneficial
Interest Certificate and for all other purposes, and neither the Issuer nor the
Owner Trustee shall be affected by notice to the contrary.
The Trust Agreement permits the amendment or modification of the
Trust Agreement and the Beneficial Interest Certificate by AFT with the consent
of the majority in interest of the Certificateholders on the date of any vote of
such Certificateholders and certain of the Trustees as provided in the Trust
Agreement; provided that, no Basic Terms Modification shall be effected without
the consent of each Certificateholder affected thereby. Any such amendment or
modification shall be binding on every Certificateholder, whether or not
notation thereof is made upon this Beneficial Interest Certificate.
The Issuer is permitted by the Trust Agreement, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee under the Indenture and the Trustees and the Certificateholders under
the Trust Agreement.
This Beneficial Interest Certificate shall in all respects be
governed by, and construed in accordance with, the laws of the State of
Delaware.
3
<PAGE> 44
IN WITNESS WHEREOF, AFT has caused this Beneficial Interest
Certificate to be signed manually or by facsimile by the Owner Trustee.
Date:______________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company,
not in its individual capacity but solely
as the Owner Trustee
_____________________________________________
Name:
Title:
4
<PAGE> 45
[FORM 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 Beneficial Interest Certificate and all rights thereunder, hereby
irrevocably constituting and
appointing ___________________________________ attorney to transfer said
Beneficial Interest Certificate on the books of AFT 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.
Date:
In connection with any transfer of this Beneficial Interest
Certificate, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
{Check One}
{ } (a) this Beneficial Interest Certificate is being transferred
in compliance with the exemption from registration under the
Securities Act of 1933 provided by Rule 144A thereunder.
or
{ } (b) this Beneficial Interest Certificate is being transferred
other than in accordance with (a) above and documents are being
furnished that comply with the conditions of transfer set forth
in this Beneficial Interest Certificate and the Trust Agreement.
If none of the foregoing boxes is checked or if any of the other
conditions to transfer set forth in Section 3.09 of the Trust Agreement are not
satisfied, the Owner Trustee
<PAGE> 46
shall not be obligated to register this Beneficial Interest Certificate in the
name of any Person other than the Certificateholder hereof unless and until the
conditions to any such transfer of registration set forth herein and in Section
3.09 of the Trust Agreement shall have been satisfied.
Date:
NOTICE: 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.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this
Beneficial Interest Certificate for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act of 1933 and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
_____________________________________________
Dated:
NOTICE: to be executed by an executive
officer
2
<PAGE> 47
EXHIBIT B
AFFIDAVIT OF CITIZENSHIP
)
) ss.
)
I, ________________, being duly sworn, depose and say, that:
1. I am a ________________ of [CERTIFICATEHOLDER], a _____________ (the
"Certificateholder");
2. The president and two-thirds or more of the board of directors and
other managing officers of the Certificateholder are individuals who are
citizens of the United States of America and at least seventy-five percent (75%)
of the voting interest of the Certificateholder is owned or controlled by
persons or corporations who are citizens of the United States of America
OR
The Certificateholder is a partnership each of whose partners is an
individual who is a citizen of the United States, and
3. Accordingly, the Certificateholder is a "citizen of the United States"
as defined in Section 40102(a)(15) of the Federal Aviation Act.
SWORN to this ____ day of ____________, ____.
[CERTIFICATEHOLDER]
By: ________________________________
Name:
Title:
SWORN AND SUBSCRIBED TO
Before me this ________ day
of ____________, _____
_______________________
Notary Public
My Commission Expires on _________________
<PAGE> 48
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
_____, ____
AIRCRAFT FINANCE TRUST
c/o Wilmington Trust Company
Attention: Corporate Trust Administrator
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Ladies and Gentlemen:
In connection with our proposed purchase of the Beneficial Interest
Certificate of AIRCRAFT FINANCE TRUST (the "Issuer"), we confirm that:
1. We have received a copy of the Trust Agreement dated as of April 13,
1999 as amended and restated under the Amended and Restated Trust Agreement
dated May 4, 1999 (the "Trust Agreement") relating to the Beneficial Interest
Certificate and such other information as we deem necessary in order to make our
investment decision. We acknowledge that we have read and agreed to the matters
stated therein.
2. We understand that any subsequent transfer of the Beneficial Interest
Certificate is subject to certain restrictions and conditions set forth in the
Trust Agreement and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Beneficial Interest Certificate except in
compliance with such restrictions and conditions and the Securities Act of 1933
(the "Securities Act").
3. We understand that the offer and sale of the Beneficial Interest
Certificate has not been registered under the Securities Act, that the
Beneficial Interest Certificate will only be in the form of definitive physical
certificates and that the Beneficial Interest Certificate may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell a Beneficial Interest Certificate in the future, we will
do so only (1) (A) to the Issuer or any subsidiary thereof that is a citizen of
the United States, (B) to a "qualified institutional buyer" in compliance with
Rule 144A under the Securities Act (and as defined therein) that is a "citizen
of the United States" (as defined in Section 40102(a)(15) of Part A of Subtitle
VII of Title 49, United States Code and in the Federal Aviation Regulations),
(C) to an institutional "accredited investor" (as defined below) that is also a
"citizen of the United States" (as defined in Section 40102(a)(15) of Part A of
Subtitle VII of Title 49, United States Code and in the Federal Aviation
Regulations) that, prior to such transfer, furnishes to the Owner Trustee (as
defined in
<PAGE> 49
the Trust Agreement) a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Beneficial Interest
Certificate and an opinion of counsel acceptable to the Owner Trustee that such
transfer is in compliance with the Securities Act, (D) to a citizen of the
United States, pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available) or (E) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any Beneficial Interest Certificate from us a notice
advising such purchaser that resales of the Beneficial Interest Certificates are
restricted as stated herein and (2) in each case, in accordance with any
applicable securities laws of any state in the United States or any other
applicable jurisdiction and in accordance with the legend to be set forth in the
Beneficial Interest Certificates, which will reflect the substance of this
paragraph.
4. We understand that, on any proposed resale of any Beneficial Interest
Certificates, we will be required to furnish to the Owner Trustee such
certifications, legal opinions and other information as the Owner Trustee may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3), (7) or (8) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Beneficial
Interest Certificates, and we and any accounts for which we are acting are each
able to bear the economic risks of our or their investment.
6. We are acquiring the Beneficial Interest Certificates purchased by us
for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
7. We are not acquiring the Beneficial Interest Certificates with a view
to distribution thereof or with any present intention of offering or selling the
Beneficial Interest Certificates, except as permitted above, provided that the
disposition of our property and property of any accounts for which we are acting
as fiduciary shall remain at all times within our control.
8. We understand the additional restrictions on transfer contained in
Section 3.09 of the Trust Agreement.
An opinion of counsel to the effect that the purchase of this Beneficial
Interest Certificate does not require registration under the Securities Act is
attached to this certificate. You, the Issuer and the Owner Trustee are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
Very truly yours,
By: ________________________________
Name:
Title:
2
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
TRUST INDENTURE
dated as of May 5, 1999
between
AIRCRAFT FINANCE TRUST,
as the Issuer,
RESOURCE/PHOENIX, INC.,
in its capacity as the Administrative Agent
and
BANKERS TRUST COMPANY,
as the Trustee
<PAGE> 2
Reconciliation and tie between the Indenture, dated as of May 5, 1999, and
the Trust Indenture Act of 1939, as amended. This reconciliation does not
constitute part of the Indenture.
<TABLE>
<CAPTION>
Trust Indenture Act
of 1939 Section Indenture Section
------------------- -----------------
<S> <C>
310(a)(1) 6.09
(a)(2) 6.09
(b) 6.10
311 6.11
312(a) 6.13
312(b) 6.14(b)
312(c) 6.14(c)
313(a) 6.15(a)
313(c) 6.15/12.05
314(a) 6.12(a) - (c)
(a)(4) 6.12(d)
(c)(1) 1.03
(c)(2) 1.03
(e) 1.03
315(b) 6.07
315(d) 6.01
316(a)(1)(A) 4.12
(a)(1)(B) 4.05
(b) 4.09
(c) 1.04(d)
317(a)(1) 4.03
(a)(2) 4.10
(b) 2.04
318(a) 12.13
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article I DEFINITIONS ............................................................................................1
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 Holders.......................................................................36
Section 1.05 Incorporation by Reference of Trust Indenture Act.....................................37
Article II THE NOTES ............................................................................................37
Section 2.01 Authorized Amount; Terms; Form; Execution and Delivery................................37
Section 2.02 Restrictive Legends...................................................................40
Section 2.03 Registrar and Paying Agent............................................................42
Section 2.04 Paying Agent to Hold Money in Trust...................................................43
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............................................46
Section 2.09 Payments of Transfer Taxes............................................................46
Section 2.10 Refinancing of Notes..................................................................46
Section 2.11 Additional Securities.................................................................48
Section 2.12 Book-Entry Provisions.................................................................49
Section 2.13 Special Transfer Provisions...........................................................51
Section 2.14 Temporary Definitive Notes............................................................55
Section 2.15 Statements to Holders and the Owner Trustee...........................................55
Section 2.16 CUSIP, CINS and ISIN Numbers..........................................................58
Section 2.17 Holder Representations and Covenants..................................................58
Article III ACCOUNTS; PRIORITY OF PAYMENTS.......................................................................58
Section 3.01 Accounts..............................................................................58
Section 3.02 Investments of Cash...................................................................62
Section 3.03 Closing Date Deposits, Withdrawals and Transfers......................................63
Section 3.04 Interim Deposits, Transfers and Withdrawals...........................................64
Section 3.05 Interim Deposits and Withdrawals for Aircraft Sales...................................65
Section 3.06 Calculation Date Calculations.........................................................65
Section 3.07 Payment Date First Step Withdrawals and Transfers.....................................67
Section 3.08 Payment Date Second Step Withdrawals..................................................68
Section 3.09 Allocations of Principal Payments Among Subclasses of the Notes.......................73
Section 3.10 Certain Redemptions; Certain Premiums.................................................74
Section 3.11 Adjustment of Certain Percentages, Factors and Balances...............................76
Section 3.12 Credit Facilities.....................................................................76
Section 3.13 Issuer Cure Amount....................................................................76
Article IV DEFAULT AND REMEDIES .................................................................................77
Section 4.01 Events of Default.....................................................................77
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.02 Acceleration, Rescission and Annulment................................................78
Section 4.03 Other Remedies........................................................................79
Section 4.04 Limitation on Suits...................................................................79
Section 4.05 Waiver of Existing Defaults...........................................................80
Section 4.06 Restoration of Rights and Remedies....................................................80
Section 4.07 Remedies Cumulative...................................................................80
Section 4.08 Authority of Courts Not Required......................................................81
Section 4.09 Rights of Holders to Receive Payment..................................................81
Section 4.10 Trustee May File Proofs of Claim......................................................81
Section 4.11 Undertaking for Costs.................................................................81
Section 4.12 Control by Holders....................................................................81
Article V REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................82
Section 5.01 Representations and Warranties........................................................82
Section 5.02 General Covenants.....................................................................84
Section 5.03 Operating Covenants...................................................................94
Section 5.04 Compliance Through Agents.............................................................98
Article VI THE TRUSTEE ..........................................................................................98
Section 6.01 Acceptance of Trusts and Duties.......................................................98
Section 6.02 Absence of Duties.....................................................................98
Section 6.03 Representations or Warranties.........................................................98
Section 6.04 Reliance; Agents; Advice of Counsel...................................................99
Section 6.05 Not Responsible in Individual Capacity...............................................100
Section 6.06 No Compensation from Holders.........................................................100
Section 6.07 Notice of Defaults...................................................................100
Section 6.08 May Hold Securities..................................................................101
Section 6.09 Corporate Trustee Required; Eligibility..............................................101
Section 6.10 Disqualification of Trustee..........................................................101
Section 6.11 Preferential Collection of Claims Against Issuer.....................................101
Section 6.12 Reports by the Issuer................................................................101
Section 6.13 Holder Lists.........................................................................102
Section 6.14 Preservation of Information; Communications to Holders...............................102
Section 6.15 Reports by Trustee...................................................................103
Article VII SUCCESSOR TRUSTEES .................................................................................104
Section 7.01 Resignation and Removal of Trustee...................................................104
Section 7.02 Appointment of Successor.............................................................104
Article VIII INDEMNITY .........................................................................................105
Section 8.01 Indemnity............................................................................105
Section 8.02 Holders' Indemnity...................................................................106
Article IX MODIFICATION ........................................................................................106
Section 9.01 Modification with Consent of Holders.................................................106
Section 9.02 Modification Without Consent of Holders..............................................106
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.03 Subordination and Priority of Payments...............................................107
Section 9.04 Execution of Amendments by Trustee...................................................107
Section 9.05 Conformity with Trust Indenture Act..................................................107
Article X SUBORDINATION ........................................................................................107
Section 10.01 Subordination of the Securities and Other
Subordinated Obligations.............................................................107
Section 10.02 Rights of Subrogation................................................................108
Section 10.03 Further Assurances of Junior Representatives.........................................108
Section 10.04 Enforcement..........................................................................108
Section 10.05 Continued Effectiveness..............................................................109
Section 10.06 Senior Claims and Junior Claims Unimpaired...........................................109
Article XI DISCHARGE OF INDENTURE; DEFEASANCE...................................................................109
Section 11.01 Discharge of Liability on the Notes; Defeasance......................................109
Section 11.02 Conditions to Defeasance.............................................................110
Section 11.03 Application of Trust Money...........................................................111
Section 11.04 Repayment to Issuer..................................................................111
Section 11.05 Indemnity for Government Obligations and Corporate Obligations.......................111
Section 11.06 Reinstatement........................................................................111
Article XII MISCELLANEOUS ......................................................................................112
Section 12.01 Right of Trustee to Perform..........................................................112
Section 12.02 Waiver...............................................................................112
Section 12.03 Severability.........................................................................112
Section 12.04 Restrictions on Exercise of Certain Rights...........................................112
Section 12.05 Notices..............................................................................113
Section 12.06 Assignments; Third Party Beneficiary.................................................114
Section 12.07 Currency Conversion..................................................................114
Section 12.08 Application to Court.................................................................115
Section 12.09 Governing Law........................................................................115
Section 12.10 Jurisdiction.........................................................................116
Section 12.11 Counterparts.........................................................................116
Section 12.12 Table of Contents, Headings, Etc.....................................................116
Section 12.13 Trust Indenture Act..................................................................116
</TABLE>
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<PAGE> 6
Schedules
Schedule 1 - Initial Aircraft
Schedule 2 - Issuer Subsidiaries
Schedule 3 - Class Percentages
Schedule 4 - Assumed Principal Payments
Exhibits
Exhibit A-1 - Form of Subclass A-1 Fixed Rate Note
Exhibit A-2 - Form of Subclass A-2 Floating Rate Note
Exhibit B - Form of Class B Floating Rate Note
Exhibit C - Form of Class C Fixed Rate Note
Exhibit D - Form of Class D Fixed Rate Note
Exhibit E - Concentration Limits
Exhibit F - Insurance Provisions
Exhibit G - Form of Monthly Report to Each Noteholder
Exhibit H - Form of Certificate
Exhibit I - Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit J - Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Exhibit K - Core Lease Provisions
Exhibit L-1 - Form of Certificate to Depository Regarding Interest
Exhibit L-2 - Form of Depository Certificate Regarding Interest
-iv-
<PAGE> 7
This TRUST INDENTURE, dated as of May 5, 1999 (this "Indenture"), is
made between AIRCRAFT FINANCE TRUST, a Delaware statutory business trust (the
"Issuer"), RESOURCE/PHOENIX, INC., in its capacity as the Administrative Agent,
and BANKERS TRUST COMPANY, in its capacity as the person accepting appointment
as the Trustee under this Indenture.
The parties to this Indenture hereby agree as follows.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For purposes of this Indenture, the following
terms shall have the meanings indicated below:
"Acceleration" means, with respect to the principal, interest and
other amounts payable in respect of the Notes, such amounts becoming immediately
due and payable by declaration or otherwise. "Accelerate," "Accelerated" and
"Accelerating" have meanings correlative to the foregoing.
"Acceleration Default" means any Event of Default of the type
described in Section 4.01(e) or 4.01(f) hereof.
"Account" means any or, in its plural form, all of the accounts
established pursuant to Section 3.01(a) hereof and any ledger accounts and
ledger subaccounts maintained therein in accordance with this Indenture.
"Acquisition Agreements" means the Asset Purchase Agreement and any
agreements pursuant to which Additional Aircraft are acquired.
"Act" has, with respect to any Holder, the meaning given to such
term in Section 1.04(a) hereof.
"Additional Aircraft" means any aircraft and any related Engine
acquired by any Issuer Group Member from a Seller or an Affiliate of a Seller or
(upon a Rating Agency Confirmation with respect thereto, from a UniCapital
Entity) after the Initial Closing Date (other than any Remaining Aircraft or
Substitute Aircraft), excluding any such Aircraft after it has been sold or
disposed of by way of a completed Aircraft Sale.
"Additional Certificates" means any Beneficial Interest Certificate
issued pursuant to the Trust Agreement, the proceeds of which are used, in
substantial part, to acquire Additional Aircraft.
"Additional Interest" has the meaning given to such term in Section
2.01(a) hereof.
"Additional Issuance" has the meaning given to such term in Section
2.11 hereof.
<PAGE> 8
2
"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.
"Additional Notes" means any Notes of any subclass of the Class A
Notes, the Class B Notes, Class C Notes and Class D Notes issued pursuant to
this Indenture, the proceeds of which are used, in substantial part, to acquire
Additional Aircraft.
"Additional Securities" means the Additional Notes and the
Additional Certificates.
"Additional Servicer" means any UniCapital Entity that, subject to a
Rating Agency Confirmation with respect thereto, provides servicing with respect
to certain Aircraft.
"Additional Servicer Amounts" means, collectively, the "Additional
Sales Fee", the "Additional Disposition Fee" and the "Additional Rent-Collection
Fee", each as defined in the Servicing Agreement or any Additional Servicing
Agreement.
"Additional Servicing Agreement" means an agreement pursuant to
which the Additional Servicer is, subject to a Rating Agency Confirmation and a
Controlling Trustees' Resolution with respect thereto, providing servicing with
respect to certain Aircraft comparable to the Services (as defined in the
Servicing Agreement).
"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 (a) the Adjusted Base 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 for such
Aircraft on such Calculation Date by the applicable Depreciation Factor for such
Aircraft as of the date 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 between the Administrative Agent,
the Trustee, the Security Trustee and the Issuer Group Members.
"Administrative Agent" means the Person acting, at the time of
determination, in the capacity of the administrative agent of the Trustee and
the Security Trustee under the Administrative Agency Agreement. The initial
Administrative Agent is ReSource/Phoenix, Inc. Upon notice from the Security
Trustee to the Operating Bank (with a copy to the Trustee) that no Person is
then acting as the Administrative Agent or that the Administrative Agent is no
longer authorized to perform the Bank Account Managerial Services under the
Administrative Agency Agreement (in each case acting through a Responsible
Officer), each reference in this Indenture to the Administrative Agent shall be,
until a successor Administrative Agent is appointed in
<PAGE> 9
3
accordance with the Administrative Agency Agreement to perform the Bank Account
Managerial Services, to the Security Trustee.
"Affiliate" has the meaning given to such term in Section 5.02(b)
hereof.
"Agent Members" has the meaning given to such term in Section 2.12
hereof.
"Agreed Currency" has the meaning given to such term in Section
12.07(a) hereof.
"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 Purchase Account" has the meaning given to such term in
Section 3.01(a) hereof.
"Aircraft Purchase Price" has the meaning, with regard to each
Aircraft, given to such term in the Acquisition Agreement pursuant to which such
Aircraft is purchased by an Issuer Group Member.
"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.
"Annual Report" has the meaning given to such term in Section
2.15(a) hereof.
"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 or the Aircraft owned or operated
by it or as to which it has a contractual responsibility.
"Applicable Percentage" means, with respect to any Class C Notes or
Class D Notes as of the Calculation Date next preceding any Redemption Date or
Premium Payment Date (as applicable), a fraction the numerator of which is the
excess, if any, of (i)(A) in the case of a Premium Payment Date, the difference
between (1) the portion of the Outstanding Principal Balance of such Note that
would have remained outstanding as of such Premium Payment Date
<PAGE> 10
4
had no Premium Sale occurred prior to the Calculation Date for such Premium
Payment Date and (2) the portion of the Outstanding Principal Balance of such
Notes that would have remained Outstanding as of such Premium Payment Date were
the proceeds of such Premium Sale applied as provided in Section 3.08(a) hereof
but without the application of any portion thereof to the payment of Sale
Premium on all classes of Notes (all as determined by the Administrative Agent)
or (B) in the case of a Redemption Date, the portion of the Outstanding
Principal Balance of the Note being redeemed, in either case, over (ii) the
difference, if greater than zero, between the Outstanding Principal Balance of
such Note as of such Calculation Date (after giving effect to any reductions
therein that would have been made on such Payment Date in the absence of any
such Premium Sale or Redemption) and the Assumed Principal Balance of such Note
as of such Calculation Date and the denominator of which is the Assumed
Principal Balance of such Note as of such Calculation Date.
"Appraisal" means a desktop appraisal of the Base Value of an
Aircraft made pursuant to Section 5.03(c) hereof.
"Appraiser" has the meaning set forth in Section 5.03(c) hereof.
"Asset Purchase Agreement" means the Master Aircraft Purchase
Agreement dated as of May 5, 1999 among the Sellers and the Issuer Group
Members.
"Assumed Principal Balance" means, as of the Calculation Date next
preceding any Redemption Date or Premium Payment Date (as applicable), the sum
of the Assumed Principal Payments.
"Assumed Principal Payments" means, as of the Calculation Date next
preceding any Redemption Date or Premium Payment Date (as applicable), each of
the principal payment amounts for the Class C Notes or Class D Notes (as
applicable) set forth opposite a date in Schedule 4 hereto falling after such
Redemption Date and ending on the Expected Final Payment Date for such Note or
any other specified date.
"Assumed Portfolio Value" means, with respect of any Payment Date,
the 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 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" means, as of any Calculation Date, amounts
on deposit in the Collections Account. The Available Collections with respect to
any payment to be made therefrom shall be determined after giving effect to all
payments, if any, having priority to such payment under Section 3.08 hereof.
"Bank Account Managerial Services" means the services described in
Section 2.04 of the Administrative Agency Agreement.
<PAGE> 11
5
"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 such assumptions as to use since the
last reported status as may be reasonably stated in the Appraisal setting forth
such Base Value).
"Basic Terms Modification" has the meaning given to such term in
Section 9.01 hereof.
"Beneficial Interest Certificates" means all certificates issued
under the Trust Agreement, including the Initial Certificates and all Additional
Certificates, if any, so designated, in each case representing pari passu
percentage beneficial interests in the property of the Issuer arising out of the
Trust Agreement.
"Business Day" means a day on which commercial banks and foreign
exchange markets are open in New York, New York and, with respect to the
determination or payment of interest on any Floating Rate Security, a day on
which U.S. dollar deposits may be dealt in on the London inter-bank market 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 a Payment Date.
"Capital Markets Advisor" means the Person acting, at the time of
determination, in the capacity of the capital markets advisor under the Capital
Markets Advisory Agreement. The initial Capital Markets Advisor is Lehman
Brothers Inc.
"Capital Markets Advisory Agreement" means the Capital Markets
Advisory Agreement dated as of the Initial Closing Date between the Capital
Markets Advisor and the Issuer.
"Cash Collateral Account" means an Eligible Credit Facility
established as an Account pursuant to Section 3.01(a) hereof. Each Cash
Collateral Account shall be designated with reference to the Obligations owed to
the class or subclass of Notes to which it relates. The Issuer shall not be
deemed a provider of a Credit Facility with respect to any Cash Collateral
Account.
"Cedel" means Cedel Bank, a societe anonyme.
"Certificateholder" means the Person in whose name a Beneficial
Interest Certificate is registered from time to time in accordance with the
provisions of the Trust Agreement.
<PAGE> 12
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"Class A Notes" means, collectively, all Notes designated as a
subclass of Class A, including the Initial Notes so designated (consisting of
the Subclass A-1 Notes and the Subclass A-2 Notes issued as of the Initial
Closing Date), all Additional Notes, if any, so designated and, all Refinancing
Notes, if any, so designated and all Exchange Notes, if any, so designated.
"Class B Notes" means all Notes designated as a subclass of Class B,
including the Initial Notes so designated (consisting of the Subclass B-1 Notes
issued as of the Initial Closing Date), all Additional Notes, if any, so
designated, all Refinancing Notes, if any, so designated and all Exchange Notes,
if any, so designated.
"Class C Notes" means all Notes designated as a subclass of Class C,
including the Initial Notes so designated (consisting of the Subclass C-1 Notes
issued as of the Initial Closing Date), all Additional Notes, if any, so
designated, all Refinancing Notes, if any, so designated and all Exchange Notes,
if any, so designated.
"Class D Notes" means all Notes designated as a subclass of Class D,
including the Initial Notes so designated (consisting of the Subclass D-1 Notes
issued as of the Initial Closing Date), all Additional Notes, if any, so
designated and all Refinancing Notes, if any, so designated.
"Class Percentage" means the Minimum Class Percentage, the Scheduled
Class Percentage or the Supplemental Class Percentage, as the case may be.
"Closing Date" means in the case of (a) the Initial Securities and
the Initial Aircraft, the Initial Closing Date, (b) any Refinancing Notes or
Additional Securities, the relevant date of issuance of such Securities and (c)
any Additional Aircraft, the date of issuance of the Additional Securities
issued to finance the acquisition of such Additional Aircraft.
"Collateral" has the meaning given to such term in the Security
Trust Agreement.
"Collections" means without duplication (a) Rental Payments and all
other amounts received by any Issuer Group Member pursuant to any Lease or
Related Collateral Document, (b) amounts on deposit in the Collections Account
constituting Reserved Cash (including any amounts received under Sections
5.02(f)(ii)(C)(z) and 5.02(f)(iv)(C) hereof), (c) amounts received in respect of
claims for damages or in respect of any breach of contract for nonpayment of any
of the foregoing, (d) amounts received by an Issuer 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
Repossession Insurance, Requisition Compensation and all Partial Loss Proceeds,
less, in each case, any expenses payable by such Issuer Group Member to any
Person that is not an Issuer Group Member in connection therewith, (e) amounts
received by any Issuer Group Member from insurance with respect to any Aircraft,
(f) any amounts transferred from a Lessee Funded Account into the Collections
Account in accordance with Section 3.07 hereof, (g) any Swap Receipts, (h) 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), (i) any amounts transferred from the Aircraft Purchase Account into the
Collections Account in accordance with
<PAGE> 13
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Section 3.04(g) hereof, (j) any amounts received by an Issuer Group Member under
an Acquisition Agreement, including any loss proceeds and other amounts under
the second sentence of Section 4.2, Section 5.2 and/or Section 5.3 of the Asset
Purchase Agreement and any Non-Delivery Payments but excluding any Excluded
Payments, (k) any amounts transferred from a VARIG Reserve Account to the
Collections Account in accordance with Section 3.07(e) and (l) any other amounts
received by any Issuer Group Member (including any amounts received from any
other Issuer Group Member, whether by way of distribution, dividend, repayment
of a loan or otherwise, and any proceeds received in connection with any Allowed
Restructuring); provided that Collections shall not include (i) Segregated Funds
transferred to a Lessee Funded Account, (ii) Late VARIG Rental Payments
transferred to a VARIG Reserve Account, (iii) amounts deposited in the
Defeasance/Redemption Account or the Refinancing Account in connection with a
Redemption, (iv) amounts received in connection with a Refinancing (except as
provided in clause (b) above) and (v) amounts to be paid to any Person not an
Issuer Group Member or expenses in connection with the receipt of any
Collections or otherwise pursuant to any Related Document, in each case subject
to the restrictions set forth in this Indenture.
"Collections Account" has the meaning given to such term in Section
3.01(a) hereof.
"Commission" means the U.S. Securities and Exchange Commission.
"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. "Controlled" and "Controlling" have meanings correlative to the
foregoing.
"Controlling Party" means, at any time of determination, the Senior
Trustee; provided, however, that, if and only if so provided in the Controlling
Trustees' Resolution providing for a Primary Eligible Credit Facility, at any
time from and including the date that is no earlier than 30 months from the
earliest to occur of (a) the date on which the entire amount available under
such Primary Eligible Credit Facility shall have been drawn (except as a result
of any change in the rating of the provider thereof or such additional
circumstances as such Controlling Trustees' Resolution may specify) and remain
unreimbursed and (b) the date on which the Notes shall have been Accelerated,
the provider of such Primary Eligible Credit Facility shall have the right to
elect, by Written Notice to the Trustee, to become the Controlling Party (in
place of the Senior Trustee) thereafter but only for so long as any Credit
Facility Obligations due to such provider remain unpaid.
"Controlling Trustees" has the meaning given to such term in the
Trust Agreement.
<PAGE> 14
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"Controlling Trustees' Resolution" means a copy of a resolution
certified by a Controlling Trustee as having been duly adopted by the
Controlling Trustees and being in full force and effect on the date of such
certification.
"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 for each
subclass of Notes, the office of such Trustee at which at any particular time
its corporate trust business shall be principally administered. The initial
Corporate Trust Office is Four Albany Street, New York, New York 10006,
Attention: Corporate Trust and Agency Services--Structured Finance, Facsimile
No: 212-250-6439.
"Costs" means liabilities, obligations, damages, judgments,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel and costs of investigation).
"Covenant Defeasance" has the meaning given to such term in Section
11.01 hereof.
"Credit Facility" means any Primary Eligible Credit Facility, any
Secondary Eligible Credit Facility, any Tertiary Eligible Credit Facility or any
Subordinate Eligible Credit Facility, as the case may be.
"Credit Facility Advance Obligations" means all Credit Facility
Obligations other than Credit Facility Expenses.
"Credit Facility Obligations" means all principal, interest, fees
and other amounts owing to the providers of Credit Facilities.
"Credit Facility Expenses" means all Credit Facility Obligations
stated pursuant to the terms of any other Credit Facility to constitute
Expenses.
"Default" means a condition, event or act that, 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, with a copy to the Trustee of each subclass of Notes and the
Administrative Agent, 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(a) hereof.
"Definitive Notes" has the meaning given to such term in Section
2.01(b) hereof.
<PAGE> 15
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"Depository" means The Depository Trust Company, its nominees and
its and their respective successors.
"Depreciation Factor" means (a) with respect to each Initial
Aircraft on any date of determination, if positive, the product of (1-kn) and
(1+g)n, where "n" equals the age of such Aircraft in years from the date of its
manufacture, "k" equals a fraction, the numerator of which is 0.9 and the
denominator of which is the Expected Useful Life of such Initial Aircraft, and
"g" equals 0.015; provided that in the event such Aircraft is converted to
freighter service, the Depreciation Factor for such Aircraft shall be the factor
determined by the Controlling Trustees and (b) with respect to each Additional
Aircraft, the Depreciation Factor determined by the Controlling Trustees in
connection with the issuance of the Additional Securities funding the
acquisition of such Additional Aircraft.
"Developed Markets" has the meaning determined, from time to time,
in accordance with Note (3) to Exhibit E hereof.
"Direction" has the meaning given to such term in Section 1.04(c)
hereof.
"DTC" means the Depository.
"Eligibility Requirements" has the meaning given to such term in
Section 2.03(b) hereof.
"Eligible Account" means (a) a trust account maintained on the books
and records of an Eligible Institution in the name of the Security Trustee as a
Securities Account under, and as defined in, the Security Trust Agreement;
provided that no Cash Collateral Account may be maintained with a liquidity
provider at any time at which the Issuer holds any participation in the
Liquidity Facility unless written confirmation shall have been received from
each Rating Agency prior to such time to the effect that such maintenance of the
Cash Collateral Account with the Liquidity Provider will not result in a
withdrawal or downgrading of the ratings of the Notes or (b) an account
maintained on the books and records of an Eligible Institution in the name of an
Issuer Group Member as a Non-Trustee Account in compliance with the terms of the
Security Trust Agreement.
"Eligible Credit Facility" means (a) any credit agreement, letter of
credit, guarantee, credit or liquidity enhancement facility or other credit
facility provided by, or supported by a further such credit facility provided
by, an Eligible Provider in favor of any Issuer Group Member and subjected to
the lien of the Security Trust Agreement or (b) any Account established for the
purpose of providing like credit or liquidity support and designated as an
Eligible Credit Facility.
"Eligible Institution" means (a) Bankers Trust in its capacity as
the Operating Bank in respect of any Eligible Account, so long as it (i) has
either (A) a long-term unsecured debt rating of A (or the equivalent) or better
by each Rating Agency or (B) a short-term unsecured debt rating of A-1 by
Standard & Poor's and P-1 by Moody's and (ii) can act as a securities
intermediary under the New York Uniform Commercial Code; 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 branch of a foreign bank licensed under any
such laws) appointed as the
<PAGE> 16
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Operating Bank in respect of any Eligible Account, so long as it (i) has either
(A) a long-term unsecured debt rating of AA (or the equivalent) or better by
each Rating Agency or (B) a short-term unsecured debt rating of A-l+ by Standard
& Poor's and P-1 by Moody's and (ii) can act as a securities intermediary under
the New York Uniform Commercial Code, including a Person providing a Credit
Facility so long as such Person shall otherwise so qualify and shall have waived
all rights of set-off and counterclaim with respect to the account to be
maintained as an Eligible Account.
"Eligible Provider" means a Person whose short-term unsecured debt
is rated A-1+ by Standard & Poor's and P-1 by Moody's or is otherwise designated
as an Eligible Provider by the Controlling Trustees.
"Encumbrance" has the meaning given to such term in Section 5.02(b)
hereof.
"Engine" means each engine installed (or constituting a spare for an
engine installed) on any Aircraft, including any engine replacing a previously
installed engine under the relevant Lease, and any and all Parts incorporated
in, installed on or attached to any such engine.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default" has the meaning, with respect to a class of
Notes, given to such term in Section 4.01 hereof.
"Excess Amortization Date" means, with respect to (a) the Subclass
A-1 Notes, May 15, 2004, (b) the Subclass A-2 Notes and the Subclass B-1 Notes,
June 15, 1999, (c) the Subclass C-1 Notes, June 15, 2016, (d) the Subclass D-1
Notes, July 15, 2016 and (e) any Refinancing Notes or Additional Notes, the
Excess Amortization Date established by or pursuant to a Controlling Trustees'
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.
"Exchange Notes" means, with respect to any class or subclass of
Registrable Notes, any notes of the Issuer containing terms identical to such
class or subclass of Registrable Notes (except to reflect the registration of
the Exchange Note under the Securities Act and that Registration Step-up
Interest shall not apply thereto) that are issued and exchanged for Registrable
Notes of such class or subclass beneficially owned by Qualifying Persons
pursuant to a Registration Rights Agreement and this Indenture.
"Exchange Offer" has the meaning given to such term in the
applicable Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning given to
such term in the applicable Registration Rights Agreement.
"Excluded Payments" means (a) in the event Non-Delivery Payments are
made in respect of only one Aircraft, 3.26790609713% of such Non-Delivery
Payment, and (b) in the
<PAGE> 17
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event Non-Delivery Payments are made in respect of more than one Aircraft, the
product of 6.53581219426% times the aggregate of all such Non-Delivery Payments
divided by the number of Aircraft for which such Non-Delivery Payments are made.
"Expected Final Payment Date" means with respect to (a) the Subclass
A-1 Notes, May 15, 2004, (b) the Subclass A-2 Notes, June 15, 2008, (c) the
Subclass B-1 Notes, May 15, 2016, (d) the Subclass C-1 Notes, July 15, 2016, (e)
the Subclass D-1 Notes, August 15, 2016 and (f) any Refinancing Notes or
Additional Notes, the Expected Final Payment Date, if any, established by or
pursuant to a Controlling Trustees' 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 and, with respect to any Additional Aircraft, the "Useful Life"
established by or pursuant to a Controlling Trustees' Resolution or in any
indenture supplemental hereto providing for the issuance of Additional
Securities to fund the acquisition of such Additional Aircraft.
"Expense Account" has the meaning given to such term in Section
3.01(a) hereof.
"Expense Accruals" has the meaning given to such term in Section
3.08(a) hereof.
"Expenses" means, collectively, any fees, costs or expenses Incurred
by an Issuer Group Member in the course of the business activities permitted
under Section 5.02(e) hereof, including, without limitation, any fees, expenses
and indemnification amounts of, or owing to, any Service Provider and any Credit
Facility Expenses, and (subject to a limit of $10,000 per annum per Aircraft (or
other amount approved by a Controlling Trustees' Resolution with a Rating Agency
Confirmation with respect thereto) with respect to each Issuer Subsidiary
entitled thereto) the shortfall between Rental Payments received by or on behalf
of such Issuer Subsidiary in respect of a Lease of an Aircraft and the amount
payable by such Issuer Subsidiary, as head lease rent with respect of such
Aircraft, to another Issuer Group Member; provided, however, that, except as
expressly provided herein, Expenses shall not include any amount payable on the
Securities, under any Swap Agreement or under any Credit Facility (other than
Credit Facility Expenses) or the Additional Servicer Amounts.
"Extended Pool Factor" means, with respect to each subclass of
Notes, the "Extended Pool Factor" set forth in the appendix to such Notes, as
the same may be adjusted in accordance with Section 3.11 hereof.
"Extension Amount" has the meaning given to such term in Section
3.09 hereof.
"Final Maturity Date" means with respect to (a) the Initial Notes,
May 15, 2024 and (b) any Refinancing Notes or Additional Notes, the date, if
any, specified in the form of such Notes.
"Financial Advisor" means the Person acting, at the time of
determination, as the financial advisor under the Financial Advisory Agreement.
The initial Financial Advisor is Bankers Trust.
<PAGE> 18
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"Financial Advisory Agreement" means the Financial Advisory
Agreement dated as of the Initial Closing Date between the Financial Advisor and
the Issuer.
"Fixed Rate Notes" means the Subclass A-1 Notes, the Subclass C-1
Notes and the Subclass D-1 Notes constituting Initial Notes and any Refinancing
Notes or Additional Notes issued with a fixed rate of interest.
"Floating Rate Notes" means any Subclass A-1 Notes, Subclass A-2
Notes and Subclass B-1 Notes constituting Initial Notes and any Exchange Notes,
Refinancing Notes or Additional Notes issued with a floating or variable rate of
interest.
"Future Lease" means, with respect to each Aircraft, any aircraft
lease agreement as may be in effect at any time after the relevant Closing Date
between an Issuer Group Member (as lessor or vendor) and a Person not an Issuer
Group Member (as lessee or purchaser), in each case other than any Initial Lease
or Additional Lease; 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", and the sub-lessee shall constitute the
related "Lessee" with respect to such Aircraft, but only to the extent of the
provisions of such sub-lease agreement relevant to such payments and collateral
and to the extent agreed by the relevant lessor.
"GECC" means General Electric Capital Corporation, a New York
corporation.
"Global Notes" means any Rule 144A Global Notes and Regulation S
Global Notes.
"Guarantee" has the meaning given to such term in Section 5.02(f)
hereof.
"Holder" means any Person in whose name a Class A Note, Class B
Note, Class C Note or Class D Note is registered from time to time in the
Register for such Notes or, with respect to any Global Note, the Depository.
"Incur" has the meaning given to such term in Section 5.02(f)
hereof.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (d) 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, (e)
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, (f) all Indebtedness of other Persons secured by a lien on any
<PAGE> 19
13
asset of such Person, whether or not such Indebtedness is assumed by such
Person, and (g) all Indebtedness of other Persons Guaranteed by such Person.
"Indenture" has the meaning set forth in the preamble hereof.
"Initial Aircraft" means each of the aircraft identified in Schedule
1 hereto (including any related Engines and Parts and any Remaining Aircraft)
and any Substitute Aircraft, excluding any such aircraft sold or disposed of by
way of a completed Aircraft Sale and any Remaining Aircraft for which a
Substitute Aircraft is delivered.
"Initial Appraised Value" means (a) in the case of each Initial
Aircraft (other than a Substitute Aircraft), the average of the appraisals by
each of the Initial Appraisers of the Base Value of such Aircraft as of December
31, 1998, (b) in the case of any Substitute Aircraft, the average of the
appraisals by each of the Initial Appraisers of the Base Value of such Aircraft
as of a date not more than six months prior to the date of the delivery of such
Aircraft and (c) 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 Additional Securities.
"Initial Appraisers" means Aircraft Information Services, Inc., BK
Associates, Inc. and Morton Beyer & Agnew, Inc.
"Initial Certificates" means the Beneficial Interest Certificates
issued on the Initial Closing Date.
"Initial Class A Notes" means the Subclass A-1 Notes and the
Subclass A-2 Notes issued on the Initial Closing Date.
"Initial Class B Notes" means the Subclass B-1 Notes issued on the
Initial Closing Date.
"Initial Class C Notes" means the Subclass C-1 Notes issued on the
Initial Closing Date.
"Initial Class D Notes" means the Subclass D-1 Notes issued on the
Initial Closing Date.
"Initial Closing Date" means May 5, 1999.
"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 that is listed
in Schedule 1 to the Asset Purchase Agreement or with respect to any Substitute
Aircraft described in the "Substitute Aircraft Supplement" therefor, as such
agreement or arrangement may be amended, modified, extended, supplemented,
assigned or novated from time to time.
<PAGE> 20
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"Initial Notes" means the Initial Class A Notes, the Initial Class B
Notes, the Initial Class C Notes and the Initial Class D Notes.
"Initial Outstanding Balance" means, with respect to any subclass of
Notes the initial Outstanding Principal Balance thereof on the date of issuance
of such Notes.
"Initial Securities" means the Initial Notes and the Initial
Certificates.
"Initial Swap Agreement" means the Master Agreement effective as of
May 5, 1999 between Lehman Brothers Financials Products, Inc. and the Issuer.
"Insolvency Proceeding" means any proceeding of the type referred to
in clause (e) or (f) of Section 4.01 hereof in respect of the Issuer.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Intercompany Loan" has the meaning given to such term in Section
5.02(f) hereof.
"Interest Accrual Period" means, as to each subclass of Notes, the
period beginning on (and including) the relevant Closing Date 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 Notes shall end on but exclude the date such
subclass of 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 Notes, on
any Payment Date, (a) the amount of interest accrued and unpaid to such Payment
Date at the rate described in clause (a) of the definition of "Stated Rate of
Interest" with respect to such subclass of Notes on such Payment Date,
determined in accordance with the terms of such subclass of Notes, plus (b)
interest at the rate specified in clause (a) above on any Interest Amount due
but not paid on any prior Payment Date.
"Investment" has the meaning given to such term in Section 5.02(c)
hereof.
"Investment Earnings" means investment earnings on funds on deposit
in any Account net of losses and investment expenses of the Administrative Agent
in making such investments.
"Issuer" has the meaning set forth in the preamble hereof.
"Issuer Cure Amount" has the meaning given to such term in Section
3.13 hereof.
"Issuer Group" means the Issuer and each Issuer Subsidiary.
<PAGE> 21
15
"Issuer Group Member" means the Issuer or an Issuer Subsidiary.
"Issuer Subsidiary" means each subsidiary of the Issuer (including
each trust of which the Issuer is the holder of the beneficial interest)
existing on the Initial Closing Date and listed on Schedule 2 to this Indenture
and any other subsidiary (including any such trust) of the Issuer.
"Junior Claim" means (a) with respect to Expenses, all other
Obligations and (b) with respect to any other Obligations, all Obligations as to
which the payment of such Obligation constitutes a Prior Ranking Amount.
"Junior Claimant" means the holder of a Junior Claim.
"Junior Note Blockage Amount" means the lesser of (a) $48 million,
as such amount may, from time to time, be changed by a Written Notice from the
Issuer to the Trustee and the Administrative Agent accompanied by a Controlling
Trustees' Resolution adopting such change and a Rating Agency Confirmation with
respect thereto, and (b) the sum of the Mezzanine Note Blockage Amount and the
Outstanding Principal Balance of the Class C Notes; provided that, in any case,
at any time that the Outstanding Principal Balance of the Notes is $24 million
or less, the Junior Note Blockage Amount will be zero.
"Junior Representative" means, as applicable, the Issuer with
respect to any Junior Claim consisting of any of the Certificates, the Trustee
with respect to any Junior Claim consisting of any subclass of Notes of which it
is the Trustee and any other Person acting as the representative of one or more
Junior Claimants.
"Late VARIG Rental Payments" means, with respect to either VARIG
Lease, that portion of any Rental Payment under such VARIG Lease received after
its due date under such VARIG Lease that is equal to the amount previously
transferred from the related VARIG Reserve Account to the Collections Account in
respect of such Rental Payment.
"Leases" means the Initial Leases, the Future Leases and the
Additional Leases.
"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 an Issuer Group Member.
"Lessee Funded Account" has the meaning given to such term in
Section 3.01(a) hereof.
"LIBOR" means the London interbank offered rate for one month U.S.
dollar deposits, determined pursuant to the Reference Agency Agreement, or such
other interest rate so denominated, with respect to any Additional Notes or
Refinancing Notes, in an indenture supplemental hereto for any such Notes or in
the form thereof.
"Listing Agent" means Kredietbank S.A. Luxembourg.
<PAGE> 22
16
"Luxembourg Paying Agent" means Kredietbank S.A. Luxembourg.
"Maturity Step-Up Interest" means with respect to (a) 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 (b) any Refinancing Notes or
Additional Notes that by their terms provide that they are entitled to Maturity
Step-Up Interest at any time, interest, at a rate established by or pursuant to
a Controlling Trustees' 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 Notes.
"Mezzanine Note Blockage Amount" means the lesser of (a) $43
million, as such amount may, from time to time, be changed by a Written Notice
from the Issuer to the Trustee and the Administrative Agent accompanied by a
Controlling Trustees' Resolution adopting such change and a Rating Agency
Confirmation with respect thereto, and (b) the sum of the Senior Note Blockage
Amount and the Outstanding Principal Balance of the Class B Notes; provided
that, in any case, at any time that the Outstanding Principal Balance of the
Notes is $24 million or less, the Mezzanine Note Blockage Amount will be zero.
"Minimum Class Percentage" means, with respect to any class of Notes
on any Payment Date, the "Minimum Class Percentage" set forth in Schedule 3 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 Principal Payment Amount" means, with respect to any class
of Notes on any Payment Date, the difference, if positive, between the aggregate
Outstanding Principal Balance of such class of Notes and the Minimum Target
Principal Balance of such class of Notes on such Payment Date.
"Minimum Target Principal Balance" means, with respect to any class
of Notes on any Payment Date, the product of (a) the Minimum Class Percentage
for such class of Notes on such Payment Date and (b) the Assumed Portfolio Value
in respect of such Payment Date; provided that, if on any Payment Date the
Outstanding Principal Balance of Class A Notes is greater than the Adjusted
Portfolio Value in respect of such Payment Date, then the "Minimum Target
Principal Balance" of Class A Notes shall be equal to the Scheduled Target
Principal Balance of Class A Notes.
"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.
"Net Sale Proceeds" has the meaning given to such term in Section
5.02(g) hereof.
<PAGE> 23
17
"Non-Delivery Payments" means any amounts received by the Issuer
pursuant to the first sentence of Section 4.2 of the Asset Purchase Agreement or
a comparable provision in any other Acquisition Agreement.
"Non-Trustee Accounts" has the meaning given to such term in Section
3.01(f) 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(a)
hereof.
"Note Target Price" has the meaning given to such term in Section
5.02(g) hereof.
"Notes" means the Initial Notes, all Exchange Notes, if any, all
Additional Notes, if any, all Refinancing Notes, if any, and all Notes, if any,
issued in replacement or substitution of a Note.
"Notices" has the meaning given to such term in Section 12.05
hereof.
"Obligations" means the Secured Obligations and the payments to be
made to the Issuer under Section 3.08 hereof in respect of the Beneficial
Interest Certificates.
"Officer's Certificate" means a certificate signed by, with respect
to the Issuer, the Owner Trustee or any Controlling Trustee and, with respect to
any other Person, any authorized officer, director, trustee or equivalent
representative.
"Operating Bank" means the Person acting, at the time of
determination, as the Operating Bank under the Security Trust Agreement. The
initial Operating Bank is Bankers Trust.
"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.
"Optional Redemption" means a Redemption of Notes pursuant to
Section 3.10(a) hereof.
"Other Accruals" has the meaning given to such term in Section
3.08(a) 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 Holders 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
<PAGE> 24
18
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); (b) with respect to the Certificates, all
Certificates issued, and not cancelled, under the terms of the Trust Agreement;
and (c) when used with respect to any evidence of indebtedness other than any
Notes means, 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 Notes,
the total principal amount evidenced by such Notes unpaid and outstanding at any
time as determined in the report to be delivered pursuant to Section 3.06
hereof.
"Ownership Interest" has the meaning given to such term in Section
5.02(b) hereof.
"Owner Trustee" means the Person acting, at the time of
determination, as the owner trustee under the Trust Agreement. The initial Owner
Trustee is Wilmington Trust Company.
"Owner Trustee Account" has the meaning given to such term in
Section 3.01(a) hereof.
"Partial Loss" means, with respect to any Aircraft, 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, the
total proceeds of the insurance or reinsurance (other than in respect of
liability insurance) paid in respect of any Partial Loss to any Issuer Group
Member.
"Parts" means any part, component, appliance, accessory, instrument
or other item of equipment (other than any Engine) installed in or attached to
(or constituting a spare for any such item installed in or attached to) any
Aircraft (other than any Engine).
"Paying Agent" has the meaning given to such term in Section 2.03
hereof.
"Payment Date" means the 15th day of each month, commencing on June
15, 1999; provided that if any Payment Date would otherwise fall on a day that
is not a Business Day, such Payment Date shall be the first following day that
is a Business Day.
"Permanent Regulation S Global Note" has the meaning given to such
term in Section 2.01 hereof.
"Permitted Account Investments" means, in each case (except with
regard to clause (f) hereof), book-entry securities, negotiable instruments or
securities in bearer or registered form that evidence:
<PAGE> 25
19
(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,
"P-1" by Moody's 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" by Standard & Poor's and "Aa2" by Moody's;
(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 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" by Standard & Poor's, "Aa2" by Moody's;
(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, "Aa2" by Moody's;
(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 Issuer Group Member to or for the credit or the account of such
bank.
"Permitted Accruals" means Expense Accruals and Other Accruals.
"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.
"Person" means any natural person, firm, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any political subdivision
thereof or any other legal entity, including public bodies.
<PAGE> 26
20
"Pledged Beneficial Interest" has the meaning given to such term in
the Security Trust Agreement.
"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 Notes on any
Payment Date, the "Pool Factor" for such Payment Date set forth in the appendix
to such Notes as the same may be adjusted in accordance with Section 3.11
hereof.
"Portfolio" means, at any time, all Aircraft owned by the Issuer
Group.
"Precedent Lease" has the meaning given to such term in Section
5.03(f) hereof.
"Premium Payment Date" means any Payment Date next succeeding any
Premium Sale that occurred prior to the Calculation Date for such Payment Date.
"Premium Sale" means any sale or other disposition of one or more
Aircraft prior to the Payment Date falling in May, 2010 (other than by reason of
or during the exercise of remedies under the Security Trust Agreement or by
reason of the occurrence of any Event of Loss with respect of such Aircraft).
"Primary Eligible Credit Facility" means any Eligible Credit
Facility, other than a Secondary Eligible Credit Facility, a Tertiary Eligible
Credit Facility or a Subordinated Eligible Credit Facility. A Primary Eligible
Credit Facility shall provide by its terms that it is entitled only to the
priority of repayment accorded to Primary Eligible Credit Facilities under
Section 3.08 hereof.
"Primary Expenses" means all Expenses other than Modification
Payments and Refinancing Expenses.
"Prior Ranking Amounts" has the meaning assigned to such term in
Section 3.08 hereof.
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth in Section 2.02(a) hereof.
"Prohibited Countries" has the meaning determined, from time to
time, in accordance with Section 5.03(a) hereof.
"Projected Principal Payment Amounts" means, as of the Calculation
Date next preceding any Redemption Date or Premium Payment Date (as applicable),
the Applicable Percentage of the Assumed Principal Payments of the Class C Notes
or Class D Notes.
<PAGE> 27
21
"Purchase Option" means a contractual option granted by the lessor
or owner under an Aircraft Agreement (including pursuant to a conditional sale
agreement) as to the purchase of the applicable Aircraft.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualifying Person" means, with respect to any exchange offer
effected pursuant to a Registration Rights Agreement with respect to Registrable
Notes of any class or subclass, any Person that is acquiring Exchange Notes in
its ordinary course of business and is not (a) a person participating in the
distribution of Exchange Notes in exchange for such Registrable Notes or (b) an
affiliate (as defined in Rule 144 under the Securities Act) of the Issuer.
"Quarterly Report" has the meaning given to such term in Section
2.15(a) hereof.
"Rating Agency" means each of Moody's and Standard & Poor's and any
other nationally recognized rating agency designated by the Issuer; provided
that such organizations shall only be deemed to be a Rating Agency for purposes
of this Indenture with respect to the Notes they are then rating.
"Rating Agency Confirmation" means a prior written confirmation from
each Rating Agency received by each of the Issuer and the Trustee that a
specified action or event shall not result in the downgrade, qualification or
withdrawal of such Rating Agency's then current credit rating, if any, of any
subclass of Notes then Outstanding.
"Received Currency" has the meaning given to such term in Section
12.07(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 or, if 15 days
has not passed since the Initial Closing Date, the Initial Closing Date, in any
event 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 pursuant to Section
3.10 hereof.
"Redemption Premium" means (a) in respect of any Initial Note being
redeemed in an Optional Redemption on any date, the Redemption Premium indicated
for such Initial Note with respect to such date in the table below:
<PAGE> 28
22
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Class A-1 Class A-2 Class B Class D
Redemption Date Notes Notes Notes Notes
- --------------- ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
After the Closing Date................ 101.00% 101.00% 101.50% ___
On or after May 15, 2000 and prior to
May 15, 2001.......................... 100.75 100.75 101.25 ___
On or after May 15, 2001 and prior to
May 15, 2002.......................... 100.50 100.50 101.00 ___
On or after May 15, 2002 and prior to
May 15, 2003.......................... 100.25 100.25 100.75 ___
On or after May 15, 2003 and prior to
May 15, 2004.......................... 100.00 100.25 100.50 ___
On or after May 15, 2004 and prior to
May 15, 2005.......................... 100.00 100.00 100.25 105.50%
On or after May 15, 2005 and prior to
May 15, 2006.......................... 100.00 100.00 100.00 104.40
On or after May 15, 2006 and prior to
May 15, 2007.......................... 100.00 100.00 100.00 103.30
On or after May 15, 2007 and prior to
May 15, 2008.......................... 100.00 100.00 100.00 102.20
On or after May 15, 2008 and prior to
May 15, 2009.......................... 100.00 100.00 100.00 101.10
On or after May 15, 2009.............. 100.00 100.00 100.00 100.00
</TABLE>
"Redemption Price" means an amount (determined as of the Calculation
Date for the Redemption Date for any Redemption pursuant to Section 3.10(a)
hereof) equal to:
(a) with respect to any Initial Class A Notes or Initial Class B
Notes (or any Exchange Notes therefor) being redeemed and except as otherwise
provided in clause (d) below, the product of the applicable Redemption Premium
times the portion of the Outstanding Principal Balance being redeemed;
(b) with respect to any Initial Class C Notes (or any Exchange Notes
therefor) being redeemed and except as otherwise provided in clause (d) below,
the greater of (i) the Projected Principal Payment Amounts for such Notes and
the Interest Amount thereon to and including the Expected Final Payment Date
discounted to present value at a discount rate equal to the applicable Treasury
Rate plus 0.50% plus the difference between the portion of the Outstanding
Principal Balance being redeemed and the sum of the Projected Principal Payment
Amounts and (ii) the portion of the Outstanding Principal Balance being
redeemed;
(c) with respect to any Initial Class D Notes (or any Exchange Notes
therefor) being redeemed and except as otherwise provided in clause (d) below,
(i) prior to May 15, 2004, the greater of (A) the sum of (x) the Projected
Principal Payment Amounts and the scheduled Interest Amount thereon to but not
including May 15, 2004 plus (y) the product of the applicable Redemption Premium
and the sum of the Projected Principal Payment Amounts of such Notes falling due
on May 15, 2004 and each Payment Date thereafter discounted as of May 15, 2004
to present value at a discount rate equal to the applicable Treasury Yield plus
0.75% plus the difference between the portion of the Outstanding Principal
Balance being redeemed and the sum of the Projected Principal Payment Amounts
and (B) the portion of the Outstanding Principal
<PAGE> 29
23
Balance being redeemed or (ii) on or after May 15, 2004, the product of the
applicable Redemption Premium times the Outstanding Principal Balance being
redeemed;
(d) with respect to any Notes being redeemed under Section 3.10(a)
hereof after the giving of a Default Notice or the Acceleration of any of the
Notes, the then Outstanding Principal Balance thereof; and
(e) with respect to any Notes other than the Initial Notes, as
provided in the Controlling Trustees' Resolution providing for the issuance of
such Notes.
"Reference Agency Agreement" means the Reference Agency Agreement
dated as of the Initial Closing Date, between the Issuer, the Reference Agent
and the Administrative Agent pursuant to which LIBOR is determined from time to
time.
"Reference Agent" means the Person acting, at the time of
determination, in the capacity of the Reference Agent under the Reference Agency
Agreement. The initial Reference Agent is Bankers Trust.
"Reference Date" means, with respect to each Interest Accrual
Period, the day that is two Business Days prior to the commencement of such
Interest Accrual Period.
"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(a) 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, in
a Refinancing under Section 2.10 hereof.
"Register" has the meaning given to such term in Section 2.03
hereof.
"Registrable Notes" means (a) the Initial Class A Notes, the Initial
Class B Notes, the Initial Class C Notes, and (b) any Refinancing Notes therefor
and any Additional Notes designated as Registrable Notes by the Controlling
Trustees' Resolution therefor.
"Registrar" has the meaning given to such term in Section 2.03
hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Initial Closing Date between the Issuer and Lehman
Brothers Inc. and any other agreement entered into between the Issuer and a
purchaser of Registrable Notes providing for the registration of the issuance of
Exchange Notes in exchange for such Registrable Notes under the Securities Act.
<PAGE> 30
24
"Registration Statement" means the Registration Statement as defined
or described in a Registration Rights Agreement.
"Registration Step-Up Interest" has the meaning given to such term
in the definition of the term "Stated Rate of Interest".
"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.
"Regulation S Global Note Exchange Date" means the earliest
permitted date of exchange of any Temporary Regulation S Global Note for any
Permanent Regulation S Global Note, which date shall be forty days after the
Initial Closing Date, in the case of the Initial Notes, and, in the case of any
Additional Issuance, the date established by or pursuant to a Controlling
Trustees' Resolution or in any indenture supplemental hereto providing for such
Additional Issuance, in each case in accordance with Regulation S.
"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 Documents" means the Administrative Agency Agreement, each
Credit Facility, this Indenture, the Securities, the Reference Agency Agreement,
the Security Documents, the Servicing Agreement, the Additional Servicing
Agreement (if any), the Financial Advisory Agreement, the Capital Markets
Advisory Agreement, the Asset Purchase Agreement and any other Acquisition
Agreement, the Registration Rights Agreement, 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 an Issuer Group Member pursuant to the Related
Documents.
"Remaining Aircraft" has the meaning given to such term in the Asset
Purchase Agreement.
"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(a) hereof.
"Rental Payments" means all rental payments and other amounts
equivalent to a rental payment payable by or on behalf of a Lessee under a
Lease, including Purchase Option Payments.
<PAGE> 31
25
"Repossession Guidelines" has the meaning given to such term in
Section 5.03(a) hereof.
"Repossession Insurance" has the meaning given to such term in
Section 5.03(h) hereof.
"Required Amount" means, with respect to any Credit Facility, such
amount as is determined pursuant to the Controlling Trustees' Resolution with
respect to such Credit Facility.
"Required Expense Amount" means, with respect to each Payment Date,
the amount of Expenses of the Issuer Group due and payable on the Calculation
Date relating to such Payment Date or reasonably anticipated to become due and
payable before the next succeeding Payment Date to the extent such Expenses
consist of (a) Primary Expenses and (b) any Modification Payments or Refinancing
Expenses in respect of which a Permitted Accrual was previously effected by a
deposit in the Expense Account (whether or not any such deposit has been
previously used to pay any other Primary Expense but excluding any portion of
such deposit previously used to pay any Modification Payments or Refinancing
Expenses) in each case after giving effect to any withdrawal from any Lessee
Funded Account or any drawing upon a Related Collateral Document that is then
available for the payment of any such Expense.
"Requisition Compensation" means all monies or other compensation
receivable by any Issuer 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.
"Reserved Cash" means amounts held in the Collections Account, at
any time of determination, in respect of the Senior Note Blockage Amount, the
Mezzanine Note Blockage Amount, the Junior Note Blockage Amount and the
Subordinate Note Blockage Amount.
"Responsible Officer" means (a) with respect to the Trustee, any
officer within the Corporate Trust Office, including any Vice President,
Managing Director, Principal, Assistant Vice President, Secretary, Assistant
Secretary 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, (b) with respect to the Issuer, any Controlling Trustee and (c) with
respect to any Person providing a Credit Facility and the Administrative Agent,
any authorized officer of such Person.
"Restricted Note" means any Note bearing the Private Placement
Legend.
"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.
"Sale Premium" means an amount (determined as of the Calculation
Date for any Premium Payment Date) equal to:
<PAGE> 32
26
(a) in the case of the Initial Class C Notes (and any Exchange Notes
issued therefor), the excess, if any, of (i) the Projected Principal Payment
Amounts for such Notes and the Interest Amount thereon to and including the
Expected Final Payment Date discounted to present value at a discount rate equal
to the applicable Treasury Rate plus 0.50% over (ii) the sum of the Projected
Principal Payment Amounts for such Notes to and including the Expected Final
Payment Date for such Notes;
(b) in the case of the Initial Class D Notes (and any Exchange Notes
issued therefor) and any Premium Payment Date occurring prior to May 15, 2004,
the excess, if any, of (i) the sum of the Projected Principal Payment Amounts
and the Interest Amount thereon to but not including May 15, 2004 plus the
product of the applicable Redemption Premium and the sum of the Projected
Principal Payment Amounts of such Notes falling due on May 15, 2004 and each
Payment Date thereafter discounted as of May 15, 2004 to present value at a
discount rate equal to the applicable Treasury Yield plus 0.75% over (ii) the
sum of the Projected Principal Payment Amounts for such Notes to and including
the Expected Final Payment Date for such Notes;
(c) in the case of the Initial Class D Notes (and any Exchange Notes
issued therefor) and any Premium Payment Date occurring on or after May 15,
2004, the excess, if any, of (i) the product of the applicable Redemption
Premium times the sum of the Projected Principal Payment Amounts on such Notes
to and including the Expected Final Payment Date for such Notes over (ii) the
sum of the Projected Principal Payment Amounts for such Notes to and including
the Expected Final Payment Date for such Notes; and
(d) in the case of any class of Notes other than the Initial Notes
(and any Exchange Notes issued therefor), such amount as is set forth in the
Controlling Trustees' Resolution providing for the issuance of such Notes.
"Scheduled Class Percentage" means, with respect to any class of
Notes on any Payment Date, the "Scheduled Class Percentage" set forth in
Schedule 3 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 Principal Payment Amount" means, with respect to any
class of Notes on any Payment Date, the difference, if positive, between the
aggregate Outstanding Principal Balance of such class of Notes (after giving
effect to any payment of the Minimum Principal Payment Amount and the
Supplemental Principal Payment Amount for such class of Notes) and the Scheduled
Target Principal Balance of such class of Notes on such Payment Date.
"Scheduled Target Principal Balance" means, with respect to (a) the
Class A Notes on any Payment Date, the product of (i) of the Scheduled Class
Percentage for the Class A Notes on such Payment Date and (ii) the lesser of (A)
the Assumed Portfolio Value in respect of such Payment Date and (B) 105% of the
Adjusted Portfolio Value in respect of such Payment Date, (b) the Class B Notes,
the Class C Notes and the Class D Notes on any Payment Date, the product of the
Scheduled Class Percentage for such class of Notes on such Payment Date and the
Assumed Portfolio Value in respect of such Payment Date.
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27
"Secondary Eligible Credit Facility" means any Eligible Credit
Facility designated as a "Secondary Eligible Credit Facility" by the Controlling
Trustees. A Secondary Eligible Credit Facility shall provide by its terms that
it is entitled only to the priority of repayment accorded to Secondary Eligible
Credit Facilities under Section 3.08 hereof.
"Secured Obligations" has the meaning given to such term in the
Security Trust Agreement.
"Secured Parties" has the meaning given to such term in the Security
Trust Agreement.
"Securities" means the Initial Securities, all Additional
Securities, if any, all Refinancing Securities, if any, and all Exchange Notes,
if any.
"Securities Act" means the Securities Act of 1933.
"Security Documents" means the Security Trust Agreement and any
document executed pursuant thereto, or otherwise, for the purpose of granting a
security interest in any Collateral to the Security Trustee for the benefit of
the Secured Parties or for the purpose of perfecting such security interest.
"Security Interests" means the security interests granted or
expressed to be granted in the Collateral pursuant to the Security Trust
Agreement.
"Security Trust Agreement" means the Security Trust Agreement dated
as of the Initial Closing Date, between the Issuer, each other party thereto and
the Security Trustee.
"Security Trustee" means the Person appointed, at the time of
determination, as the trustee for the benefit of the Secured Parties pursuant to
Section 5.01 of the Security Trust Agreement. The initial Security Trustee is
Bankers Trust.
"Segregated Funds" means, with respect to each Lease, (a) all
security deposits provided for under such Lease that have been received from the
relevant Lessee or pursuant to the relevant Acquisition Agreement with respect
to such Lease and (b) all other funds, including any maintenance reserves,
received from the relevant Lessee or pursuant to the relevant Acquisition
Agreement with respect to such Lease and not permitted, pursuant to the terms of
such Lease, to be commingled with the funds of the Issuer Group.
"Sellers" means GECC and any Affiliates thereof that are sellers of
aircraft to an Issuer Group Member on or after the Initial Closing Date.
"Senior Claim" means, with respect to any Obligations (other than
Expenses), all other Obligations the payment of which constitutes a Prior
Ranking Amount with respect thereto.
"Senior Claimant" means the holder of a Senior Claim.
"Senior Class" means (a) so long as any Class A Notes are
Outstanding, the Class A Notes, (b) after the Class A Notes have been repaid in
full and so long as any Class B Notes
<PAGE> 34
28
are Outstanding, the Class B Notes, (c) 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 and (d) 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.
"Senior Note Blockage Amount" means $33 million, as such amount may,
from time to time, be changed by a Written Notice from the Issuer to the Trustee
and the Administrative Agent accompanied by a Controlling Trustees' Resolution
adopting such change and a Rating Agency Confirmation with respect thereto,
provided that from and after the Payment Date on which the Outstanding Principal
Balance of the Class A Notes has been reduced to $24 million or less, the Senior
Note Blockage shall be $24 million; provided further that, in any case, at any
time that the Outstanding Principal Balance of the Notes is less than $24
million, the Senior Note Blockage Amount will be zero.
"Senior Swap Payment" means, on any Payment Date, a net payment to a
Swap Provider by any Issuer Group Member, other than any Subordinated Swap
Payment.
"Senior Trustee" means the Trustee of the Senior Class; provided
that if the same Person shall not be the Trustee of each of the subclasses of
the Senior Class, then the Senior Trustee shall be the Trustee of the subclass
of such Notes with the lowest numerical designation then Outstanding. If as a
result of the foregoing, the Senior Trustee and the Operating Bank are not the
same Person, the Senior Trustee shall assume the obligations of the Operating
Bank under, and become a party to, the Security Trust Agreement.
"Service Provider" means each of the Operating Bank, the Owner
Trustee, the Servicer, the Trustee, the Security Trustee, any Authorized Agent,
the Administrative Agent, the Reference Agent, the Financial Advisor, the
Capital Markets Advisor and any Additional Servicer.
"Servicer" means the Person acting, at the time of determination, in
the capacity of the servicer under the Servicing Agreement. The initial Servicer
is GE Capital Aviation Services, Limited, an Irish company.
"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 the
Initial Closing Date between the Servicer and the Issuer.
"Shelf Registration" has the meaning given to such term in the
applicable Registration Rights Agreement.
"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 (including any trust of which the Issuer is the beneficiary) of the
Issuer other than any subsidiary
<PAGE> 35
29
that owns or leases Aircraft having an aggregate Base Value of less than 10% 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.
"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 or, in the
absence of any such provisions, Applicable Law.
"Stated Rate of Interest" means, with respect to each subclass of
Notes (a) the interest rate set forth in such Notes plus (b) Maturity Step-Up
Interest, if any, thereon plus (c) (i) with respect to Initial Notes that are
Registrable Notes, if a Registration Default (as defined and determined under
Section 5 of the Registration Rights Agreement relating to such Initial Notes)
shall have occurred and be continuing, 0.5% per annum until such Registration
Default shall no longer be deemed to be continuing (as determined under Section
5 of such Registration Rights Agreement), or (ii) with respect to any
Refinancing Notes or Additional Notes that are Registrable Notes, an exchange
offer of Exchange Notes for such Refinancing Notes or Additional Notes is not
commenced or a Shelf Registration Statement for the resale of such Refinancing
Notes or Additional Notes is not declared effective by the Commission, on or
before the date specified in the Registration Rights Agreement, if any, relating
to such Refinancing Notes or Additional Notes that are also Registrable Notes,
plus such additional rate specified in such Registration Rights Agreement until
such date as is so specified (the additional interest resulting from any such
increase pursuant to clause (i) or (ii), "Registration Step-Up Interest").
"Subclass A-1 Notes" means the Initial Notes that are designated
Subclass A-1 Notes, all Exchange Notes, if any, so designated, all Additional
Notes, if any, so designated, all Refinancing Notes, if any, so designated and
all Notes, if any, issued in replacement or substitution therefor.
"Subclass A-2 Notes" means the Initial Notes that are designated
Subclass A-2 Notes, all Exchange Notes, if any, so designated, all Additional
Notes, if any, so designated, all Refinancing Notes, if any, so designated and
all Notes, if any, issued in replacement or substitution therefor.
"Subclass B-1 Notes" means the Initial Notes that are designated
Subclass B-1 Notes, all Exchange Notes, if any, so designated, all Additional
Notes, if any, so designated, all Refinancing Notes, if any, so designated and
all Notes, if any, issued in replacement or substitution therefor.
"Subclass C-1 Notes" means the Initial Notes that are designated
Subclass C-1 Notes, all Exchange Notes, if any, so designated, all Additional
Notes, if any, so designated, all Refinancing Notes, if any, so designated and
all Notes, if any, issued in replacement or substitution therefor.
<PAGE> 36
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"Subclass D-1 Notes" means the Initial Notes that are designated
Subclass D-1 Notes all Additional Notes, if any, so designated, all Refinancing
Notes, if any, so designated and all Notes, if any, issued in replacement or
substitution therefor.
"Subordinated Claim" has the meaning given to such term in Section
10.01 hereof.
"Subordinate Eligible Credit Facility" means (a) any Eligible Credit
Facility designated as a "Subordinate Eligible Credit Facility" by the
Controlling Trustees or (b) any Eligible Credit Facility not designated by the
Controlling Trustees as a Primary Eligible Credit Facility, a Secondary Eligible
Credit Facility or a Tertiary Eligible Credit Facility. A Subordinate Eligible
Credit Facility described in clause (a) of the preceding sentence shall provide
by its terms that it is entitled only to the priority of repayment accorded to
Subordinate Eligible Credit Facilities under Section 3.08 hereof.
"Subordinate Note Blockage Amount" means the lesser of (a) $52
million, as such amount may, from time to time, be changed by a Written Notice
from the Issuer to the Trustee and the Administrative Agent accompanied by a
Controlling Trustees' Resolution adopting such change and a Rating Agency
Confirmation with respect thereto, and (b) the sum of the Junior Note Blockage
Amount and the Outstanding Principal Balance of the Class D Notes; provided
that, in any case, at any time that the Outstanding Principal Balance of the
Notes is $24 million or less, the Subordinate Note Blockage Amount will be zero.
"Subordinated Swap Payments" has the meaning given to such term in
Section 3.08 hereof.
"Substitute Aircraft" has the meaning given to such term in the
Asset Purchase Agreement.
"Supplemental Class Percentage" means, with respect to the Class A
Notes and the Class B Notes on each Payment Date, the "Supplemental Class
Percentage" on such Payment Date set forth for such Class in Schedule 3 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
Class A Notes and the Class B Notes on any Payment Date, the difference, if
positive, between the Outstanding Principal Balance of such class of Notes
(after giving effect to any payment of the Minimum Principal Payment Amount for
such class of Notes) and the Supplemental Target Principal Balance of such class
of Notes on such Payment Date.
"Supplemental Target Principal Balance" means, with respect to the
Class A Notes and the Class B Notes on any Payment Date, the product of (a) the
Supplemental Class Percentage for such class of Notes on such Payment Date and
(b) the Assumed Portfolio Value in respect of such Payment Date.
"Swap Agreement" means any interest rate or currency swap, cap,
floor, Swaption, or other interest rate or currency hedging agreement between
the Issuer and any Swap
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Provider existing on the Initial Closing Date (including the Initial Swap
Agreement) or entered into in accordance with Section 5.02(e)(iv) hereof.
"Swap Breakage Costs" means any amounts payable by any Issuer Group
Member to a Swap Provider as a result of any early termination (however
described or defined therein) of any Swap Agreement.
"Swap Provider" means the counterparty to any Issuer Group Member
under any Swap Agreement.
"Swap Receipt" means a net payment to be made by a Swap Provider
into the Collections 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 Class C Notes
and the Class D Notes on any Payment Date, each of the Minimum Target Principal
Balance and the Scheduled Target Principal Balance on such Payment Date.
"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.
"Temporary Regulation S Global Note" has the meaning given to such
term in Section 2.01 hereof.
"Tertiary Eligible Credit Facility" means any Eligible Credit
Facility designated as a "Tertiary Eligible Credit Facility" by the Controlling
Trustees. A Tertiary Credit Facility shall provide by its terms that it is
entitled only to the priority of repayment accorded to a Tertiary Eligible
Credit Facilities under Section 3.08 hereof.
"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,
<PAGE> 38
32
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 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.
"Transfer Restricted Securities" has the meaning given to such term
in the applicable Registration Rights Agreement.
"Treasury Yield" means, with respect to any Redemption of or
determination of Sale Premium with respect to the Initial Class C Notes or
Initial Class D Notes on any Payment Date, the interest rate (expressed as a
semiannual decimal and, in the case of United States Treasury bills, converted
to a bond equivalent yield) determined on the fourth Business Day prior to such
Payment Date to be the per annum rate equal to the semiannual yield to maturity
for United States Treasury securities maturing on the Average Life Date of such
class and trading in the public securities markets either (i) as determined by
interpolation between the most recent weekly average yield to maturity for two
series of United States Treasury securities trading in the public securities
markets, (A) one maturing as close as possible to, but earlier than, the Average
Life Date of such class and (B) the other maturing as close as possible to, but
later than, the Average Life Date of such class in each case as published in the
most recent H.15 (519) or (ii) if a weekly average yield to maturity for United
States Treasury securities maturing on the Average Life Date of such class is
reported in the most recent H.15 (519), such weekly average yield to maturity as
published in such H.15 (519).
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33
For the purposes of this definition,
"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, and the most recent H.15 (519) is the H.15 (519)
published prior to the close of business on the fourth Business Day prior to the
applicable Payment Date.
"Average Life Date" means, with respect to any subclass of Notes,
the date which follows the applicable Payment Date by a period equal to the
Remaining Weighted Average Life of such subclass.
"Remaining Weighted Average Life" means, with respect to any
subclass of Notes on any Payment Date, (a) the sum of the products of (i) the
portion of each Projected Principal Payment Amount allocable to such subclass in
accordance with Section 3.09 hereof on each subsequent Payment Date (each, a
"Subsequent Date") and (ii) the number of days remaining until such Subsequent
Date divided by (b) the Outstanding Principal Balance of such subclass on such
Payment Date.
"Trust Agreement" means the Trust Agreement dated as of April 13,
1999 between the Certificateholders of the Initial Certificates and the Owner
Trustee as amended and restated by the Amended and Restated Trust Agreement
dated as of May 4, 1999 between the Certificateholders of the Initial
Certificates and the Owner Trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S. Code Section 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.06 hereof.
"Trustee" means, with respect to each subclass of Notes the Person
appointed, at the time of determination, as the trustee of such subclass of
Notes in accordance with this Indenture. The initial Trustee for each subclass
of Notes is Bankers Trust.
"UniCapital Entity" means UniCapital Corporation and any direct or
indirect wholly-owned subsidiary of UniCapital Corporation (including each trust
of which UniCapital Corporation is the direct or indirect holder of the
beneficial interest).
"Unrestricted Note" means any Note not bearing the Private Placement
Legend.
"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.
"VARIG Aircraft" means each Initial Aircraft subject to a VARIG
Lease.
"VARIG Deposit Amount" means, with respect to each VARIG Reserve
Account, $3,375,000.
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34
"VARIG Lease" has the meaning given to such term in the Asset
Purchase Agreement.
"VARIG Reserve Accounts" has the meaning given to such term in
Section 3.01 hereof.
"Written Notice" means, with reference to the Issuer, the Trustee,
the Administrative Agent or the provider of any Credit Facility, a written
instrument executed by a Responsible Officer of such Person (or in the case of
the Issuer, of the Owner Trustee).
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, Schedules or Exhibits refer to an Article or Section of, or
a Schedule or Exhibit 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, or to a subclass of
Refinancing Notes or Additional Notes, as applicable; and references to a class
of Notes shall be to the Class A Notes, Class B Notes, Class C Notes, the Class
D Notes and the Beneficial Interests or to a class of Refinancing Notes or
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 (without, however, limiting the effect
of the provisions of this Indenture with regard to any such amendment,
replacement or modification), and the provisions of this Indenture apply to
successive events and transactions. References to any Person shall include such
Person's successors in interest and permitted assigns.
(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, and references to any
governmental Person shall include reference to any governmental Person
succeeding to the relevant functions of such Person.
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(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.
(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; provided, however, that in the case of Floating
Rate Notes, no Additional Interest shall be due in respect of such delay.
(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 replacement servicer and the rights and obligations of the parties hereto
shall be construed accordingly.
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 or any indenture
supplemental hereto shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Indenture relating thereto;
(b) 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;
(c) 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
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(d) 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 Holders. (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 Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders 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 and 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 Holders signing
such 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 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 (including any Certificateholders) 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 Holders 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 Holders in connection therewith. If such a record date is
fixed, such Direction may be given before or after such record date, but only
the Holders of record of the applicable
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subclass at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders 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 Holders 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.
(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 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;
"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 Authorized Amount; 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 subclass of
Refinancing Notes or Additional Notes, authorized in a Controlling Trustees'
Resolution; provided that at no time may the Outstanding Principal Balance of
any subclass of Refinancing Notes exceed the Redemption Price of the subclass of
Notes being refinanced thereby plus Refinancing Expenses relating thereto and
any amount to be deposited in any Cash Collateral Account for such Refinancing
Notes and/or as Reserved Cash in the Collections Account; and provided, further,
that any Additional Notes shall be issued in accordance with Section 2.11
hereof. All Notes of any class or subclass need not be issued at the same time
and any class or subclass of Notes may be reopened, without the consent of any
Holder, for issuances of Additional Notes or Refinancing Notes of such class or
subclass, subject in all cases to
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Sections 2.10, 2.11, 3.09, 3.11 and 5.02 hereof and any other applicable
provision of this Indenture.
The Initial Notes issuable hereunder on the Initial Closing Date
shall be issued in five 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 and the Subclass D-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 the first Interest Accrual
Period and any 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.
Any amount of Sale Premium, premium or interest on any subclass of
Notes not paid when due shall, to the fullest extent permitted by applicable
law, bear interest (other than the portion thereof included in the Interest
Amount for such subclass of Notes, "Additional Interest") at an interest rate
per annum equal to the Stated Rate of Interest for such 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 Available
Collections therefor after making payments entitled to priority under Section
3.08 hereof.
(b) There shall be issued and delivered and authenticated on the
relevant Closing Date, to each of the Holders, Notes in the principal amounts
and maturities and bearing the interest rates, in each case in registered form
and substantially in the form set forth in the applicable exhibit to this
Indenture or in any indenture supplemental hereto, with such appropriate
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 Owner Trustee executing such Notes, such determination by the Owner Trustee
to be evidenced by his execution of the Notes.
Definitive 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 Owner Trustee executing such
Notes, as evidenced by its execution of such Notes.
Each subclass of Registrable Notes offered and sold in reliance on
Rule 144A shall be issued initially in the form of one or more permanent global
Notes in registered form, 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"), registered in the name of the nominee
<PAGE> 45
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of the Depository, deposited with the Trustee, as custodian for the Depository,
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 custodian for the Depository or its nominee, in accordance with the
instructions given by the Holder thereof, as hereinafter provided.
Each subclass of Registrable Notes offered and sold in offshore
transactions in reliance on Regulation S shall be issued initially in the form
of one or more temporary global Notes in registered form substantially in the
form set forth in the applicable exhibit to this Indenture or in any indenture
supplemental hereto (each, a "Temporary Regulation S Global Note"), registered
in the name of the nominee of the Depository, deposited with the Trustee, as
custodian for the Depository, duly executed by the Issuer and authenticated by
the Trustee as hereinafter provided. At any time following the applicable
Regulation S Global Note Exchange Date, upon receipt by the Trustee and the
Issuer of a certificate substantially in the form of Exhibit H hereto, executed
by Euroclear or Cedel, as the case may be, together with copies of certificates
from Euroclear and Cedel certifying that they have received certification of
non-United States beneficial ownership of a Temporary Regulation S Global Note
(or portion thereof) with respect to a subclass of Notes to be exchanged, one or
more permanent global Notes for such subclass of Notes in registered form
substantially in the form set forth in the applicable exhibit to this Indenture
or in any indenture supplemental hereto (each, a "Permanent Regulation S Global
Note"; and together with each Temporary Regulation S Global Note, the
"Regulation S Global Notes") duly executed by the Issuer and authenticated by
the Trustee as hereinafter provided shall be deposited with the Trustee, as
custodian for the Depository, and the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of such Temporary
Regulation S Global Note in an amount equal to the principal amount of the
beneficial interest in such Temporary Regulation S Global Note exchanged. Until
the Regulation S Global Note Exchange Date with respect to any Temporary
Regulation S Global Note, interests in such Temporary Regulation S Global Note
may be held only through Agent Members acting for and on behalf of Euroclear and
Cedel.
Registrable Notes offered and sold in reliance on Section 4(2) of
the Securities Act (other than in reliance on Rule 144A) and the Class D Notes
shall be issued initially in the form of permanent certificated Notes in
registered form in substantially the form set forth in the applicable exhibit to
this Indenture (collectively with the definitive, fully registered Notes issued
pursuant to Section 2.12(b) hereof, the "Definitive Notes").
(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 Controlling Trustees' 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 Additional Notes,
the Issuer shall issue and deliver, as provided in Sections 2.11 and 5.02(f)
hereof, an aggregate principal amount of Additional Notes having the maturities
and bearing the interest rates and such other terms authorized by one or more
Controlling Trustees' Resolutions or in any indenture supplemental
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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) The Notes shall be executed on behalf of the Issuer by the
manual or facsimile signature of the Owner Trustee.
(f) Each Note bearing the manual or facsimile signatures of any
individual who was at the time such Note was executed an Authorized Officer of
the Owner Trustee shall bind the 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.
(g) 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 (h) 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.
(h) 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 (e) above and authenticated by or on
behalf of the Trustee as provided in clause (g) 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.
Section 2.02 Restrictive Legends. (a) Except as specified in Section
2.13(f) hereof, each Rule 144A Global Note, each Regulation S Global Note and
each Definitive Note (and all Notes issued in exchange therefor or upon
registration of transfer or substitution thereof) shall bear the following
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND
<PAGE> 47
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AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) IF THIS NOTE IS NOT A CLASS D NOTE, IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND, IN EACH CASE (A) THROUGH (F) 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, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE ATTACHED HERETO
AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE
IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE TRANSFER IS PURSUANT TO
AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE AIRCRAFT FINANCE TRUST SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. 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.
(b) Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR
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OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.13 OF THE INDENTURE.
(c) Each Temporary Regulation S Global Note shall bear the following
legend on the face thereof:
THIS NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE WITHIN THE MEANING
OF THE TRUST INDENTURE REFERRED TO HEREINAFTER AND IS SUBJECT TO
RESTRICTIONS ON THE TRANSFER AND EXCHANGE THEREOF AND ON THE PAYMENT OF
INTEREST THEREON AS SPECIFIED IN THE TRUST INDENTURE.
(d) Each Class D Note shall bear the following legend on the face
thereof:
THIS NOTE IS SUBJECT TO ADDITIONAL RESTRICTIONS ON THE TRANSFER
THEREOF SET FORTH IN SECTION 2.13(h) OF THE INDENTURE, INCLUDING A LIMIT
ON THE NUMBER OF DIRECT OR INDIRECT HOLDERS THEREOF A PROHIBITION ON
TRANSFERS TO NON-U.S. PERSONS AND DELIVERY BY THE TRANSFEREE OF CERTAIN
CERTIFICATIONS TO THE TRUSTEE.
Section 2.03 Registrar and Paying Agent. (a) With respect to each subclass
of Notes, there shall at all times be maintained an office or agency in the
location set forth in Section 12.05 hereof where Notes of such subclass may be
presented or surrendered for registration of transfer or for exchange (each, a
"Registrar"), and for payment thereof (each, a "Paying Agent") and where notices
and demands in respect of the payment of such Notes may be served. For so long
as any Notes are listed on the Luxembourg Stock Exchange, the Issuer shall
appoint and maintain a Paying Agent and a Registrar in Luxembourg. The Issuer
shall cause each Registrar to keep a register of such subclass of 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 such office or
agency shall be maintained or no 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
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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 with respect to the Notes of each subclass. 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 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 mail notice of such appointment to all Holders of the
related subclass as their names and addresses appear on the Register for such
subclass.
(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 (with
regard to payments on the Notes) and the Owner Trustee (with regard to
distributions on or with respect to the Certificates) 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 or the
Owner Trustee, as applicable, 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
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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 therefor transferred to a Note Account, to the Holders all principal
or Redemption Price of, and interest and Sale Premium, if any, on the Notes of
each subclass (other than payments received following an Event of Default in
respect of any subclass of Notes) and to the Owner Trustee Account all sums on
or in respect of the Certificates to which it is entitled in accordance with the
provisions hereof; 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; and provided further, that payment on a Temporary Regulation S Global
Note shall be made to the Holder thereof only in conformity with Section 2.05(c)
hereof. Each payment on any Payment Date other than the Final Maturity Date with
respect to any subclass of Notes shall be made by the Trustee or Paying Agent to
the Holders as of the Record Date for such Payment Date. The final payment with
respect to any Note, however, shall be made only upon presentation and surrender
of such Note by the Holder 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. The Trustee or Paying Agent
shall mail such notice of the final payment of each Note to the Holder thereof,
specifying the date and amount of such final payment, no later than five
Business Days prior to such final payment.
(b) At such time, if any, as the Notes of any subclass are issued in
the form of Definitive Notes, payments on a Payment Date shall be made by check
mailed to each Holder 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 Holder of one or more Definitive Notes of such
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
Holder 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 Definitive Notes of such subclass by the Holder 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 Holders of such subclass, specifying the date and amount
of such final payment no later than five Business Days prior to such final
payment.
(c) The beneficial owner of a Temporary Regulation S Global Note of
any subclass may arrange to receive interest installments through Euroclear or
Cedel on such Temporary Regulation S Global Note only after delivery by such
beneficial owner to Euroclear or Cedel, as the case may be, of a written
certification, substantially in the form of Exhibit L-1 hereto, and upon
delivery of Euroclear or Cedel, as the case may be, to the Paying Agent of a
certification or certifications substantially in the form of Exhibit L-2 hereto.
No interest shall be paid to any beneficial owner and no interest shall be paid
to Euroclear or Cedel on such
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beneficial owner's interest in a Temporary Regulation S Global Note unless
Euroclear or Cedel, as the case may be, has provided such a certification to the
Paying Agent with respect to such interest.
Section 2.06 Minimum Denomination. Each subclass of Registrable Notes
shall be issued in minimum denominations of $100,000 and integral multiples of
$1,000 in excess thereof. Each subclass of Class D Notes shall be issued in
minimum denominations of $1,000,000 and integral multiples of $100,000 in excess
thereof.
Section 2.07 Transfer and Exchange; Cancellation. The Notes are issuable
only in registered form. A Holder may transfer a 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
effective 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 Note,
the Issuer and the Trustee may deem and treat the applicable registered Holder
as the absolute owner and Holder of such Note for the purpose of receiving
payment of all amounts payable with respect to such Note and for all other
purposes and shall not be affected by any 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 Note by furnishing the Issuer a copy of such request.
Furthermore, any Holder of a Global Note shall, by acceptance of
such Global Note, agree that, subject to Section 2.12(b) hereof, transfers of
beneficial interests in such Global Note may be effected only through a
book-entry system maintained by the Holder of such Global Note (or its agent)
and that ownership of a beneficial interest in such Note shall be required to be
reflected in a book entry. When Notes are presented to the Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Notes of other authorized denominations (including an exchange of
Registrable Notes for Exchange Notes), the Registrar shall register the transfer
or make the exchange as requested if the requirements for such transactions are
met (including, in the case of a transfer, that such 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); provided that no
exchanges of Registrable Notes for Exchange Notes shall occur until a
Registration Statement shall have been declared effective by the Commission. To
permit registrations of transfers and exchanges, the Issuer shall execute and
the Trustee shall authenticate Notes at the Issuer'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 or redemption of the Notes.
The Issuer shall not be required to exchange or register the
transfer of any Notes as above provided during the 15-day period preceding the
Final Maturity Date of any such Notes or during a 15-day period preceding 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 Notes that have been selected, called or are being called for
Redemption or
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Refinancing except, in the case of any Notes where notice has been given that
such Notes are to be redeemed in part, the portion thereof not so to be
redeemed.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. 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
Holders 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 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 Notes (including refinancings of
Refinancing Notes). Each refinancing of any subclass of Notes with the proceeds
of an offering of Refinancing Notes (a "Refinancing") shall be authorized
pursuant to one or more Controlling Trustees' Resolutions and shall be effected
only following a Rating Agency Confirmation. Each Refinancing Note shall
constitute a "Note" for all purposes under this Indenture, and shall have the
class or subclass designation and such further designations added or
incorporated in such title as specified in the related Controlling Trustees'
Resolutions, 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 Notes in whole or in part may
occur on any Payment Date after the Initial Closing Date and shall be effected
as an Optional Redemption pursuant to Section 3.10 hereof. On the date of any
Refinancing, the Issuer shall issue and sell an aggregate principal amount of
Refinancing Notes not to exceed the Redemption Price of the Notes being
refinanced thereby plus the Refinancing Expenses relating thereto and any amount
to be deposited in any Cash Collateral Account for such Refinancing Notes and/or
as Reserved Cash in the Collections Account. The proceeds of each sale of
Refinancing Notes shall be used to make the deposit required by Section 3.10(d)
hereof, to pay such Refinancing Expenses and to fund such Cash Collateral
Account and/or Reserved Cash.
(c) Each Refinancing Note shall contain such terms as may be
established in or pursuant to the related Controlling Trustees' Resolution
(subject to Section 2.01 hereof), 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
hereof with respect to all other Obligations as the Notes of the class to which
such Refinancing Notes belong (and, with respect to other subclasses of such
class, as provided in Section 3.09 hereof). No less than seven Business Days,
prior to any Refinancing, any or all of the following, as applicable, with
respect to the related issue of each subclass of Refinancing Notes shall have
been determined by the Issuer and set forth in such Controlling Trustees'
Resolutions, in any indenture supplemental hereto or specified in the form of
such Notes, as the case may be:
(i) the Notes to be refinanced by such Refinancing Notes;
(ii) the aggregate principal amount of such Refinancing Notes that
may be issued;
(iii) the proposed date of such Refinancing;
(iv) the Expected Final Payment Date and the Final Maturity Date of
such Refinancing Notes;
(v) whether such Refinancing Notes are to have the benefit of any
Credit Facility and, if so, the amount and other terms thereof and/or any
increase in Reserved Cash;
(vi) the rate at which such Refinancing Notes shall bear interest or
the method by which such rate shall be determined;
(vii) if other than denominations of $100,000 or higher integral
multiples of $1,000 (with respect to Registrable Notes) or $1,000,000 or higher
integral multiples of $100,000 (with respect to Class D Notes), the denomination
or denominations in which such Refinancing Notes shall be issuable;
(viii) whether such Refinancing Notes are to be issuable initially
in 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 the same class or subclass and of like tenor
of any 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
<PAGE> 54
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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;
(ix) any adjustments to be made, consistent with Sections 3.09 and
3.11 hereof, to the Assumed Principal Payments and/or applicable Class
Percentages, Pool Factors or Extended Pool Factors as a result of the issuance
of such Refinancing Notes;
(x) the class and subclass of Notes to which such Refinancing Notes
belong; and
(xi) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to such 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 Controlling Trustees'
Resolutions, such Controlling Trustees' Resolutions shall be delivered to the
Trustee setting forth the terms of such Refinancing Notes.
Section 2.11 Additional Securities. (a) Subject to paragraph (b) below and
Section 5.02(f)(iv) hereof without limiting the provisions of Section
5.02(l)(ii)(A) and (C) hereof, as applicable, the Issuer may issue Additional
Notes pursuant to this Indenture or Additional Certificates pursuant to the
Trust Agreement the proceeds of which in each case shall be used to acquire
Additional Aircraft, make payments into a Cash Collateral Account or the
Collections Account as Reserved Cash or pay expenses related thereto (each, an
"Additional Issuance"). Each issuance of Additional Securities shall be
authorized pursuant to one or more Controlling Trustees' Resolutions and shall
be effected only following a Rating Agency Confirmation. Each Additional
Security shall constitute a "Security" for all purposes under this Indenture,
and (in the case of the Additional Notes) shall have such subclass and such
further designations added or incorporated in such title as specified in the
related Controlling Trustees' Resolutions, 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 Additional Note shall contain such terms as may be
established in or pursuant to the related Controlling Trustees' Resolutions
(subject to Section 2.01 hereof), 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
hereof with respect to all other Obligations as the Notes of the class to which
such Additional Notes belong (and, with respect to other subclasses of such
class, as provided in Section 3.09 hereof). No less than seven Business Days
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 Controlling Trustees' Resolutions, in any indenture
supplemental hereto or specified in the form of such Securities, as the case may
be:
(i) the subclass of Additional Notes or the Additional Certificates
to be issued; and
(ii) with respect to each such subclass of Additional Notes or the
Additional Certificates:
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(A) the aggregate principal amount of any such Additional
Notes which may be issued or the capital contributions to be made in respect of
any such Additional Certificates;
(B) the proposed date of such Additional Issuance;
(C) the Expected Final Payment Date and the Final Maturity
Date of any such Additional Notes;
(D) whether any such Additional Notes are to have the benefit
of any Credit Facility and/or any increase in Reserved Cash and, if so, the
amount and terms thereof;
(E) the rate at which any such Additional Notes shall bear
interest or the method by which such rate shall be determined;
(F) if other than denominations of $100,000 or higher integral
multiples of $1,000 (with respect to Registrable Notes) or $1,000,000 or higher
integral multiples of $100,000 (with respect to Class D Notes), the denomination
or denominations in which any such Additional Notes shall be issuable;
(G) whether any such Additional Notes are to be issuable
initially in temporary or permanent global form and, if so, whether beneficial
owners of interests in any such permanent global Additional Note may exchange
such interests for Additional Notes of the same class or subclass and of like
tenor and of any 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;
(H) any adjustments to be made, consistent with Sections 3.09
and 3.11 hereof, to the Assumed Principal Payments and/or applicable Class
Percentages, Pool Factors or Extended Pool Factors as result of the issuance of
any such Additional Notes; and
(I) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to any such 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 12.13 hereof).
If any of the terms of any issue of any such Additional Notes are
established by action taken pursuant to one or more Controlling Trustees'
Resolutions, such Controlling Trustees' Resolutions shall be delivered to the
Trustee setting forth the terms of such Additional Notes.
Section 2.12 Book-Entry Provisions. (a) Global Notes of each subclass
initially shall (i) be registered in the name of the Depository for such Notes
or in the name of the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for the Depository and (iii) if not registered under the
Securities Act, bear the Private Placement Legend as set forth in Section
2.02(a) hereof.
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Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under
such Global Note, and the Depository 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.
Whenever notice or other communication to the Holders of any
subclass of Global Notes is required under this Indenture, unless and until
Definitive Notes shall have been issued pursuant to Section 2.12(b) below, the
Trustee shall give all such notices and communications specified herein to be
given to Holders of such subclass of Global Notes to the Depository.
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
Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Global Note. Neither the Issuer nor the Trustee shall be liable
for any delay by the Depository in identifying the beneficial owners of the
Global Notes, and the Issuer and the Trustee may conclusively rely on, and shall
be fully protected in relying on, instructions from the Depository for all
purposes (including with respect to the registration and delivery, and the
respective principal amounts, of any Global Notes to be issued).
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depository, its successors or
their respective nominees. Interests of beneficial owners in a Global Note may
be transferred in accordance with the rules and procedures of the Depository and
the provisions of Section 2.13 hereof. Definitive Notes shall be issued to the
individual beneficial owners or their nominees in exchange for their beneficial
interests in a Rule 144A Global Note or a Regulation S Global Note,
respectively, with respect to any subclass of Notes only if (i) the Issuer
advises the Trustee in writing that the Depository is no longer willing or able
to properly discharge its responsibilities as depositary with respect to the
Notes and the Issuer is unable to appoint a qualified successor within 90 days
of such notice, (ii) the Issuer, at its option, elects to terminate the
book-entry system through the Depository (but if the Issuer does so, the Issuer
shall find another clearing system that is recognized by, and operates in
accordance with the rules of, the Luxembourg Stock Exchange as long as any class
of Notes is listed on the Luxembourg Stock Exchange) or (iii) after the
occurrence of an Event of Default with respect to any class of Notes, Holders 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 and the Depository through the Agent Members 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 the Holders of such subclass.
Upon the occurrence of any event described in the immediately preceding
sentence, the Trustee shall notify all Holders of each affected subclass,
through the Depository, of the occurrence of such event and of the availability
of Definitive Notes of such subclass; provided, however, that in no event shall
the Temporary Regulation S Global Note be exchanged for Definitive Notes prior
to the later of (x) the Regulation S Global Note Exchange Date and (y) the date
of receipt by the Issuer of any certificates determined by it to be required
pursuant to Rule 903 under the Securities Act. Upon surrender to the Trustee of
the Global Notes of such subclass held by the Depository, accompanied by
registration instructions from the Depository for registration of Definitive
Notes
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in the names of Holders of such subclass, the Issuer shall issue and the Trustee
shall authenticate and deliver the Definitive Notes of such subclass to the
beneficial owners of such subclass or their nominees in accordance with the
instructions of the Depository.
None of the Issuer, the Registrar, the Paying Agent or the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
registration instructions. Upon the issuance of Definitive Notes of such
subclass, the Trustee shall recognize the Persons in whose name the Definitive
Notes are registered in the Register as Holders hereunder. Neither the Issuer
nor the Trustee shall be liable if the Trustee or the Issuer is unable to locate
a qualified successor Depository.
Definitive Notes of any subclass will be freely transferable and
exchangeable for Definitive Notes of the same subclass at the office of the
Trustee or the office of a Registrar upon compliance with the requirements set
forth herein. In the case of a transfer of only part of a holding of Definitive
Notes, a new Definitive Note shall be issued to the transferee in respect of the
part transferred and a new Definitive Note in respect of the balance of the
holding not transferred shall be issued to the transferor and may be obtained at
the office of the applicable Registrar.
(c) Any beneficial interest in one of the Global Notes as to any
subclass that is transferred to a Person who takes delivery in the form of an
interest in another Global Note with respect to such subclass will, upon
transfer, cease to be an interest in such 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 beneficial
interests in such other Global Note for as long as it remains such an interest.
(d) Any Definitive Note delivered in exchange for an interest in a
Rule 144A Global Note pursuant to paragraph (b) of this Section 2.12 shall,
except as otherwise provided by paragraph (f) of Section 2.13 hereof, bear the
Private Placement Legend applicable to a Rule 144A Global Note set forth in
Section 2.02 hereof.
(e) Any Definitive Note delivered in exchange for an interest in a
Regulation S Global Note pursuant to paragraph (b) of this Section shall, except
as otherwise provided by paragraph (f) of Section 2.13 hereof, bear the Private
Placement Legend applicable to a Regulation S Global Note set forth in Section
2.02 hereof.
(f) Any Exchange Note exchanged for a Restricted Note held by a
Qualifying Person pursuant to an effective registration statement under the
Securities Act pursuant to the Registration Rights Agreement shall not bear the
Private Placement Legend.
Section 2.13 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Restricted Note (other than a Temporary Regulation S
Global Note) to any Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons):
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(i) The Registrar shall register the transfer if the proposed
transferee has delivered to the Registrar (A) a certificate substantially in the
form of Exhibit J hereto and (B) an Opinion of Counsel acceptable to the Issuer
that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Rule 144A Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) and (y) instructions
given in accordance with the Depository's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Rule 144A Global Note in an amount equal to the
principal amount of the beneficial interest in the Rule 144A Global Note to be
transferred, and the Issuer shall execute, and the Trustee shall authenticate
and deliver, one or more Definitive Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an interest in a
Restricted Note (other than a Temporary Regulation S Global Note) to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) Definitive Notes,
the Registrar shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on the form of Note
stating, or has otherwise advised the Issuer and the Registrar in writing, that
the sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of Note
stating, or has otherwise advised the Issuer and the Registrar in writing, that
it is purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such account
are QIBs within the meaning of Rule 144A, are aware that the sale to it is being
made in reliance on Rule 144A and acknowledge that they have received such
information regarding the Issuer as they have requested pursuant to Rule 144A or
have determined not to request such information and that they are aware that the
transferor is relying upon their foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (y) an interest in a Rule
144A Global Note, the transfer of such interest may be effected only through the
book-entry system maintained by the Depository.
(ii) If the proposed transferee is an Agent Member, and the Note to
be transferred is a Definitive Note and a Registrable Note, upon receipt by the
Registrar of the documents referred to in Clause (i) and instructions given in
accordance with the Depository's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in the principal
amount of the beneficial interest in the Rule 144A Global Note in an amount
equal to the principal amount of the Definitive Note to be transferred, and the
Trustee shall cancel the Definitive Note so transferred.
(c) Transfers of Interests in a Temporary Regulation S Global Note.
The following provisions shall apply with respect to registration of any
proposed transfer of interests in a Temporary Regulation S Global Note:
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(i) The Registrar shall register the transfer of any interest in a
Temporary Regulation S Global Note (x) if the transfer occurs following the
Regulation S Global Note Exchange Date, if the proposed transferee is a Non-U.S.
Person and the proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit I hereto or (y) if the proposed transferee
is a QIB and the proposed transferor has checked the box provided for on the
form of Note stating, or has otherwise advised the Issuer and the Registrar in
writing, that the sale has been made in compliance with the provisions of Rule
144A to a transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised the Issuer and the Registrar in
writing, that it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it and any
such account are QIBs within the meaning of Rule 144A, are aware that the sale
to them is being made in reliance on Rule 144A and acknowledge that they have
received such information regarding the Issuer as they have requested pursuant
to Rule 144A or have determined not to request such information and that they
are aware that the transferor is relying upon their foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member that provides the
documents referred to in clause (i)(y) above, upon receipt by the Registrar of
such documents and instructions given in accordance with the Depository's and
the Registrar's procedures, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the beneficial interest in
the Rule 144A Global Note of the relevant subclass, in an amount equal to the
principal amount of the Temporary Regulation S Global Note of such subclass to
be transferred, and the Trustee shall decrease the amount of the Temporary
Regulation S Global Note of such subclass.
(d) Transfers of Interests in a Permanent Regulation S Global or
Definitive Notes Issued in Exchange for an Interest in a Permanent Regulation S
Global Note. The Registrar shall register any transfer of interests in a
Permanent Regulation S Global Note or Definitive Notes issued in exchange for an
interest in a Permanent Regulation S Global Note in accordance with Section
2.12(b) hereof to U.S. Persons or to Non-U.S. Persons without requiring any
additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The following
provisions shall apply with respect to any transfer of a Restricted Note to a
Non-U.S. Person at any time:
(i) Prior to the applicable Regulation S Global Note Exchange Date,
the Registrar shall register any proposed transfer of a Restricted Note (except
for a Regulation S Global Note) to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit I hereto from the proposed
transferor.
(ii) On and after the applicable Regulation S Global Note Exchange
Date, the Registrar shall register any proposed transfer of a Restricted Note to
any Non-U.S. Person if the Note to be transferred is a Definitive Note or an
interest in a Rule 144A Global Note, upon receipt of a certificate substantially
in the form of Exhibit I from the proposed transferor.
(iii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in a Rule 144A Global Note, upon receipt by the Registrar of
(x) the documents, if any,
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required by paragraph (ii) and (y) instructions in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of such Rule
144A Global Note in an amount equal to the principal amount of the beneficial
interest in such Rule 144A Global Note to be transferred, and (B) if the
proposed transferee is an Agent Member and the Note to be transferred is a
Registrable Note, upon receipt by the Registrar of instructions given in
accordance with the Depository's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in the principal
amount of the Regulation S Global Note of the relevant subclass in an amount
equal to the principal amount of the beneficial interest in such Rule 144A
Global Note or Definitive Note to be transferred, and the Trustee shall cancel
the Definitive Note or decrease the amount of the Rule 144A Global Note, if any,
so transferred.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) such Note so delivered is a Permanent Regulation S Global Note issued
in exchange for a Temporary Regulation S Global Note in accordance with Section
2.02(b) hereof, (ii) such Note so delivered is an Exchange Note issued in
accordance with Section 2.12(f) hereof, (iii) such Note so delivered is a
Permanent Regulation S Global Note issued upon registration of transfer of a
Restricted Note in accordance with Section 2.13(e)(ii) hereof, or (iv) 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. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes 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.
(h) Transfer of Class D Notes. Notwithstanding any other provision
of Section 2.13 hereof, (i) no transfer of a Class D Note shall be permitted
hereunder or recognized by the Trustee if the Administrative Agent has
determined (and so advised the Trustee in writing) that (A) assuming the Class D
Notes were to be treated as equity interests in the Issuer, such transfer (1)
would cause the Issuer to lose the benefits of the safe harbor from publicly
traded partnership taxable as a corporation for federal income tax purposes
status provided by Treasury Regulation Section 1.7704-1 or any other available
exemption from such status or (2) would result in a termination of the Issuer as
a partnership pursuant to Section 708 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision thereto, or (B) such transfer
would result in there being more than 90 Holders of the Class D Notes or more
than 100
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holders of the equity of the Issuer, in either case determined as if the Holders
of the Class D Notes were partners, and the "anti-avoidance" rule of Treasury
Regulation 1.7704-1(h)(13) (or any successor provision thereto) applied and (ii)
no transfer of a Class D Note to a "tax-exempt entity" within the meaning of
Code Section 168(h)(2) or to a Person that is not a "United States person"
within the meaning of Code Section 7701(a)(30) or any successor provision
thereto will be permitted or recognized. Each such transferee of a Class D Note
shall be required to furnish to the Trustee certifications, included in the form
of transfer notice in the form set forth in Exhibit D hereof, to the effect that
it is not a tax-exempt entity and is a United States person.
The Trustee shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.12 hereof or this Section
2.13 in accordance with applicable law. 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 during the term of this Agreement and for a period of
three months thereafter.
Section 2.14 Temporary Definitive Notes. Pending the preparation of
Definitive Notes of any subclass, the Issuer may execute and the Trustee may
authenticate and deliver temporary Definitive 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 Owner Trustee executing such temporary
Definitive Notes may determine, as evidenced by his execution of such temporary
Definitive Notes.
If temporary Definitive Notes of any subclass are issued, the Issuer
will cause Definitive Notes of such subclass to be prepared without unreasonable
delay. After the preparation of Definitive Notes of such subclass, the temporary
Definitive Notes shall be exchangeable for Definitive Notes upon surrender of
such temporary Definitive 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 Notes, the Issuer shall execute and the Trustee
shall authenticate and deliver in exchange therefor Definitive Notes of like
subclass, in authorized denominations and in the same aggregate principal
amounts. Until so exchanged, such temporary Definitive Notes shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Notes.
Section 2.15 Statements to Holders and the Owner Trustee. (a) On the
second Business Day before each Payment Date, the Administrative Agent shall
deliver to the Trustee and the Owner Trustee, and the Trustee shall (or shall
instruct any Paying Agent to) promptly thereafter distribute to each Holder of
record with respect to such Payment Date and each Rating Agency, a report,
substantially in the form attached as Exhibit G hereto prepared by the
Administrative Agent and setting forth the information described therein after
giving effect to such payment (each, a "Monthly Report"). Each Monthly Report
provided to the Trustee, the Owner Trustee and each Rating Agency for each May
15, August 15 and November 15 shall be accompanied by (i) a statement setting
forth an analysis of the Collections Account activity for the preceding fiscal
quarter ended March 31, June 30 and September 30, respectively, (ii) a
discussion and analysis of such activity and of any significant developments
affecting the Issuer
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Group in such quarter and (iii) an updated description of the Aircraft then in
the Portfolio and the related Lessees (each, a "Quarterly Report"). Each Monthly
Report provided to the Trustee, the Owner Trustee and each Rating Agency for
each April 15 shall be accompanied by (x) a statement setting forth an analysis
of the Collections Account activity for the preceding fiscal year ended December
31, (y) a discussion and analysis of such activity and of any significant
developments affecting the Issuer Group in such year and (z) updated information
with respect to the Aircraft then in the Portfolio (each, a "Annual Report").
The Trustee shall deliver a copy of each Quarterly Report and Annual Report to
any Holder or other Secured Party who requests a copy thereof.
(b) After the end of each calendar year but not later than the
latest date permitted by law, the Administrative Agent shall deliver to the
Trustee and the Owner Trustee, and the Trustee shall (or shall instruct any
Paying Agent to) furnish to each Person who at any time during such calendar
year was a Holder of record of any subclass of Notes) a statement prepared by
the Administrative Agent containing the sum of the amounts determined pursuant
to Exhibit G hereto with respect to the subclass of Notes (or with respect to
the statement provided to the Owner Trustee, the Beneficial Interest
Certificates) for such calendar year or, in the event such Person was a Holder
of record of any subclass during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to the Administrative Agent and which a Holder or the Owner Trustee
shall reasonably request as necessary for the purpose of such Holder's or the
Owner Trustee's or a Certificateholder's, as applicable, preparation of its U.S.
federal income or other tax returns. So long as any of the Notes are registered
in the name of the initial Depository or its nominee, such report and such other
items will be prepared on the basis of such information supplied to the
Administrative Agent by the initial Depository and the Agent Members, and will
be delivered by the Trustee, when received from the Administrative Agent, to the
Owner Trustee and the Depository to be available for forwarding by the Owner
Trustee and the Depository to the applicable beneficial owners in the manner
described above. In the event that any such information has been provided by any
Paying Agent directly to such Person through other tax-related reports or
otherwise, the Trustee in its capacity as Paying Agent shall not be obligated to
comply with such request for information.
(c) A copy of each report described in Section 2.15(a) shall be
concurrently delivered by the Administrative Agent to the Listing Agent, on
behalf of the Luxembourg Stock Exchange, each Rating Agency, the Servicer, the
Additional Servicer (if any), the Financial Advisor and the Capital Markets
Advisor.
(d) At such time, if any, as the Notes of any subclass are issued in
the form of Definitive Notes, the Trustee shall prepare and deliver the
information described in this Section 2.15(b) to each Holder of record of a
Definitive Note of such subclass for the relevant period of beneficial ownership
of such Definitive Note as appears on the records of the Trustee.
(e) 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 thereof 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
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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 Holders 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 Notes are issued in exchange for any class or subclass of the
Registrable Notes and, so long as such Notes of any subclass are registered with
the Depository, Euroclear and/or Cedel, and so long as such Notes are listed on
the Luxembourg Stock Exchange and the rules of such exchange so permit as
advised by the Listing Agent, delivery of the relevant notice to the Depository,
Euroclear and/or Cedel for communication by them to Holders of such subclass.
Notwithstanding the above, any notice to the Holders of any class or subclass of
Floating Rate Notes specifying an interest rate for such Notes, any Payment
Date, any principal payment or any payment of Sale Premium, if any, shall be
validly given by delivery of the relevant notice to the Depository, Euroclear
and/or Cedel for communication by them to such Holders, without the need for
publication in the Luxemburger Wort, and shall be promptly delivered to the
Listing Agent and made available at the offices of the Luxembourg Paying Agent
and the Luxembourg Stock Exchange (other than notices required to be delivered
by the Administrative Agent under the Related Documents). Any notice specifying
(a) an increase in the interest rate of any class of Notes due to Maturity
Step-Up Interest or Registration Step-Up Interest or (b) redemption of principal
of any Notes must be published in the Luxemburger Wort or another daily
newspaper of general circulation in Luxembourg for so long as any class of Notes
is listed on the Luxembourg Stock Exchange. Any such notice shall be deemed to
have been given on the first day on which any of such conditions shall have been
met.
(f) Notices referred to in this Section 2.15 to Holders of the Class
D Notes generally will only be made by the Trustee directly to the registered
holders thereof by any of the methods referred to in Section 12.05 hereof.
(g) The Trustee shall be at liberty to sanction some other method of
giving notice to the Holders of any subclass if, in its opinion, such other
method is reasonable, having regard to the number and identity of the Holders of
such subclass and/or to market practice then prevailing, is in the best
interests of the Holders 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 Holders of such
subclass in such manner as the Trustee shall require.
Notwithstanding the above, any notice specifying the rate, amount or
Payment Date in respect of the Notes of any subclass bearing interest at a
floating rate or in respect of any repayment of principal on any Notes shall,
for so long as such 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; provided that such requirement shall be satisfied until such time
as any Definitive Notes of such subclass are issued to all Holders and so long
as the Notes of such subclass are held on behalf of DTC, Cedel and Euroclear by
(i) delivery of the relevant notice to DTC, Cedel and Euroclear for
communication by them to the Holders of such
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subclass without need for publication in the Luxemburger Wort and (ii) delivery
of the notice to the Luxembourg Stock Exchange and the Paying Agent in
Luxembourg; provided further, that any notice specifying (a) an increase in the
rate of interest of any subclass of Notes due to Maturity Step-Up Interest or
Registration Step-Up Interest or (b) redemption of principal of any Notes must
be published in the Luxemburger Wort or another daily newspaper of general
circulation in Luxembourg. Any such notice shall be deemed to have been given on
the first day on which any of such conditions 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.
Section 2.17 Holder Representations and Covenants. Each Holder and
beneficial owner of a Note, by the purchase of such Note or beneficial interest
therein, covenants and agrees that it will treat such Note as indebtedness for
all purposes and will not take any action contrary to such characterization,
including, without limitation, filing any tax returns or financial statements
inconsistent therewith. Each Holder of a Class D Note, by purchase of such Note,
represents and warrants to each other Holder and to the Issuer that (a) (i) it
is not a pass-through entity within the meaning of Treasury Regulation Section
1.7704-1(h)(3) or (ii) a substantial percentage of the value of beneficial
interests in such Holder is not attributable (directly or indirectly) to its
interest in the Class D Notes or (iii) the beneficial interests in the Holder
are held by a single person that is not itself a flow-through entity within the
meaning of Treasury Regulation Section 1.7704-1(h)(3) (as applicable), (b) it is
not a "tax-exempt entity" within the meaning of Code Section 168(h)(2) and (c)
it is a "United States person" within the meaning of Code Section 7701(a)(30).
ARTICLE III
ACCOUNTS; PRIORITY OF PAYMENTS
Section 3.01 Accounts. (a) Establishment of Accounts. The Administrative
Agent, acting on behalf of the Security Trustee, shall direct the Operating Bank
in writing to establish and maintain on its books and records in the name of the
Security Trustee (i) a collections account (the "Collections Account"), one or
more lessee funded accounts as provided in the Administrative Agency Agreement
(each, a "Lessee Funded Account"), an expense account (the "Expense Account"),
one note account for each subclass of the Initial Notes (each, a "Note
Account"), separate reserve accounts with respect of each VARIG Lease (each, a
"VARIG Reserve Account") and an Owner Trustee's account (the "Owner Trustee
Account"), in each case on or before the Initial Closing Date and (ii) one or
more rental accounts (each, a "Rental Account") and any additional Lessee Funded
Accounts, in each case provided for in the
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Administrative Agency Agreement, any additional Note Accounts, an aircraft
purchase account (the "Aircraft Purchase Account"), a defeasance/redemption
account (the "Defeasance/Redemption Account"), a refinancing account (the
"Refinancing Account") and any other Account (including, any Cash Collateral
Account) the establishment of which is set forth in a Controlling Trustees'
Resolution delivered to the Trustee, the Security Trustee and the Administrative
Agent, in each case at such time as is set forth in this Section 3.01 or in such
Controlling Trustees' Resolution. Each Account shall be established and
maintained as an Eligible Account in accordance with the terms of the Security
Trust Agreement so as to create, perfect and establish the priority of the
security interest of the Security Trustee in such Account and all cash,
Investments and other property therein under the Security Trust Agreement and
otherwise to effectuate the Security Trust Agreement. Each new Account
established pursuant to Section 2.04 of the Administrative Agency Agreement
shall, when so established, be the Account of such name and purposes for all
purposes of this Indenture.
(b) Withdrawals and Transfers Generally. Any provision of this
Indenture relating to the withdrawal from, or any transfer to or from, any
Account by the Administrative Agent shall mean any such withdrawal or transfer
effected by the Operating Bank at the written direction of the Administrative
Agent (such direction to be provided to the Operating Bank by 1 P.M. (New York
City time) on the date of such transfer or withdrawal) given in accordance with
the terms of this Indenture, the Administrative Agency Agreement and the
Security Trust Agreement. No withdrawal from or transfer from or to any Account
shall be made except in accordance with the terms of this Indenture, the
Security Trust Agreement and the Administrative Agency Agreement or by any
Person other than the Administrative Agent (or, upon the written direction of
the Administrative Agent, the Operating Bank) or, in the case of the Note
Accounts, the Trustee (in which respect the Trustee agrees it is acting as the
agent of the Security Trustee).
(c) Collections Account. All Collections shall be, when received,
deposited in the Collections Account, and all cash, Investment and other
property in the Collections Account shall be transferred from, or retained as
Reserved Cash in, the Collections Account in accordance with the terms of this
Indenture.
(d) Lessee Funded Account. Any Segregated Funds received from time
to time from any Lessee or pursuant to any Acquisition Agreement shall be
transferred by the Operating Bank at the written direction of the Administrative
Agent from the Collections Account into the related Lessee Funded Account. The
Administrative Agent shall not make any withdrawal from, or transfer from or to,
any Lessee Funded Account in respect of (i) any portion of the Segregated Funds
therein consisting of a security deposit except, upon the termination of the
related Lease, as provided in such Lease or (ii) any Segregated Funds that is
contrary to the requirements of the respective Leases as to Segregated Funds and
the requirements of the Security Trust Agreement (including the agreement of the
Security Trustee that it designate on its account records that it holds its
interest in each Lessee Funded Account for the benefit of the respective Lessee
in respect of whom such Segregated Funds are held). Without limiting the
foregoing, no cash, Investment and other property in a Lessee Funded Account may
be used to make payments, other than as permitted under Section 3.07 hereof, in
respect of the Securities at any time, including after the delivery of a Default
Notice. Any Segregated Funds relating to an expired Lease that remain in a
Lessee Funded Account after expiration or termination of such Lease and that are
not
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due and owing to the relevant Lessee under such expired or terminated Lease
shall, if so required under the terms of a subsequent Lease, if any, relating to
such Aircraft, be credited in a Lessee Funded Account for the benefit of the
next Lessee of the relevant Aircraft to the extent required under the terms of
such subsequent Lease and, to the extent not so required, transferred to the
Collections Account. When and as provided in the Administrative Agency Agreement
the Administrative Agent shall cause to be established such additional Lessee
Funded Accounts as are provided for in accordance with Section 3.01(a)(ii)
hereof.
(e) Expense Account. On each Payment Date, such amounts as are
provided in Section 3.08 hereof in respect of the Required Expense Amount,
Expense Accruals and Other Accruals shall be deposited into the Expense Account
from the Collections Account. Expenses shall be paid from the Expenses Account
as provided in Section 3.04 hereof.
(f) Rental Accounts. All Rental Payments and other amounts received
pursuant to any Related Collateral Document shall be deposited into such Rental
Account (including any Non-Trustee Account) as the Administrative Agent may
determine or as provided for in the Administrative Agency Agreement. Except with
respect to amounts, if any, that for local tax or other regulatory or legal
reasons must be retained on deposit or as to the transfer of which the
Administrative Agent determines there is any substantial uncertainty, all
amounts so deposited shall, within one Business Day of their receipt, be
transferred by the Administrative Agent to the Collections Account. If the
Administrative Agent determines that, for any tax or other regulatory or legal
reason, any such Collections may not be deposited into an account in the name of
the Security Trustee, then, notwithstanding the requirements of Section 3.01(a)
hereof, the relevant Issuer Group Member may establish one or more Rental
Accounts ( a "Non-Trustee Account") for such Collections in its own name (but
subject to the direction and control of the Administrative Agent on behalf of
the Security Trustee) at any Eligible Institution provided that the Lessor under
the relevant Lease is or becomes a party to a Security Document with respect to
such Account.
(g) Refinancing Account. Upon notice to it of a Refinancing, the
Administrative Agent shall cause the Operating Bank to establish and maintain a
Refinancing Account pursuant to Section 3.01(a) hereof in the name of the
Security Trustee for the benefit of the Holders of the subclass of Notes, if
any, to be refinanced. All net cash proceeds of such Refinancing shall be
deposited in the Refinancing Account and shall be held in such Account until
such proceeds are applied to pay the Redemption Price of and all accrued and
unpaid interest on such Notes until such Notes are cancelled by the Trustee and
Refinancing Expenses with respect thereto (except to the extent the Controlling
Trustees have determined, as evidenced by a Controlling Trustees' Resolution, to
pay the same from funds available therefor as Permitted Accruals in the Expense
Account) and as otherwise provided in Section 5.02(f)(ii)(C).
(h) Defeasance/Redemption Account. Upon notice to it that any
subclass of Notes is to be redeemed pursuant to Section 3.10 hereof (other than
in a Refinancing) or defeased under Article XI hereof, the Administrative Agent
shall cause the Operating Bank to establish and maintain a Defeasance/Redemption
Account pursuant to Section 3.01(a) hereof in the name of the Security Trustee
for the benefit of the Holders of such subclass. All amounts received for the
purpose of any such redemption or defeasance shall be deposited in the
Defeasance/Redemption Account.
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(i) Aircraft Purchase Account. All proceeds of the issuance of the
Initial Securities, after any other deposits out of such proceeds to any other
Account pursuant to Section 3.03 hereof, shall be directly paid to the Sellers
in accordance with Section 5.1 of the Asset Purchase Agreement. All proceeds of
any Additional Securities shall, after making any other deposits out of such
proceeds pursuant to Section 3.03 hereof or otherwise required by the terms of
an indenture supplement hereto, a supplement to the Trust Agreement or a
Controlling Trustees' Resolution relating to such Additional Securities, be
deposited in the Aircraft Purchase Account and shall be held in such Account and
invested in Permitted Account Investments until applied for the purchase of
Additional Aircraft in accordance with the relevant Acquisition Agreement. The
Issuer shall notify the Security Trustee and the Administrative Agent of the
satisfaction or waiver (specifying which) of all conditions for the payment of
the Aircraft Purchase Price of any Aircraft, and no amounts may be paid to the
Sellers (with respect of the Initial Aircraft) or withdrawn or transferred from
the Aircraft Purchase Account (with respect of Additional Aircraft), in either
event as the Aircraft Purchase Price of any Aircraft until receipt of such
notice as to such Aircraft.
(j) Note Account. Upon the issuance of Notes of any subclass for
which a Note Account was not previously established, the Administrative Agent
shall cause the Operating Bank to establish and maintain a Note Account for such
subclass in accordance with Section 3.01(a) hereof in the name of the Security
Trustee for the benefit of the Holders of the Notes of such subclass. Upon the
transfer of any amounts to the Note Account for any subclass of Notes in
accordance with Section 3.08 hereof, the Trustee on the same day shall pay all
such amounts to the Holders of such subclass of Notes as of the related Record
Date in accordance with the terms of this Indenture.
(k) Owner Trustee Account. All amounts transferred to the Owner
Trustee Account in accordance with Section 3.08 hereof shall be paid to Owner
Trustee in accordance with the terms of this Indenture for further application
by the Owner Trustee in accordance with the terms of the Trust Agreement.
(l) Cash Collateral Accounts. Upon receipt by the Administrative
Agent and the Trustee of a Controlling Trustees' Resolution providing for the
establishment of a Cash Collateral Account as a Primary Eligible Credit
Facility, a Secondary Eligible Credit Facility, a Tertiary Eligible Credit
Facility or a Subordinated Eligible Credit Facility for one or more subclasses
of Notes or in respect of any other Obligation, the Administrative Agent shall,
by Written Notice, cause the Operating Bank to establish (within three Business
Days of the giving of such Written Notice) and maintain such Cash Collateral
Account pursuant to Section 3.01(a) hereof in the name of the Security Trustee
for the benefit of the Holders of the Notes of each such subclass and/or the
Secured Parties holding such other Obligation. All amounts provided in
connection with any such Controlling Trustees' Resolution for deposit in such
Account and all amounts to be deposited in such Account under Section 3.08
hereof as a Primary Eligible Credit Facility, a Secondary Eligible Facility or a
Tertiary Eligible Credit Facility or a Subordinated Credit Facility (as
applicable) shall be held in such Cash Collateral Account for application, and
all replenishment shall be made, in accordance with the terms of the Controlling
Trustees' Resolution relating to such Credit Facility, which Controlling
Trustees' Resolution shall include the basis of any replenishment of the Cash
Collateral Account.
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(m) VARIG Reserve Accounts. (i) On the Initial Closing Date there
shall be deposited in each VARIG Reserve Account the VARIG Deposit Amount as
provided in Section 3.03(f) hereof. In addition, on any Business Day (prior to
the closure of such VARIG Reserve Account) that the Administrative Agent
determines that there has been deposited in the Collections Account any Late
VARIG Rental Payments under either VARIG Lease, the Administrative Agent shall
direct the Operating Bank in writing to transfer the amount of such Late VARIG
Rental Payments from the Collections Account to the VARIG Reserve Account for
such VARIG Lease pursuant to Section 3.04(h) hereof; provided that no such
transfer shall be required to the extent that such transfer would cause the
amount in the VARIG Reserve Account to exceed the VARIG Deposit Amount.
(ii) If, on any Calculation Date, the Administrative Agent
determines that the Rental Payments then due under either VARIG Lease have not
been paid in full, the Administrative Agent shall direct the Operating Bank in
writing to transfer, on the related Payment Date, from the VARIG Reserve Account
for such VARIG Lease an amount (to the extent of available funds in such
Account) equal to such shortfall to the Collections Account pursuant to Section
3.07(d) hereof.
(iii) If (A) on the Payment Date immediately after any anniversary
of the Delivery Date for a VARIG Aircraft (commencing with the second such
anniversary), the Administrative Agent determines that, during the immediately
preceding 12 months, no Rental Payments under the related VARIG Lease have been
in arrears for more than 60 consecutive days or (B) on any Payment Date, a VARIG
Lease has been terminated or the related VARIG Aircraft is otherwise no longer
part of the Portfolio, whichever first occurs, the Administrative Agent shall
direct the Operating Bank in writing to transfer, on such Payment Date, the
amount then on deposit in the VARIG Reserve Account for such VARIG Lease to GE
Capital (at the payment account specified in the Asset Purchase Agreement) under
Section 3.07(e) hereof and to close such VARIG Reserve Account.
Section 3.02 Investments of Cash. For so long as any Notes remain
Outstanding, the Administrative Agent, on behalf of the Security Trustee, shall,
or shall direct the Operating Bank in writing to, invest and reinvest, at the
written direction of the Controlling Trustees, 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 Administrative Agent 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 the case of a Lessee Funded Account only to the
extent any such investment credited to such Lessee Funded Account 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. The Administrative Agent shall make
such investments and reinvestments in accordance with the terms of the following
provisions:
(a) 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 (i) before the next Payment Date after which
such investment is made, in the case of investments of funds on deposit in the
Collections Account and the Expense Account, or (ii) in accordance with
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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;
(b) 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 described in
clause (d) of the definition thereof; provided that neither the Trustee nor the
Security Trustee shall be liable for any losses Incurred in respect of the
failure to invest funds not thereby received; and
(c) if required by the terms of a Lease, any investments of funds on
deposit in a Lessee Funded Account or the Collections 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. The
Administrative Agent shall, on each Closing Date, upon the Operating Bank's
receipt thereof, make, or direct the Operating Bank in writing to make, the
following transfers to the Accounts:
(a) deposit in the relevant Lessee Funded Account the amount of the
initial Segregated Funds, if any, received or deemed to have been received
pursuant to the terms of the relevant Acquisition Agreements;
(b) deposit in any Cash Collateral Account then to be established an
amount equal to the Required Amount for such Account;
(c) deposit to the Collections Account, in the case of each Closing
Date, an amount equal to the Subordinate Note Blockage Amount minus the then
aggregate amount available under all Credit Facilities (after giving effect to
any deposits made thereto on such Closing Date);
(d) deposit in the Expense Account an amount equal to the Required
Expense Amount for the relevant initial Interest Accrual Period, as specified in
a Written Notice of the Administrative Agent to the Trustee;
(e) in the case of any Closing Dates other than the Initial Closing
Date, if applicable, an amount equal to the remaining proceeds of any Additional
Securities issued to acquire the Additional Aircraft to the Collections Account;
and
(f) on the Initial Closing Date (i) deposit in each VARIG Reserve
Account, the VARIG Deposit Amount received from GE Capital for deposit therein
pursuant to the terms of Section 5.1(a) of the Asset Purchase Agreement, and
(ii) deposit in the Collections Account the amounts received from the Sellers
pursuant to Section 5.01(b) and (c) of the Asset Purchase Agreement except to
the extent any such sums referred to in such Section 5.01 constitute Segregated
Funds, in which case such amounts shall be deposited in a Lessee Rental Account.
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Section 3.04 Interim Deposits, Transfers and Withdrawals. On any Business
Day, the Administrative Agent may make, or direct the Operating Bank in writing
to make, without duplication, the following deposits, transfers and withdrawals
for the following purposes, in each case after Written Notice from the
Administrative Agent to the Trustee, identifying the basis for such deposit,
transfer or withdrawal in reasonable detail:
(a) withdraw from a Lessee Funded Account to the extent that funds
on deposit therein or available thereunder may be withdrawn or drawn pursuant to
the terms of the related Lease for payment thereof, to discharge any Expense
then due and payable and pay such amount to the appropriate payees thereof;
(b) withdraw from the Expense Account (to the extent of funds on
deposit therein) such amount as is needed to discharge (i) any Primary Expenses
and (ii) any Modification Payments or Refinancing Expenses in respect of which a
Permitted Accrual was previously effected by a deposit in the Expense Account
(whether or not any such deposit has been previously used to pay any other
Primary Expense but excluding any portion of such deposit previously used to pay
any Modification Payments or Refinancing Expenses) then due and payable and pay
such amount to the appropriate payees thereof;
(c) transfer from the Collections Account from time to time (but in
no event on less than one Business Day's prior written notice to the Trustee
(unless such one Business Day's notice requirement is waived by the Trustee)),
other amounts, including amounts constituting the Reserved Cash, from the
Collections Account to the Expense Account, in each case only to the extent that
such funds are to be applied to Primary Expenses that become due and payable
during such Interest Accrual Period and for the payment of which there are
insufficient funds in the Expense Account; provided that no such transfer from
the Collections Account in respect of Primary Expenses shall be made prior to
the next succeeding Payment Date if, in the reasonable judgment of the
Administrative Agent, such transfer would have a material adverse effect on the
ability of the Issuer to make payments of accrued and unpaid interest on the
Senior Class then Outstanding on the next Payment Date therefor in accordance
with Section 3.08 hereof;
(d) withdraw Segregated Funds from a Lessee Funded Account or draw
under or cause to be drawn under any applicable Related Collateral Document, in
any case to the extent required by or necessary in connection with a Lease or
any documents related thereto and the Related Collateral Documents, for deposit
in the Collections Account to satisfy any default in Rental Payments under any
related Lease;
(e) transfer any Segregated Funds from the Collections Account to a
Lessee Funded Account in accordance with the terms of any Lease;
(f) withdraw from the Aircraft Purchase Account an amount equal to
the Aircraft Purchase Price of any Additional Aircraft, to the extent necessary
to effect payment therefor;
(g) in the case of any Additional Securities, on such date as shall
be set forth in a Controlling Trustees' Resolution, transfer any balance in the
Aircraft Purchase Account to the Collections Account for application in
accordance with Section 3.08(a); and
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(h) unless such VARIG Reserve Account has been closed, transfer any
Late VARIG Rental Payments as to either VARIG Lease from the Collections Account
to the VARIG Reserve Account for such VARIG Lease; provided that no such
transfer shall be required to the extent that such transfer would cause the
amount in the VARIG Reserve Account to exceed the VARIG Deposit Amount.
Section 3.05 Interim Deposits and Withdrawals for Aircraft Sales. The
Administrative Agent shall cause the Operating Bank to deposit any and all
proceeds received in respect of any Aircraft Sale by any Issuer Group Member
(including any loss proceeds and any other amounts under the second sentence of
Section 4.2, Section 5.2 and Section 5.3 of the Aircraft Purchase Agreement) and
all receipts of Non-Delivery Payments in the Collections Account (other than in
connection with any sale of all or substantially all of the assets of the Issuer
Group, in which case the Administrative Agent shall deposit any and all proceeds
of any thereof into the Defeasance/Redemption Account in connection with the
redemption of each subclass of the Notes). Any funds then on deposit in a Lessee
Funded Account related to the Aircraft subject to such sale or other disposition
shall be applied on a 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. The Administrative Agent shall determine, as soon as practicable after
each Calculation Date, but in no event later than two Business Days preceding
the immediately succeeding Payment Date, based on information known to the
Administrative Agent or Relevant Information provided to the Administrative
Agent, 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:
(i) the balance of funds on deposit in the Accounts on the
Calculation Date, the Reserved Cash on such Calculation Date and the amount
available under all Credit Facilities on such Calculation Date;
(ii) the Required Expense Amount and any amount to be deposited in
respect of Expense Accruals and Other Accruals as of such Calculation Date as
set forth in a the Monthly Report prepared by the Administrative Agent and
provided to the Operating Bank;
(iii) the Available Collections on such Calculation Date (separately
listing any Senior Swap Payments, Subordinated Swap Payments and Swap Breakage
Costs);
(iv) the net Segregated Funds available to be transferred into the
Collections Account on such Calculation Date;
(v) any amounts to be retained in the Collections Account on the
Payment Date immediately following such Calculation Date under clauses (iv),
(viii), (xii) and (xviii) of Section 3.08(a) hereof;
(vi) any amounts to be transferred in respect of Credit Facilities
under clauses (iii), (viii), (xi) and (xvii) of Section 3.08(a) hereof or
clauses (ii), (v), (vii) and (ix) of Section 3.08(b) hereof;
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(vii) any amounts to be transferred from each VARIG Reserve Account
to the Collections Account under Section 3.07(d) hereof on the Payment Date
immediately following such Calculation Date;
(viii) any amounts to be transferred from each VARIG Reserve Account
to GE Capital under Section 3.07(e) hereof; and
(ix) 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 and Sale Premium. The
Administrative Agent shall, not later than five Business Days prior to each
Payment Date, make the following calculations or determinations with respect to
Interest Amounts due on such Payment Date:
(i) based on Relevant Information provided to it by the Reference
Agent, the applicable interest rate on each subclass of Floating Rate Notes
based on LIBOR determined on the Reference Date for the relevant Interest
Accrual Period;
(ii) the Interest Amount (calculating separately any Registration
Step-Up Interest and Maturity Step-Up Interest included therein) and any
Additional Interest in respect of each class or subclass of Floating Rate Notes
on such Payment Date;
(iii) the Interest Amount (calculating separately any Registration
Step-Up Interest and Maturity Step-Up Interest included therein) and any
Additional Interest in respect of each class or subclass of Fixed Rate Notes on
such Payment Date; and
(iv) if such Payment Date is a Premium Payment Date, any Sale
Premium payable on the Payment Date immediately following such Calculation Date
pursuant to Section 3.08(a)(xxvii) hereof.
(c) Calculation of Principal Payment Amounts. The Administrative
Agent shall, not later than five Business Days prior to each Payment Date,
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 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 class of Notes
Outstanding and the Minimum Principal Payment Amount on such Payment Date with
respect to each class of Notes;
(iv) the Scheduled Target Principal Balance for each class of Notes
Outstanding and the Scheduled Principal Payment Amount on such Payment Date with
respect to each class of Notes;
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(v) the Supplemental Target Principal Balance for each applicable
class of Notes Outstanding and the Supplemental Principal Payment Amount on such
Payment Date with respect to each such class of Notes; and
(vi) the amount of any additional principal to be paid with respect
to each class or subclass of Notes.
(d) Calculation of Refinancing Amounts. The Administrative Agent
shall, not later than five Business Days prior to each Payment Date on which a
Refinancing or Redemption of any class or subclass of Notes is scheduled to
occur, perform the calculations necessary to determine the Redemption Price of
and the accrued and unpaid interest on such Notes.
(e) Application of the Available Collections. The Administrative
Agent shall, not later than 1:00 p.m. New York City time on the Business Day
prior to each Payment Date, 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)
hereof, as applicable, setting forth separately, the amount to be applied on
such Payment Date pursuant to each clause of Section 3.08(a) or 3.08(b) hereof,
as applicable, including, where applicable, the allocation of principal of the
Notes in accordance with Section 3.09 hereof.
Section 3.07 Payment Date First Step Withdrawals and Transfers. Two
Business Days prior to each Payment Date, the Administrative Agent shall make or
direct the Operating Bank in writing to make (such direction to be communicated
in computer file format or in such other form as the Administrative Agent, the
Operating Bank, the Trustee and the Security Trustee agree, provided that, in
the case of communication in computer file format or any other form other than a
written tangible form, a written tangible form thereof shall promptly thereafter
be sent to the Operating Bank), on such Payment Date, the following withdrawals
from and transfers among the Accounts:
(a) transfer the net proceeds of any Refinancing of any Notes from
the Refinancing Account to any Cash Collateral Account established for the
related Refinancing Notes (up to the Required Amount therefor in accordance with
Section 3.03 hereof) and/or as Reserved Cash to the Collections Account (in
accordance with Section 3.03 hereof) and the balance to the applicable Note
Accounts, in each case in accordance with Sections 2.10(b) and 5.02(f) hereof;
(b) transfer any amounts on deposit in the Defeasance/Redemption
Account in respect of any Redemption that is not a Refinancing to the applicable
Note Accounts.
(c) transfer from each Lessee Funded Account to the Collections
Account any available Segregated Funds that are no longer required to be
maintained in a segregated account under the applicable Leases;
(d) transfer from the Collections Account to the relevant Lessee
Funded Accounts the amount of any Segregated Funds then on deposit in the
Collections Account;
(e) transfer from each VARIG Reserve Account to the Collections
Account the amount, if any, provided for in Section 3.01(m)(ii) hereof;
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(f) transfer from each VARIG Reserve Account to GE Capital the
amount, if any, provided for in Section 3.01(m)(iii) hereof;
(g) transfer from any Account (other than the Collections Account)
to the Collections 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
(h) after the giving of a Default Notice, during the continuation of
an Acceleration Default or following the Interest Accrual Period in which an
Aircraft Sale occurs with respect to the last remaining Aircraft, transfer any
amounts remaining in the relevant 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 Collections 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 Administrative Agent shall distribute from (or retain in the
Collections Account, if so indicated in the relevant clause below), or direct
the Operating Bank in writing to do same (such direction to be communicated in
computer file format or in such other form as the Administrative Agent, the
Operating Bank, the Trustee and the Security Trustee agree, provided that, in
the case of communication in computer file format or any other form other than a
written tangible form, a written tangible form thereof shall promptly thereafter
be sent to the Operating Bank) at least two Business Days prior to such Payment
Date 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 (or
retained in the Collections Account, as applicable) ranking prior thereto
("Prior Ranking Amounts") have been paid (or retained in the Collections
Account, as applicable) in full. All payments of Available Collections to be
made to or for the account of Holders of any subclass of Notes or to the Owner
Trustee, for the account of the Certificateholders, 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 or the Owner Trustee Account with
respect to the Certificateholders.
(i) to the Expense Account an amount such that the amounts on
deposit therein is at least equal to the Required Expense Amount;
(ii) in no order of priority inter se, but pro rata, (A) to the Note
Accounts for each subclass of Class A Notes, the Interest Amount 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 Senior
Swap Payment due from any Issuer Group Member pursuant to any Swap Agreement;
(iii) in no order of priority inter se, but pro rata, to any Persons
providing any Primary Eligible Credit Facilities, any Credit Facility Advance
Obligations payable to such Persons under the terms of their respective Primary
Credit Eligible Credit Facilities and, to the extent any such Credit Facility
consists of a Cash Collateral Account, such amount so that the amount on deposit
in each such Account is equal to the Required Amount therefor;
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(iv) to the Collections Account, an amount so that the Reserved Cash
on deposit therein is equal to the positive difference, if any, between (A) the
Senior Note Blockage Amount and (B) the aggregate amounts available for drawing
under any Primary Eligible Credit Facilities (after giving effect to any
transfer under clause (iii) above);
(v) to the Note Accounts for each subclass of 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 Class A Notes;
(vi) to the Note Accounts for each subclass of Class B Notes, the
Interest Amount 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;
(vii) in no order of priority inter se, but pro rata, to any Persons
providing any Secondary Eligible Credit Facilities, any Credit Facility Advance
Obligations payable to such Persons under the terms of their respective
Secondary Eligible Credit Facilities and, to the extent any such Credit Facility
consists of a Cash Collateral Account, such amount so that the amount on deposit
in each such Account is equal to the Required Amount therefor;
(viii) to the Collections Account an amount so that the Reserved
Cash on deposit therein (after giving effect to the transfer under clause (iv)
above) is equal to the positive difference, if any, between (A) the Mezzanine
Note Blockage Amount and (B) the aggregate amounts available for drawing under
any Primary Eligible Credit Facilities and any Secondary Eligible Credit
Facilities (after giving effect to any transfers under clauses (iii) and (vii)
above);
(ix) to the Note Accounts for each subclass of 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 Class B Notes;
(x) to the Note Accounts for each subclass of Class C Notes, the
Interest Amount on such subclass of 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 Class C Notes;
(xi) in no order of priority inter se, but pro rata, to any Persons
providing any Tertiary Eligible Credit Facilities, any Credit Facility Advance
Obligations payable to such Persons under the terms of their respective Tertiary
Eligible Credit Facilities and, to the extent any such Credit Facility consists
of a Cash Collateral Account, such amount so that the amount on deposit in each
such Account is equal to the Required Amount therefor;
(xii) to the Collections Account an amount so that the Reserved Cash
on deposit therein (after giving effect to the transfers clauses (iv) and (viii)
above) is equal to the positive difference, if any, between (A) the Junior Note
Blockage Amount less and (B) amounts available for drawing under any Primary
Eligible Credit Facilities, Secondary Eligible Credit Facilities or Tertiary
Eligible Credit Facilities (after giving effect to any transfers under clauses
(iii), (vii) and (xi) above);
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(xiii) to the Note Accounts for each subclass of Class A Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Supplemental Principal Amount of the Class A Notes;
(xiv) to the Note Accounts for each subclass of Class B Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Supplemental Principal Amount of the Class B Notes;
(xv) to the Note Accounts for each subclass of Class C Notes, in the
order of priority by subclass set forth in Section 3.09 hereof, an amount equal
to the Minimum Principal Amount of the Class C Notes;
(xvi) to the Note Accounts for each subclass of Class D Notes, the
Interest Amount on such subclass of 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 Class D Notes;
(xvii) in no order of priority inter se, but pro rata, to any
Persons providing any Subordinate Eligible Credit Facilities, any Credit
Facility Advance Obligations payable to such Persons under the terms of their
respective Subordinate Eligible Credit Facilities and, to the extent any such
Credit Facility consists of a Cash Collateral Account, such amount so that the
amount on deposit in each such account is equal to the Required Amount therefor;
(xviii) to the Collections Account an amount so that the Reserved
Cash on deposit therein (after giving effect to any transfer under clauses (iv),
(viii), and (xii) above) is equal to the positive difference, if any, between
(A) the aggregate Subordinate Note Blockage Amount and (B) amounts available for
drawing under Credit Facilities after giving effect to any transfers under
clauses (iii), (vii), (xi) and (xvii) above;
(xix) to the Note Accounts for each subclass of 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 Class D Notes;
(xx) to the Expense Account, such amount as an accrual (the "Expense
Accrual") for Primary Expenses that are anticipated to become due and payable
during the period from and after the next succeeding Payment Date to the fifth
Payment Date thereafter for which the Administrative Agent reasonably determines
there should be an accrual.
(xxi) to the Note Accounts for each subclass of Notes entitled
thereto, an amount equal to all accrued and unpaid Maturity Step-Up Interest,
Registration Step-Up Interest and Additional Interest, if any, in order of
seniority (by alphabetical designation) of each class and, as to the subclasses
of each class, in no order of priority inter se, but pro rata according to the
amount of such accrued and unpaid Maturity Step-Up Interest, Registration
Step-Up Interest and Additional Interest;
(xxii) to the Note Accounts for each subclass of 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 Class A Notes;
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(xxiii) to the Note Accounts for each subclass of 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 Class B Notes;
(xxiv) to the Note Accounts for each subclass of 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 Class C Notes;
(xxv) to the Note Accounts for each subclass of 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 Class D Notes;
(xxvi) to the Owner Trustee's Account, the amount of any
unreimbursed Issuer Cure Amounts for distribution by the Owner Trustee in
accordance with the Trust Agreement;
(xxvii) to the Note Accounts for each subclass of the Class C Notes,
the Class D Notes, any Refinancing Notes and any Additional Notes, the Sale
Premium, if any, calculated with respect to such class of Notes as of the
Calculation Date for such Payment Date and any unpaid Sale Premium with respect
to such class of Notes, in order of seniority (by alphabetical designation)
among such Notes but in no order of priority among the subclasses of such
classes of Notes but pro rata according to the amount of Sale Premium owed to
such subclass;
(xxviii) to the Expense Account, such amount as an accrual (the
"Other Accruals") in respect of any Modification Payments or Refinancing
Payments as the Administrative Agent shall determine;
(xxix) to the Note Accounts for each subclass of Class A Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Outstanding Principal Balance of each such subclass;
(xxx) to the Note Accounts for each subclass of Class B Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Outstanding Principal Balance of each such subclass;
(xxxi) to the Note Accounts for each subclass of Class C Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Outstanding Principal Balance of each such subclass;
(xxxii) to the Note Accounts for each subclass of Class D Notes, in
the order of priority by subclass set forth in Section 3.09 hereof, an amount
equal to the Outstanding Principal Balance of each such subclass;
(xxxiii) payments to Swap Providers, pro rata inter se, which are
subordinated in accordance with the relevant Swap Agreement (the "Subordinated
Swap Payments");
(xxxiv) to the Servicer or any Additional Servicer, pro rata, the
Additional Servicer Amounts then due them; and
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(xxxv) to the Owner Trustee Account for distribution by the Owner
Trustee under and in accordance with the Trust Agreement, all remaining amounts.
For the avoidance of doubt, no transfer shall be made pursuant to
any clause of this Section 3.08(a) following clause (iv), (viii), (xii) or
(xviii), respectively, except from the amount by which the Available Collections
exceeds the amount to be retained as Reserved Cash pursuant to such clause.
(b) Anything to the contrary contained in Section 3.08(a) hereof
notwithstanding, following delivery to the Issuer or the Administrative Agent of
a Default Notice or during the continuance of an Acceleration Default, the
allocation of payments described in Section 3.08(a) hereof shall not apply and
the Administrative Agent shall direct the Operating Bank in writing (such
direction to be communicated in computer file format or in such other form as
the Administrative Agent, the Operating Bank, the Trustee and the Security
Trustee agree, provided that, in the case of communication in computer file
format or any other form other than a written tangible form, a written tangible
form thereof shall promptly thereafter be sent to the Operating Bank) to cause
all amounts on deposit in the Collections Account and the Expense Account to be
applied in the following order of priority:
(i) to the Expense Account, an amount such that the amount on
deposit therein is equal to the Required Expense Amount;
(ii) in no order of priority inter se, but pro rata, to any Persons
providing any Primary Eligible Credit Facilities, pro rata inter se, any Credit
Facility Advance Obligations payable to such Persons under the terms of their
respective Primary Credit Eligible Credit Facilities and, to the extent any such
Credit Facility consists of a Cash Collateral Account, such amount so that the
amount on deposit in each such Account is equal to the Required Amount therefor;
(iii) in no order of priority inter se, but pro rata, (A) to the
Note Accounts for each subclass of Class A Notes, the Interest Amount on, and
the Outstanding Principal Balance of, such subclass of Class A Notes in no order
of priority inter se but pro rata according to the amount of the principal of
such subclass of Notes and (B) pro rata to any Swap Provider, such amounts as
are required to make any Senior Swap Payments due to such Swap Provider pursuant
to any Swap Agreement;
(iv) to the Note Accounts for the Holders of Class A Notes, all
Maturity Step-Up Interest, Registration Step-Up Interest and Additional
Interest, if any, pro rata according to the aggregate amount thereof accrued and
unpaid on such Notes;
(v) in no order of priority inter se, but pro rata, to any Persons
providing any Secondary Eligible Credit Facilities, pro rata inter se, any
Credit Facility Advance Obligations payable to such Persons under the terms of
their respective Secondary Credit Eligible Credit Facilities and, to the extent
any such Credit Facility consists of a Cash Collateral Account, such amount so
that the amount on deposit in each such Account is equal to the Required Amount
therefor;
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(vi) to the Note Accounts for each subclass of Class B Notes, all
accrued and unpaid interest (including Maturity Step-Up Interest, Registration
Step-Up Interest and Additional Interest, if any) on, and the Outstanding
Principal Balance of, such subclass of Class B Notes, in no order of priority
inter se but pro rata according to the aggregate amount thereof with respect to
such Notes;
(vii) in no order of priority inter se, but pro rata, to any Persons
providing any Tertiary Eligible Credit Facilities, pro rata inter se, any Credit
Facility Advance Obligations payable to such Persons under the terms of their
respective Tertiary Eligible Credit Facilities and, to the extent any such
Credit Facility consists of a Cash Collateral Account, such amount so that the
amount on deposit in each such Account is equal to the Required Amount therefor;
(viii) to the Note Accounts for each subclass of Class C Notes, all
accrued and unpaid interest (including Maturity Step-Up Interest, Registration
Step-Up Interest and Additional Interest, if any) and Sale Premium, if any, on,
and the Outstanding Principal Balance of, such subclass of Class C Notes, in no
order of priority inter se but pro rata according to the aggregate amount
thereof with respect to such Notes;
(ix) in no order of priority inter se, but pro rata, to any Persons
providing any Subordinate Eligible Credit Facilities, pro rata inter se, any
Credit Facility Advance Obligations payable to such Persons under the terms of
their respective Subordinate Eligible Credit Facilities and, to the extent any
such Credit Facility consists of a Cash Collateral Account, such amount so that
the amount on deposit in each such Account is equal to the Required Amount
therefor;
(x) to the Note Accounts for each subclass of Class D Notes, all
accrued and unpaid interest (including Maturity Step-Up Interest, Registration
Step-Up Interest and Additional Interest, if any) and Sale Premium, if any, on,
and the Outstanding Principal Balance of, such subclass of Class D Notes, in no
order of priority inter se but pro rata according to the aggregate amount
thereof with respect to such Notes;
(xi) to any Swap Provider, pro rata inter se, such amounts as are
required to make any Subordinated Swap Payments due to such Swap Provider; and
(xii) to the Owner Trustee Account for distribution by the Owner
Trustee under and in accordance with the Trust Agreement, 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 Notes on any Payment Date, such payment will
be applied to repay all 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 principal 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 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
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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 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, the 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, the 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
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.
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 (including in connection with any
Refinancing) any subclass of the Notes in whole or in part, out of amounts
available in the Defeasance/Redemption Account or, in the case of a Refinancing,
the Refinancing Account, for such purpose, if any, other than any funds
constituting part of the Available Collections, at the Redemption Price plus any
accrued and unpaid interest and accrued and unpaid Sale Premium (after giving
effect to any payment thereof on such Redemption Date under Section 3.08 hereof)
on the Notes to be redeemed to the Redemption Date; provided that after the
giving of a Default Notice or the Acceleration of any Notes, the Notes may be
redeemed only in whole but not in part pursuant to this Section 3.10(a); and
provided further that Written Notice of any such Redemption shall be given by
the Issuer (or the Administrative Agent on its behalf) to the Trustee and, for
so long as any Notes are listed on the Luxembourg Stock Exchange, to the Listing
Agent and the Luxembourg Stock Exchange not less than thirty days and not more
than forty-five days prior to such Redemption Date.
(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
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) that has
resulted or will result in the imposition of a tax (whether by direct assessment
or by withholding at source) or other similar imposition by any jurisdiction
that would (A) materially increase the cost to the Issuer of making payments in
respect of any subclass of Notes or of complying with its obligations under or
in connection with
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the 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 Administrative Agent on
behalf of the Issuer Group as contemplated by the Administrative Agency
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 a Rating Agency Confirmation. If, after using its reasonable
best efforts to avoid the adverse effects described above, any Issuer Group
Member has not avoided such effects, the Issuer may, at its election, redeem the
Notes on any Payment Date, in whole, at the Outstanding Principal Balance
thereof plus accrued and unpaid interest and accrued and unpaid Sale Premium
(after giving effect to any payment thereof on such Redemption Date under
Section 3.08 hereof) thereon to such Payment Date but without premium (other
than such Sale Premium); 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
Written Notice of any such Redemption shall be given by the Issuer (or the
Administrative Agent on its behalf) to the Trustee and, for so long as any Notes
are listed on the Luxembourg Stock Exchange, to the Listing Agent and the
Luxembourg Stock Exchange not less than thirty days and not more than forty-five
business days prior to the Redemption Date for such Redemption.
(c) Method of Redemption. Upon receipt of notice from the Issuer or
the Administrative Agent under Section 3.10(a) or 3.10(b) hereof, the Trustee
shall give Written Notice in respect of any such redemption of any subclass of
Notes under Section 3.10(a) or 3.10(b) hereof (a "Redemption") to each Holder of
Notes, at least 20 days before the Redemption Date for such Redemption. Except
in the case of a Refinancing, the Trustee shall not deliver any notice under
this Section 3.10(c) unless and until the Trustee shall have received
certification that all conditions precedent to such Redemption have been
satisfied and evidence satisfactory to it that the amounts required to be
deposited pursuant to Section 3.10(d) hereof 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 or the
Outstanding Principal Balance of each subclass of Notes to be redeemed, (iv) in
the case of a Redemption of the Notes of any subclass in whole, that Notes of
each subclass to be redeemed must be surrendered to the Trustee to collect the
Redemption Price plus accrued and unpaid interest on such Notes and (v) in the
case of a Redemption of the Notes of any subclass 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 Notes called for Redemption
shall cease to accrue on and after the Redemption Date.
(d) Deposit of Redemption Amount. On or before 10:00 a.m. (New York
City time) on the twentieth day preceding any Redemption Date in respect of a
Redemption under Section 3.10(a) hereof, the Issuer shall, to the extent an
amount equal to the Redemption Price of Notes to be redeemed and all accrued and
unpaid interest and accrued and unpaid Sale Premium (after giving effect to any
payment thereof on such Redemption Date under Section 3.08 hereof) as of the
Redemption Date is not then held on deposit therein, deposit or cause to be
deposited in
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the Defeasance/Redemption Account or, in the case of a Refinancing, the
Refinancing Account, an amount in immediately available funds equal to such
amount. On or before 10:00 a.m. (New York City time) on the twentieth day
preceding any Redemption Date in respect of a Redemption under Section 3.10(b)
hereof, the Issuer shall, to the extent an amount equal to the Outstanding
Principal Balance of Notes to be redeemed and all accrued and unpaid interest
and accrued and unpaid Sale Premium (after giving effect to any payment thereof
on such Redemption Date under Section 3.08 hereof) as of the Redemption Date is
not then held on deposit therein, deposit or cause to be deposited in the
Defeasance/Redemption Account or, in case of a Refinancing, the Refinancing
Account, an amount in immediately available funds equal to such amount.
(e) Notes Payable on Redemption Date. After notice has been given
under Section 3.10(c) hereof, the Outstanding Principal Balance of the Notes to
be redeemed on such Redemption Date shall become due and payable at the
Corporate Trust Office of the Trustee, and 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. Upon surrender of
any Note for redemption in accordance with such notice, the Redemption Price or
the Outstanding Principal Balance (as applicable) of such Note, together with
accrued and unpaid interest and accrued and unpaid Sale Premium on such Note
shall be paid as provided for in this Section 3.10. If any Note to be redeemed
shall not be so paid upon surrender thereof for redemption, the amount in
respect thereof shall continue to bear interest until paid from the Redemption
Date at the interest rate applicable to such Note.
Section 3.11 Adjustment of Certain Percentages, Factors and Balances. Upon
each acquisition of any Additional Aircraft or the issuance of any Refinancing
Notes, subject to Sections 5.02(f) and 5.02(h) hereof (as applicable), the Class
Percentages for any class of Notes and related Pool Factors and Extended Pool
Factors for any subclass of Notes may be adjusted to take into account such
Permitted Additional Aircraft Acquisition or the issuance of such Refinancing
Notes in the manner specified in the Controlling Trustees' Resolution providing
for such action; provided, that no Pool Factor or Extended Pool Factor for any
subclass of Notes may be adjusted so as to change the original Average Life of
the affected subclass of Notes or alter the rate at which such subclass of Notes
was originally scheduled to amortize. The Administrative Agent shall include
such adjusted Class Percentages, Pool Factors, Extended Pool Factors and Target
Principal Balances in each Quarterly Report and Annual Report.
Section 3.12 Credit Facilities. Notwithstanding Section 3.08 hereof,
Article X hereof, or anything else to the contrary contained in the Indenture or
the Security Trust Agreement, all amounts available in any Cash Collateral
Account or drawn against any other Credit Facility shall be paid to Holders of
the subclass of Notes (and holders of other obligations) for whose benefit such
Credit Facility is stated to be established except to the extent otherwise
provided in the Controlling Trustees' Resolutions providing for such Credit
Facility.
Section 3.13 Issuer Cure Amount. In the event that the amounts available
for distribution under Section 3.08 hereof and from any Credit Facility are
insufficient to pay in full the interest due on any class of Notes on any
Payment Date, the Issuer may, out of funds provided to it by one or more
Certificateholders (and not out of any amounts in the Collections Account or any
other Account or any other Collateral), pay such shortfall with respect to such
class of Notes on such Payment Date by giving Written Notice of its intention to
do so
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(specifying the amount thereof) to the Administrative Agent and the Trustee at
least one Business Day prior to such Payment Date by transferring funds in such
amount (the "Issuer Cure Amounts") to the Trustee on such Payment Date for
deposit into the applicable Note Account. All Issuer Cure Amounts so deposited
shall be paid out of such Note Account to the relevant Holders notwithstanding
Section 3.08 hereof, Article X hereof or anything else to the contrary contained
in this Indenture or the Security Trust Agreement.
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 subclass 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 Maturity Step-Up
Interest, Registration Step-Up Interest or Additional Interest) on any Note of
such subclass, and the continuance of such default unremedied for a period of
five Business Days after the same shall have become due and payable;
(b) failure to pay when due principal of any Note of such subclass 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 subclass, to the extent that there are, on
any Payment Date, amounts available for such payment in the Collections Account
or Cash Collateral Account, and the continuance of such default for a period of
five or more Business Days after such Payment Date;
(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 subclass of Notes and continues for a
period of 30 days (or, if such failure or breach is capable of remedy within 90
days of the date of the written notice referred to below and the Administrative
Agent has promptly provided the Trustee with a certificate stating that the
Issuer has commenced, or will promptly commence, and diligently pursue all
reasonable efforts to remedy such failure or breach, so long as the Issuer or
any Issuer Subsidiary is diligently pursuing such remedy but in any event no
longer than 90 days) after written notice thereof has been given to the Issuer
by the Controlling Party or by the Holders of at least 25% of the aggregate
Outstanding Principal Balance of the Notes of the Senior Class;
(e) 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
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the Issuer or any Significant 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;
(f) 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;
(g) a 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 Issuer 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(g) 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
(h) 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 (other than an Event of Default under
clause (e) or (f) of Section 4.01 hereof) occurs and is continuing, the
Controlling Party may, and (if the Controlling Party is the Senior Trustee) upon
the written direction of Holders of at least 25% of the aggregate Outstanding
Principal Balance of the Senior Class, shall, give a Default Notice to the
Issuer, the Administrative Agent, the Security Trustee 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 Controlling Party 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, the Controlling
Party may (and if the Controlling Party is the Senior Trustee, upon the written
direction of Holders of a majority of the aggregate Outstanding Principal
Balance of the Senior Class, shall) by Written Notice to the Issuer, the Senior
Trustee (if not the Controlling Party), the Administrative Agent, the Security
Trustee and the Trustee, subject to Section 4.05(a) hereof, 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 Notes, and the principal or
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Redemption Price of and Sale Premium, if any, on the 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 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) of Section 4.01
hereof 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, no Holders of any
class of Notes other than the Senior Class may give or direct the giving of a
Default Notice or exercise or direct the exercise of any remedy in respect of
such Event of Default, and no Person other than the Controlling Party may give a
Default Notice or exercise any such remedy.
(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 (at the direction of the Controlling Party if it
is not the Controlling Party) may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal or Redemption Price of,
interest or Sale Premium, if any, 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 hereof and the final sentence of Section 12.04 hereof, 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:
(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 a majority the aggregate Outstanding Principal Balance
of the Senior Class 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;
(e) during such 60-day period, Holders of a majority of the Outstanding
Principal Balance of the Senior Class do not give the Senior Trustee a
revocation or direction inconsistent with such request; and
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(f) the provider of any Primary Eligible Credit Facility shall not have
elected to become the Controlling Party.
No one or more Holders 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 Controlling Party or (if
the Controlling Party is the Senior Trustee) a majority of the Outstanding
Principal Balance of the Senior Class 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, or Sale
Premium, if any, with respect to 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
given to each Rating Agency.
(b) Any written waiver of a Default or an Event of Default given by
Holders 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 any reason, or has been determined adversely to the Trustee or
such Holder, then in every such case the Issuer, the Trustee and the Holders
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 Holders 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 (or the Controlling Party) 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 (or the Controlling Party), 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 (or the Controlling Party) in the
exercise of any right, remedy or power or in the pursuance of any remedy shall
impair any
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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 Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal or Redemption Price of, or Interest or Sale 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 Holder.
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 Holder 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 Holder 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 Holder for the enforcement of the payment of principal or Redemption Price
of, or interest or Sale Premium, if any, on its Note on or after the respective
due dates expressed in such Note, or a suit by a Holder or Holders of more than
10% of the Outstanding Principal Balance of any class or subclass of the Notes.
Section 4.12 Control by Holders. Subject to Sections 4.02 and 4.04 hereof
and to the rights of the Controlling Party hereunder, the Holders holding Notes
of any class or subclass of not less than a majority 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 for such class under this Indenture; provided that, for such class (a)
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;
and (b) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
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ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01 Representations and Warranties. The Issuer represents and
warrants to the Trustee as follows:
(a) Due Organization. The Issuer is a business trust duly created
under the laws of Delaware, and each Issuer Subsidiary is a business trust duly
created or 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.
(b) Special Purpose Status. The Issuer has not engaged in any
activities since its organization (other than those incidental to its
organization and other appropriate trust steps and arrangements for the payment
of fees to, and director's and officer's insurance for, the Controlling
Trustees, the authorization and the issuance of the Initial Securities, the
execution of the Related 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 organization.
(c) Non-Contravention. The purchase of the Initial Aircraft and
interests in the Initial Leases pursuant to the Asset Purchase Agreement, the
creation of the Initial Securities, the issuance, execution and delivery by the
Issuer of, and the compliance by the Issuer with the terms of the Initial
Securities, and the execution and delivery by each Issuer Group Member of, and
compliance by it with the terms of each of the Related Documents to which it is
a party:
(i) 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
(ii) do not and will not at the Initial Closing Date or any Payment
Date 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.
(d) Due Authorization. The purchase of the Initial Aircraft and
interests in the Initial Leases, the creation, execution and issuance of the
Initial Securities, 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 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.
(e) 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
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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. The Initial Certificates, when issued under the Trust
Agreement, will constitute validly issued interests to the trust estate under
the Trust Agreement.
(f) No Defaults. There exists no Event of Default nor any event
which, had the Initial Notes already been issued, would constitute a Default or
an Event of Default.
(g) No Encumbrances. Subject to the Security Interests created in
favor of the Security Trustee 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.
(h) No Consents. All consents, approvals, authorizations or other
orders of all regulatory authorities required (excluding any required by the
other parties to 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 Securities and the
offering of the Initial Securities by the Issuer has been obtained and are in
full force and effect and not contingent upon fulfillment of any condition.
(i) 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.
(j) Employees, Subsidiaries. The Issuer and each Issuer Subsidiary
have no employees. Set forth in Schedule 2 hereto is a true and complete list,
as of the date hereof, of all Issuer Subsidiaries, together with their
jurisdictions of organization.
(k) Ownership. The Issuer or an Issuer Subsidiary is the beneficial
owner of the Pledged Stock, the Pledged Debt, the Pledged Beneficial Interest
and the Non-Trustee Accounts, free from all Encumbrances and claims whatsoever
other than Permitted Encumbrances.
(l) No Filings. Under the laws of the States of Delaware and New
York and the Federal laws of the United States of America 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
Trust Agreement in Delaware) 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.
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(m) 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 the
Issuer Group than the agreement being terminated) or discharge or prejudice the
validity or effectiveness of this Indenture (other than as permitted herein),
the Security Trust Agreement, the Asset Purchase Agreement, the Administrative
Agency Agreement, the Financial Advisory Agreement, the Capital Markets Advisory
Agreement, the Registration Rights Agreement, the Additional Servicing Agreement
(if entered into) or the 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 Controlling
Trustees determining that such action, permitted action or release does not
materially adversely affect the interests of the Holders 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 with respect to the
Issuer Group Services (as defined in the Administrative Agency Agreement), a
financial advisor and a servicer (provided that, if the Servicer or any
Additional Servicer terminates the Servicing Agreement or the Additional
Servicing Agreement pursuant to Section 10.02(a) thereof, this Section 5.02(a)
shall not be violated if the Issuer uses its best efforts to obtain a successor
servicer).
(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
("Ownership Interest") 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 Trust Agreement, (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 the Issuer and any other
Issuer Group Member from such Lease had such Encumbrance not been created) or
(iv) 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.
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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 the ownership of voting Ownership
Interest, 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, conditional sale agreement or Purchase Option under the Initial
Lease of any Initial Aircraft existing on the date of acquisition of such
Aircraft or otherwise existing on the relevant Closing Date or Aircraft
Agreement meeting the requirements of clause (iii) or (v) 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;
(viii) any Encumbrance arising under an Eligible Credit Facility and (ix) any
other lien not referred to in clauses (i) through (viii) of this paragraph which
would not adversely affect the owner's rights and does not exceed, individually,
$250,000 per Aircraft or, in the aggregate, 1% of the Initial Appraised Value of
the Portfolio for all 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 Ownership Interest held by Persons other than the
Issuer or any Issuer Subsidiary; provided that the Issuer may, subject to the
provisions set forth in Article III hereof, make the payments to or for the
account of the Certificateholders provided for therein; (ii) purchase, redeem,
retire or otherwise acquire for value any shares of Ownership Interest of the
Issuer or any Issuer Subsidiary held by or on behalf of Persons other than the
Issuer or any Issuer Subsidiary other than as provided in Sections 2.11 and
5.02(l)(ii)(B) hereof; (iii) make any payment of principal, interest or 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 Articles II, III and XI hereof; provided that the Issuer
or any of its Affiliates may repurchase, defease or otherwise acquire or retire
any of the Notes other than from the Available Collections so long as any new
notes of the Issuer issued in connection with such transaction rank pari passu
with the Notes being repurchased, defeased, acquired or retired and the
Controlling Trustees shall determine that such action does not materially
adversely affect the Holders and shall have obtained a Rating Agency
Confirmation; or (iv) make any Investments (other than Permitted Account
Investments, Allowed Restructurings, Investments permitted under Section 5.02(e)
hereof and Investments in any Issuer Group Member pursuant to the Asset Purchase
Agreement or a Permitted Additional Aircraft Acquisition; provided that written
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notification of the organization or acquisition of each such Issuer Group Member
shall have been given to each Rating Agency).
The term "Investment" for purposes of the above restriction means
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 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) or
(iv) of the second paragraph of Section 5.02(g) hereof so long as the Issuer
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 Ownership Interest 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 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 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) purchasing or otherwise acquiring (subject to Section 5.02(h)
hereof), owning, 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 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 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
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anticipated to be delinquent, of such Lessees or their respective Affiliates in
the ordinary course of business (an "Allowed Restructuring");
(ii) providing loans to, guaranteeing or otherwise supporting the
obligations and liabilities of any Issuer Group Member, in each case on such
terms and in such manner as the Controlling Trustees see 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); provided that written
notification shall have been given to each Rating Agency of such loan, guarantee
or other support;
(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 Issuer upon such terms and conditions as the Controlling
Trustees see fit, for cash or in payment or in partial payment for any property
purchased or otherwise acquired by any Issuer 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 and with providers
specified by the Controlling Trustees' Resolution providing therefor from time
to time and submitted to the Rating Agencies, including 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, trusts, syndicates, partnerships
or other entities 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 this Indenture, (B) acquiring, holding and
disposing of shares, securities and other interests in any such trust, company,
syndicate, partnership or other entity 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;
(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;
and
(vii) entering into the Additional Servicing Agreement with any
UniCapital Entity with respect to Aircraft purchased from that or any other
UniCapital Entity provided that the Issuer shall have first obtained a Rating
Agency Confirmation with respect to such action and shall deliver to the Trustee
the Controlling Trustees' Resolution authorizing the Additional Servicing
Agreement.
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(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.
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;
(ii) Indebtedness in respect of any Refinancing Notes or other
Indebtedness described in the proviso to Section 5.02(c)(iii) hereof; provided
that (A) such Refinancing Notes or other Indebtedness receive ratings from the
Rating Agencies at the close of such Refinancing or repurchase equal to or
higher than those of the subclass being refinanced or repurchased (determined at
the date of Incurrence), (B) taking into account such Refinancing or repurchase,
a Rating Agency Confirmation is obtained prior to such Refinancing or repurchase
with respect to each subclass of Notes Outstanding at such time and (C) the net
proceeds of any such Refinancing or other Indebtedness shall be applied only (x)
to repay the Redemption Price of the subclass of Notes being so refinanced or
repurchased plus the Refinancing Expenses relating thereto, (y) to fund any Cash
Collateral Account established for the related Refinancing Notes (up to the
Required Amount therefor) and (z) for deposit into the Collections Account as
Reserved Cash (including in connection with an increase in any Blockage Amount
effected under this Indenture in connection with the issuance of such
Refinancing Notes);
(iii) Indebtedness in respect of guarantees by any Issuer Group
Member or any other Issuer Group Member (other than the Guarantee described in
(v) below), provided that no such Indebtedness shall be Incurred if it would
materially adversely affect the Holders;
(iv) Indebtedness in respect of any Additional Notes the net
proceeds of which are applied (A) to finance a Permitted Additional Aircraft
Acquisition, (B) to fund any Cash Collateral Account established for such
Additional Notes (up to the Required Amount therefor), (C) for deposit into the
Collections Account as Reserved Cash (including in connection with an increase
in any Blockage Amount effected under this Indenture in connection with the
issuance of such Additional Notes) and (D) to fund expenses related thereto;
provided that (x) a Rating Agency Confirmation is obtained prior to the
Incurrence of such Indebtedness with respect to all of the Notes Outstanding at
such time and (y) the net proceeds of such Indebtedness shall be applied only
for the purposes specified above in this clause (iv) and (z) such Additional
Notes will be cross-collateralized with all Secured Obligations by the
Collateral under the Security Trust Agreement;
(v) obligations to each Seller or each UniCapital Entity (as
applicable) under each Acquisition Agreement and any related lease assignment
and assumption agreements and the documents related thereto, including any
Indebtedness owed to any Lessee under any such agreement or the Lease with
respect to maintenance contributions;
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(vi) Indebtedness under any agreements between the Issuer or any
Issuer Subsidiary and any other Issuer Group Member (each, an "Intercompany
Loan"); provided that such Indebtedness shall be evidenced by promissory notes
and written notification shall have been given to each Rating Agency of the
Incurrence of such Indebtedness on behalf of the Issuer; and
(vii) Indebtedness of the Issuer under any Credit Facility, provided
that a Rating Agency Confirmation is obtained prior to entering into such new
Credit Facility.
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 Dispositions. The Issuer shall not, and
shall not permit any Issuer Subsidiary to, sell, transfer or otherwise dispose
of any Aircraft or any interest therein other than as provided in Section 4(e)
of Schedule 2.02(a) of the Servicing Agreement or such similar provision in the
Additional Servicing Agreement.
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 purchased on the date such Aircraft is
acquired 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 Substitute Aircraft or 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 Issuer Group Member; provided that no 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 Holders; 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 or (v) pursuant to an
Aircraft Agreement the net present value of the cash Net Sale Proceeds of which
is less than the Note Target Price, provided that (with respect to this clause
(v)), (x) in any one calendar year such sales do not exceed 10% of the Adjusted
Portfolio Value as determined by the most recent Appraisal obtained for such
calendar year, (y) a Controlling Trustees' Resolution delivered to the Trustee
confirms that such sales would not materially adversely affect the Holders and
(z) Rating Agency Confirmation is obtained or such sales do not result in a
Concentration Default.
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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 means the present value of all payments received or to be received by
the Issuer or any Issuer Subsidiary 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 Issuer (based on
the cost of funds represented by the Notes and 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 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 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 Notes,
in each case on the most recent Payment Date.
"Aircraft Agreement" means any lease, sublease, conditional sale
agreement, finance leases, 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 a Purchase Option granted to an
Issuer Group Member) to purchase an Aircraft, 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 or Additional Servicing Agreement, as
applicable) 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) hereof 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.
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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) the acquisition does not result in a Concentration Default and
(iii) after giving effect to such acquisition, no more than 90% by appraised
Base Value of the Portfolio consists of Stage 3 narrowbody aircraft, 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 regional jets and none of the Aircraft are turboprop aircraft, without Rating
Agency Confirmation, and (B) purchase or otherwise acquire, directly or
indirectly, (x) Remaining Aircraft pursuant to the Asset Purchase Agreement or
(y) Substitute Aircraft. If, in connection with any Permitted Additional
Aircraft Acquisition, Rating Agency Confirmation has been obtained with respect
to a UniCapital Entity's acting as the Additional Servicer, the Issuer shall
enter into the Additional Servicing Agreement with such UniCapital Entity upon
the terms approved by the Rating Agencies and set forth in the Controlling
Trustees' Resolution therefor.
(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, including without limitation 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, excluding any capital
expenditure made in the ordinary course of business in connection with a new
lease of such Aircraft (each such non-excluded 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, does not exceed the aggregate amount of funds that would be
necessary to perform one incidence of heavy maintenance (as described in the
Servicing Agreement) on such Aircraft, including the airframe and the related
Engines thereof; (ii) (A) such Modification Payment is included in the annual
operating budget of the Issuer Group and approved by the Controlling Trustees or
(B) 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)(xxviii) 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 Issuer Group Members,
taken as a whole, pursuant to this Section 5.02(i) after the Initial Closing
Date, including such Modification Payment, shall not exceed 5% of the aggregate
Initial Appraised Value of all Aircraft acquired by the Issuer 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 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 entity, the
charter of which is substantially
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similar to the Trust Agreement 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, (A) payments from such
resulting entity to the Holders do not give rise to any withholding tax payments
less favorable to the Holders than the amount of any withholding tax payments
which would have been required had such event not occurred and (B) such entity
is not subject to taxation as a corporation or an association or a publicly
traded partnership taxable as a corporation, (ii) in the case of any
consolidation, merger or transfer by the Issuer, the Certificates shall remain
outstanding or new Ownership Interest shall be issued in exchange therefor
having substantially the same terms and conditions as the exchanged Certificates
and the surviving successor or transferee entity shall expressly assume all of
the obligations of the Issuer under this Indenture, the Notes and each other
Related Document to which the Issuer is then a party, (iii) Rating Agency
Confirmation is obtained 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, (v) such
transaction does not result in recognition of gain or loss by the
Certificateholders for U.S. Federal income tax purposes and (vi) 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 complies 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 Group if such
consolidation, merger, sale, conveyance, transfer, lease or disposition, as the
case may be, would not materially adversely affect the Holders and written
notification is given to each Rating Agency by the Issuer or its agent, (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 Notes in
accordance with Section 3.10 or Article XI hereof, respectively.
(k) Limitation on Transactions with 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 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 the Issuer Group, its
acquisition of the Initial Aircraft or pursuant to the terms of the Related
Documents; (ii) any transaction within and among the Issuer or any Issuer
Subsidiary and any other Issuer Group Member; provided that no such transaction,
other than among the Issuer and any Issuer Subsidiaries, shall be consummated if
such transaction would materially adversely affect any Holders; (iii) the
payment of reasonable and customary fees to, and the provision of reasonable and
customary liability insurance in respect of, the Controlling Trustees; (iv) any
payments on or with respect to the Notes or Certificates in accordance with this
Indenture and the Trust Agreement; (v) any Permitted Additional Aircraft
Acquisition or any transaction complying with Section 5.02(g) hereof; (vi) any
payments of the types referred to in clause (i) or (ii) of Section 5.02(c)
hereof and not prohibited thereunder; or
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(vii) sale of the Issuer or any Issuer Subsidiaries as part of a single
transaction providing for the redemption or defeasance of Notes in accordance
with Section 3.10 or Article XI hereof, respectively.
(l) Limitation on the Issuance, Delivery and Sale of Equity
Interests. 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 beneficial interests, shares, participations or
other equivalents existing on the Initial 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, other than beneficial
interests, shares, participations or other equivalents existing on the Initial
Closing Date), except (A) the issuance, sale, delivery, transfer or pledge of
Ownership Interest in any Issuer Group Member to or for the benefit of any other
Issuer Group Member, (B) issuances or sales of any Additional Certificates the
proceeds of which are applied to finance a Permitted Additional Aircraft
Acquisition provided that (x) a Rating Agency Confirmation is obtained prior to
such issuance with respect to all of the Notes Outstanding at such time and (y)
the net proceeds of such issuance shall be used only to finance such Permitted
Additional Aircraft Acquisition and/or the purpose to which the proceeds of
Additional Notes may be applied in accordance with the provisions of Section
2.11 hereof; (C) issuances or sales of shares of Ownership Interest 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 Controlling
Trustees to avoid adverse tax consequences or to facilitate the registration or
leasing of Aircraft, (D) the pledge of the Pledged Stock and Pledged Beneficial
Interest pursuant to the Security Trust Agreement, (E) the sale of any Ownership
Interest 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 issuance of Additional Certificates to the Certificateholders (or their
nominees) to the extent such Certificateholder provides funds to the Issuer with
which to effect a Redemption, fund an Issuer Cure Amount or discharge the Notes
upon their Acceleration.
(m) Bankruptcy and Insolvency; Corporate Governance. The Issuer (i)
shall promptly provide the Trustee and the Rating Agencies with written 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 it or for any substantial part of its
property; (ii) shall not take any action to waive, repeal, amend, vary,
supplement or otherwise modify its charter documents that would adversely affect
the rights, privileges or preferences of any holder of the Notes, as determined
by the Controlling Trustees; and (iii) shall not, without an affirmative
unanimous written resolution of the Controlling Trustees, take any action to
waive, repeal, amend, vary, supplement or otherwise modify the provisions of the
Trust Agreement which requires a unanimous resolution of the Controlling
Trustees, or limits the actions of beneficial interest holders, with respect to
voluntary insolvency proceedings or consents to involuntary insolvency
proceedings.
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(n) Payment of Principal, Premium, if any, and Interest. The Issuer
shall duly and punctually pay the principal, Sale Premium, if any, 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 other than as
required by any provisions of local law; provided that trustees and directors
shall not be deemed to be employees for purposes of this Section 5.02(o).
Section 5.03 Operating Covenants. The Issuer covenants with the Trustee as
follows:
(a) Concentration Limits. Without a 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 to exceed any of
the Concentration Limits set forth in Exhibit E hereto (as such limits may be
adjusted by the Issuer from time to time, subject to a 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 to any Lessee located in, or as a result of which such
Aircraft would be or would be permitted to be habitually operated, in a
jurisdiction set forth in clause (a) of the Repossession Guidelines as set forth
on Exhibit E hereto and as amended from time to time upon the approval of the
Rating Agencies (the "Repossession Guidelines") as "Prohibited Countries".
(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) 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
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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 later than 30 days prior to May 31 of each year, commencing
in 2000, deliver to the Trustee (with no obligation of review or inquiry on the
part of 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, 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
Aircraft and Engine that is subject to a Lease, cause, directly or indirectly,
through any Issuer Subsidiary, such Aircraft and Engine to be maintained in a
state of repair and condition 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 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 and Administrative Agent. The Issuer
shall notify the Trustee 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, Additional
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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.
(f) Leases. The Issuer shall (i) adopt and shall cause the Servicer
and any Additional Servicer to utilize the pro forma lease in the form provided
to the Issuer on the Initial Closing Date (in the case of the Servicer) or the
Closing Date for the acquisition of the first Additional Aircraft to be serviced
by the Additional Servicer (in the case of any Additional Servicer) as such pro
forma lease agreement or agreements may be revised for purposes of the Issuer
Group specifically or generally from time to time by the Servicer or such
Additional Servicer, as applicable (or, with respect to the Lease with respect
of the Initial Aircraft model number A320-200 bearing manufacturer's serial
number 373, the form provided by the Seller thereof to the Issuer on the Initial
Closing Date) (the "Servicer's Pro Forma Lease"), for use by the Servicer or
such Additional Servicer on behalf of the Issuer or any Issuer Subsidiary as a
starting point in the negotiation of Future Leases with Persons who are not
Issuer Group Members; provided, however, that with respect to any Future Lease
entered into in connection with (x) the renewal or extension of an Initial
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 such Additional Servicer, as applicable (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 applicable, 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
Issuer Group Members and provided further, however, that if the Controlling
Trustees determine, 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 Controlling Trustees (or, with 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 Holders, 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
Controlling Trustees 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
Controlling Trustees determine that any such revision to the Servicer's Pro
Forma Lease will not have a material adverse effect on the Holders, then the
Controlling Trustees shall amend the applicable Core Lease Provisions and (ii)
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 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 a 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 Issuer Group Member or change the jurisdiction of registration of any
Aircraft that is subject to a Lease, unless, upon
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entering into such Future Lease or changing the jurisdiction or registration of
such Aircraft (or within a commercially reasonable period thereafter), the
Servicer or the Additional Servicer, as applicable, 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
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 F hereto for each model of aircraft and as amended from
time to time with the approval of the Rating Agencies and (iii) airline
repossession insurance ("Repossession Insurance") for each Aircraft subject to a
Lease and habitually based in a jurisdiction determined in accordance with
clause (b) of the Repossession Guidelines, which may be amended from time to
time only 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 days after the
Initial Closing Date to one year from the Initial Closing Date (any such 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
Repossession Insurance 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 Repossession Insurance, any
governmental authority or agency of any jurisdiction for which Repossession
Insurance must be obtained), the sovereign foreign currency debt of which is
rated at least 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
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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.
(h) 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 Issuer 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.
Section 5.04 Compliance Through Agents. The Issuer shall be entitled to
delegate the performance of any of its covenants hereunder to one or more
Service Providers pursuant to one or more Related Documents entered into in
accordance with the terms of this Indenture so long as each such Related
Document is subject to the Lien of the Security Trust Agreement. Nothing in this
Section 5.04 is intended to, or shall, relieve the Issuer from any liability or
consequences hereunder arising from the failure of the Issuer or any such
Service Provider to perform any such covenant strictly in accordance with the
terms of this Indenture.
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.
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 Securities 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) this Indenture is the legal, valid and binding obligation of
Bankers Trust, enforceable against Bankers Trust in
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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 shall have no obligation to confirm
the veracity of the content of any such item provided to it (absent manifest
error). The Trustee may accept a copy of a resolution of, in the case of the
Issuer, the Controlling Trustees 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 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 Administrative Agent upon written
request such information and copies of such documents as the Trustee may have
and as are necessary for the Administrative Agent to perform its duties under
Articles II and III 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.
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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 Administrative Agent under
this Indenture or any of the Related Documents.
The Trustee shall not be liable for any Costs 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(e) or 4.01(f) 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 Administrative Agent or Holders 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 Administrative Agent 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 the appointment of the Administrative Agent or compliance by the Issuer,
the Administrative Agent or any lessee under a Lease with statutory or
regulatory requirements related to any Aircraft or any Lease. The Trustee shall
have no obligation, or liability in respect thereto, to verify or recalculate
any of the determinations made by the Administrative Agent pursuant to the
Related Documents. 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 Responsible in Individual Capacity. The Trustee acts
hereunder solely as trustee unless otherwise expressly provided; and all
Persons, other than the Holders 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 Holders. The Trustee agrees that it
shall have no right against the Holders 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
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to the Issuer and the Holders holding Notes of the related subclass, 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 or Sale Premium,
if any, on or principal or Redemption Price of 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 faith determines that the
withholding of such notice is in the interests of the Holders of the related
class.
Section 6.08 May Hold Securities. 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 Securities
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 Disqualification of Trustee. The Trustee shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act during the period of
time provided for therein. If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of Section 310(b) of the
Trust Indenture Act.
Section 6.11 Preferential Collection of Claims Against Issuer. The Trustee
shall comply with Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship listed in Section 311(b) of the Trust Indenture Act. A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.
Section 6.12 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
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required to file information, documents or reports pursuant to either of such
sections, then to file with the Trustee all Monthly Reports, Quarterly Reports
and Annual 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 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 Holders, 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 6.12 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, a brief certificate from the principal executive officer, principal
accounting officer or principal financial officer of the Administrative Agent,
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).
Section 6.13 Holder Lists. The Issuer will furnish or cause to be
furnished to the Trustee with respect to the Notes of each class:
(a) semi-annually, not later than 15 days after such semi-annual
dates as may be specified by the Trustee, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders as of such
Regular Record Date or semi-annual date, as the case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished, excluding from any such list names and addresses
received by the Trustee in its capacity as Registrar.
Section 6.14 Preservation of Information; Communications to Holders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 6.13 hereof and the names and addresses of
Holders received by the Trustee in its capacity as Registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.13 hereof upon receipt
of a new list so furnished.
(b) If three or more Holders of Notes of any series (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Note of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Notes of such series or with the Holders of
all Notes with
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respect to their rights under this Indenture or under such Notes and is
accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved at
the time by the Trustee in accordance with Section 6.14(a) hereof, or
(ii) inform such applicants as to the approximate number of Holders
of Notes of such series or all Notes, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with Section 6.14(a) hereof, and as to the approximate cost of
mailing to such Holders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of a Note of such series or to all Holders, as
the case may be, whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 6.14(a) hereof, a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
in connection with such mailing.
(c) Every Holder of Notes, by receiving and holding the same, agrees
with the Issuer and the Trustee that neither the Issuer nor the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with Section 6.14(b) hereof,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under Section 6.14(b) hereof.
Section 6.15 Reports by Trustee. (a) The term "reporting date" as used in
this Section 6.15 means February 28. Within 60 days after the reporting date in
each year, beginning in 2000, the Trustee shall transmit by mail to all Holders,
as their names and addresses appear in the Register, a brief report dated as of
such reporting date with respect to any of the events specified in Section 313
of the TIA which may have occurred during the 12 months preceding the date of
such report (but if no such event has occurred within such period no report need
be transmitted).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange,
except with respect to the Luxembourg Stock Exchange, the Listing Agent, upon
which the Notes are listed, with the Commission and with the Issuer. The Issuer
will notify the Trustee in writing when any Notes are listed on any stock
exchange.
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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 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
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 Holder of the
related subclass who has been a bona fide Holder 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
Holders. If a 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 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 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.
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(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.
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 its duties under this Indenture, the Notes and the other Related Documents,
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 or delayed. The Issuer need not reimburse any expense or indemnity
against any loss or liability Incurred by the Trustee through negligence or bad
faith. The provisions of this Section 8.01 and Section 8.02 hereof shall survive
the termination of this Indenture or the earlier resignation or removal of the
Trustee.
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106
Section 8.02 Holders' Indemnity. The Trustee shall be entitled to be
indemnified (except with respect to losses, damages or obligations arising from
the Trustee's negligence or bad faith) by the Holders of any subclass of the
Notes before proceeding to exercise any right or power under this Indenture or
the Administrative Agency Agreement at the request or direction of such Holders.
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 a Controlling Trustees' Resolution, may amend or modify this
Indenture or the Notes provided that, without the consent of each provider of a
Credit Facility, no such amendment may modify the provisions of this Indenture
relating to such Person's Credit Facility or, to the extent affecting such
Person's Credit Facility, Credit Facilities generally; provided further that,
without the consent of each Swap Provider, each provider of a Credit Facility
and each Holder of any Notes, in each instance affected thereby, no such
amendment may, except as otherwise provided in Section 3.11 hereof, 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
amount of, any interest, principal or Redemption Price and Sale 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, except as otherwise
provided in Section 3.09 hereof, 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 this Indenture.
The Issuer shall give each Rating Agency prior notice of any
amendment under this Section 9.01 and any amendments of the 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 with the Issuer, without the consent of any
Holder, (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 subclass of
<PAGE> 113
107
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
Administrative Agency Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses Incurred among the Accounts by the
Administrative Agent, (c) to add or reflect any Credit Facility, (d) to any
amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to facilitate the issuance of Refinancing Notes and/or Additional
Notes and related acquisition of Additional Aircraft (all in a manner consistent
with the provisions of this Indenture) or (e) 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 Holder of the subclass of Notes affected thereby and
each Holder of any subclass of Notes ranking senior thereto. In no event shall
the provisions set forth in Section 3.08 hereof 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, 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,
immunities or indemnities under this Indenture or otherwise.
Section 9.05 Conformity with Trust Indenture Act. Every indenture
supplemental hereto pursuant to this Article IX shall conform to the
requirements of the Trust Indenture Act as then in effect.
ARTICLE X
SUBORDINATION
Section 10.01 Subordination of the Securities and Other Subordinated
Obligations. (a) The Issuer (on behalf of itself and the Certificateholders),
each Holder (by its acceptance of its Note) and each other Secured Party (by its
acceptance of the benefits of the Security Trust Agreement) agree that (i) the
Securities and the other Obligations shall be subject to the provisions of this
Article X and, in the case of the Secured Obligations, to the provisions of
Article VII of the Security Trust Agreement and (ii) each Junior Claimant (and
each Junior Representative of any thereof) agree for the benefit of each Senior
Claimant (and the Controlling Party and the Trustee acting therefor) that each
Junior Claim shall be subordinated fully in right of payment to each Senior
Claim as provided in Section 3.08 hereof, Section 3.09 hereof (if applicable),
this Article X and Article VII of the Security Trust Agreement.
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(b) For the purposes of this Agreement, no Senior Claims shall be
deemed to have been paid in full until and unless the Senior Claimant (or the
Trustee therefor) of such Senior Claims shall have received payment in full in
cash of such Senior Claims.
(c) All payments or distributions upon or with respect to any
Obligations that are received by any Junior Claimant (or any Junior
Representative thereof) contrary to the provisions of this Indenture or in
excess of the amounts to which such Junior Claimant is entitled under Section
3.08 hereof shall be received for the benefit of the Senior Claimant, shall be
segregated from other funds and property held by such Junior Claimant (or any
Junior Representative therefor) and shall be forthwith paid over to the 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 Claims in accordance
with the terms hereof.
(d) Notwithstanding anything contained herein to the contrary,
payments from any property (or the proceeds thereof) (i) deposited in any Cash
Collateral Account or drawn under any Credit Facility (as provided in Section
3.12 hereof), (ii) deposited in any Note Account as Issuer Cure Amounts (as
provided in Section 3.11 hereof) or (iii) deposited in the Defeasance/Redemption
Account (or, in the case of a Refinancing, the Refinancing Account) in respect
of a Redemption under Section 3.10 hereof or in respect of the defeasance of
Notes pursuant to Article XI hereof shall not be subordinated to the prior
payment of any Senior Claimants in respect of any Senior Claims or subject to
any other restrictions set forth in this Article X and Article VII of the
Security Trust Agreement, 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 Grantors.
(e) The Senior Representative is hereby authorized to demand
specific performance of the provisions of this Article X at any time when any
Junior Claimant (or any Junior Representative thereof) shall have failed to
comply with any of such provisions applicable to them. The Junior Claimants (and
each Junior Representative of any thereof) hereby irrevocably waive 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 10.02 Rights of Subrogation. The Junior Claimants (and each Junior
Representative of any thereof) agree that no payment or distributions to any
Senior Claimant (or the Trustee therefor) pursuant to the provisions of this
Indenture shall entitle any Junior Claimant (or any Junior Representative
thereof) to exercise any rights of subrogation in respect thereof until all
Obligations constituting Senior Claims with respect to such Person shall have
been paid in full.
Section 10.03 Further Assurances of Junior Representatives. Each of the
Junior 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 Controlling Party may reasonably request,
in order to effectuate the provisions of this Article X.
Section 10.04 Enforcement. Each Junior Claimant (and the Junior
Representative therefor) agree that the provisions of this Article X shall be
enforceable against them under all
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circumstances, including without limitation in any proceeding referred to in
Sections 4.01(e) and 4.01(f) hereof.
Section 10.05 Continued Effectiveness. The provisions of this Article X
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 Claims is rescinded or
must otherwise be returned by any Senior Claimant upon the insolvency,
bankruptcy or reorganization of any Issuer Group Member, or otherwise, all as
though such payment had not been made.
Section 10.06 Senior Claims and Junior Claims Unimpaired. Nothing in this
Article X shall impair, as between the Issuer and any Senior Claimant or any
Junior Claimant, the obligations of the Issuer to such Person, including without
limitation the Senior Claims and the Junior Claims; provided that it is
understood that the enforcement of rights and remedies shall be subject to the
terms of this Indenture and the Security Trust Agreement.
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 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 hereof), 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) hereof, 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 hereof, the Issuer at any
time may terminate (i) all its obligations under the Notes and this Indenture
("Legal Defeasance" option) or (ii) its obligations under Sections 4.01 (other
than with respect to a failure to comply with Sections 4.01(a), 4.01(b),
4.01(c), 4.01(e) (only with respect to the Issuer) and 4.01(f) (only with
respect to the Issuer)), 5.02 and 5.03 hereof ("Covenant Defeasance" option).
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 Sections 4.01(a), 4.01(b),
4.01(c), 4.01(e) (other than with respect to the Issuer), 4.01(f) (other than
with respect to the Issuer)) and 5.02(n) hereof.
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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 and 2.09,
5.02(n), Article VI, Sections 8.01, 11.04, 11.05 and 11.06 hereof 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 hereof shall survive.
Section 11.02 Conditions to Defeasance. The Issuer may exercise its Legal
Defeasance option or its Covenant Defeasance option only if:
(a) the Issuer irrevocably deposits in trust in the
Defeasance/Redemption Account any one or any combination of (i) money, (ii)
obligations of, and supported by the full faith and credit of, the U.S.
Government ("U.S. Government Obligations") or (iii) 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 or Redemption Price, Sale Premium,
if any, and interest (A) on the Notes or any class or subclass of Notes being
defeased, in the case of Legal Defeasance, or (B) on all of the Notes in the
case of Covenant Defeasance, in either case, to maturity or redemption, as the
case may be;
(b) 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 each
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;
(c) 91 days pass after the deposit described in clause (a) above is
made and during the 91-day period no Event of Default specified in Section
4.01(e) or (g) hereof with respect to the Issuer occurs which is continuing at
the end of the period;
(d) the deposit described in clause (a) above does not constitute a
default under any other agreement binding on the Issuer;
(e) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit described in clause (a) does
not constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended;
(f) 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 neither the
Holders nor the Certificateholders will recognize income, gain or loss for U.S.
federal income tax purposes as a
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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;
(g) 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
Holders 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;
(h) 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;
(i) a Rating Agency Confirmation is obtained relating to the
defeasance contemplated by this Section 11.02; and
(j) the Issuer delivers to the Trustee an Opinion of Counsel and an
Officer's Certificate that all conditions precedent to such defeasance has been
satisfied.
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, Sale 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 or to
Article VIII of the Security Agreement.
Section 11.04 Repayment to Issuer. The Trustee shall promptly turn over to
the Issuer upon written request any excess money or securities held by it at any
time after application of the appropriate defeasance option.
Subject to any applicable abandoned property law, the Trustee shall
pay to the Issuer upon written request any money held by it for the payment of
principal or interest that remains unclaimed for two years and, thereafter,
Holders 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
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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.
ARTICLE XII
MISCELLANEOUS
Section 12.01 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 12.02 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 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 12.03 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 12.04 Restrictions on Exercise of Certain Rights. The Trustee and,
during the continuance of a payment Default with respect to the Senior Class,
the Senior Trustee, in its
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capacity as trustee of such class and except as otherwise provided in Section
4.04 hereof, 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 Holders 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, the Senior Trustee, in its capacity as trustee of such class and
except as provided in Section 4.04 hereof, 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 Delaware.
Section 12.05 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:
if to the Issuer, to:
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Fax (302) 651-8882
with copies to:
ReSource/Phoenix, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901
Attention: Financial Services Division
Fax: (415) 485-4522
and
UniCapital Air Group, Inc.
9420 S.W. 77th Avenue
Miami, Florida 33156
Attention: Wayne D. Lippman
Fax 305-271-1339
<PAGE> 120
114
if to the Administrative Agent, to:
ReSource/Phoenix, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901
Attention: Financial Services Division
Fax: (415) 485-4522
if to the Trustee, the Registrar, Bankers Trust or the Paying Agent, to:
Bankers Trust Company
Four Albany Street
New York, NY 10006
Structured Finance Team
Attention: Corporate Trust and Agency Services
Fax (212) 250-6439
For so long as the Notes are listed on the Luxembourg Stock
Exchange, if to the Listing Agent, Luxembourg Paying Agent and Registrar, to:
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955
Luxembourg
Attention: Pauline Slierings
Fax: 352-4797-73951
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 12.06 Assignments; Third Party Beneficiary. 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 this Indenture, or delegate
any of its duties hereunder. Each Swap Provider and each provider of a Credit
Facility shall be a third party beneficiary of Sections 3.08 and 9.03 hereof. In
addition, each Certificateholder shall be a third party beneficiary of Article
III hereof.
Section 12.07 Currency Conversion. (a) If any amount is received or
recovered by the Administrative Agent 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
<PAGE> 121
115
(the "Agreed Currency"), then the amount in the Received Currency actually
received or recovered by the Trustee or the Administrative Agent 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
Administrative Agent 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 Administrative
Agent or 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 Issuer, the
Issuer shall pay to the Administrative Agent such amount as the Administrative
Agent shall determine to be necessary to indemnify the Trustee and the
Administrative Agent 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 Administrative Agent 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 Administrative Agent may convert any moneys
received, recovered or realized by the Administrative Agent under this Indenture
(including the proceeds of any previous conversion under this Section 12.07)
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 Administrative Agent, 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 12.08 Application to Court. The Senior 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 Holders 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 12.09 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.
<PAGE> 122
116
Section 12.10 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 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 Corporation Service Company, 2 World Trade Center, New York, New
York 10048, and each of the parties hereby appoints Corporation Service Company,
its designee, appointee and agent to receive, accept and acknowledge for and on
its behalf such service of legal process, with the exception of the Trustee, who
hereby consents to receive any such service of process directly at the address
set forth in Section 12.05 herein.
(b) The submission to the jurisdiction of the courts referred to in
Section 12.10(a) hereof 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 12.11 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 12.12 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 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 12.13 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.
<PAGE> 123
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as the Owner
Trustee
By /s/ Donald G. MacKeican
-------------------------------------------
Name: Donald G. MacKeican
Title: Vice President
BANKERS TRUST COMPANY
By
-------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC.,
as the Administrative Agent
By
-------------------------------------------
Name:
Title:
<PAGE> 124
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as the Owner
Trustee
By
-------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By /s/ Jenna Kaufman
-------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC.,
as the Administrative Agent
By
-------------------------------------------
Name:
Title:
<PAGE> 125
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as the Owner
Trustee
By
-------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By
-------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC.,
as the Administrative Agent
By /s/ Michael K. Ulyatt
-------------------------------------------
Name: Michael K. Ulyatt
Title: AVP
<PAGE> 126
EXHIBIT A-1
FORM OF SUBCLASS A-1 FLOATING RATE ASSET-BACKED NOTE, SERIES 1999-1
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO AIRCRAFT FINANCE TRUST THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) IF THIS NOTE IS NOT
A CLASS D NOTE, IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE (A) THROUGH (F) 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, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE
ATTACHED HERETO AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE
TRANSFER IS PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE
<PAGE> 127
AND AIRCRAFT FINANCE TRUST SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 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.
AIRCRAFT FINANCE TRUST
$512,500,000 CLASS A-1 FLOATING RATE ASSET-BACKED NOTES, SERIES 1999-1
SUBCLASS A-1
No. ____
CUSIP:
ISIN:
Common Code:
$_________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of
the State of Delaware (herein referred to as the "Issuer"), for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum
of ______________________________ DOLLARS ($_________) on May 15, 2024 (the
"Final Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof at a fluctuating rate per annum equal to the sum of
LIBOR (calculated as provided in the Indenture) plus 0.48% per annum (together
with Registration Step-Up Interest and Maturity Step-Up Interest, the "Stated
Rate of Interest") from the date hereof until the Outstanding Principal Balance
hereof is paid, payable on each Payment Date. Interest on the Subclass A-1 Notes
in each Interest Accrual Period will be calculated by the Administrative Agent
(as hereinafter defined) by multiplying the Stated Rate of Interest on the
Subclass A-1 Notes for the relevant Interest Accrual Period by the Outstanding
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<PAGE> 128
Principal Balance of the Subclass A-1 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).
This Subclass A-1 Note is one of a duly authorized issue of Notes of
the Issuer issued under the Trust Indenture dated as of May 5, 1999 (as amended
or supplemented from time to time, the "Indenture"), between the Issuer,
ReSource/Phoenix, Inc., in its capacity as Administrative Agent (the
"Administrative Agent") and Bankers Trust Company (the "Trustee"). The Indenture
also provides for the issuance of Class A Notes of any subclass (including
additional Subclass A-1 Notes) Class B Notes, Class C Notes and Class D 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 of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of Subclass A-1 Notes. This Subclass A-1 Note is subject
to all of the terms of the Indenture.
The Outstanding Principal Balance of this Subclass A-1 Note may be
repaid prior to the Final Maturity Date through the application on the Payment
Dates of the Available Collections to the principal hereof as provided in
Section 3.08 of the Indenture (after making payments entitled to priority under
Section 3.08 of the Indenture). In addition, the Issuer may optionally redeem
all or part of the Outstanding Principal Balance of this Subclass A-1 Note on
any Payment Date at the applicable Redemption Price (calculated as provided in
the Indenture) or, in the case of a redemption for taxation reasons specified in
the Indenture or a redemption in
3
<PAGE> 129
certain default circumstances as provided in the Indenture, at the Outstanding
Principal Balance hereof plus accrued and unpaid interest hereon.
Any amount of premium or interest (including Maturity Step-Up
Interest and Registration 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 an interest rate per annum equal to the Stated Rate of Interest 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 therefor after making payments entitled to priority under Section
3.08 of the Indenture.
If a Registration Default (as defined and determined under Section 5
of the Registration Rights Agreement) occurs, thereafter an additional
incremental interest amount ("Registration Step-Up Interest") will accrue on
this Note at an annual rate of 0.5% until such Registration Default shall no
longer be deemed to be continuing (as determined under Section 5 of the
Registration Rights Agreement). The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement.
If this Note is not repaid on or before May 15, 2004, additional
interest, at a rate of 0.5% per annum shall accrue on the Outstanding Principal
Balance (as defined in the Indenture) of this Note ("Maturity Step-Up
Interest").
The indebtedness evidenced by the Subclass A-1 Notes is, to the
extent and in the manner provided in the Indenture and the Security Trust
Agreement, 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 A-1
Note is issued subject to the provisions thereof providing for such
subordination. Each Holder of this Subclass A-1 Note, by accepting the same, (a)
agrees to and
4
<PAGE> 130
shall be bound by such provisions, (b) authorizes and directs the Trustee and
the Security Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and (c)
appoints each of the Trustee and the Security Trustee its attorney-in-fact for
such purpose. All payments or distributions upon or with respect to any
Obligations (as defined in the Indenture), which include payment of principal,
premium and interest on this Note, that are received by the Holder of this Note
contrary to the priority of payment provisions of the Indenture or in excess of
the amounts to which the Holder of this Note is entitled under Section 3.08 of
the Indenture shall be received for the benefit of the Senior Claimant (as
defined in the Indenture), shall be segregated from other funds and property
held by the Holder of this Note and shall be forthwith paid over to the Security
Trustee in the same form as so received (with any necessary endorsement) 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 Claims (as
defined in the Indenture) in accordance with the terms of the Indenture.
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 subordinated
basis as referred to above, 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 ___________, to
the Person in whose name this Subclass A-1 Note is registered at the close of
business on the Record Date with respect to such Payment Date, such Person's pro
rata share (based on the aggregate percentage of the Outstanding Principal
Balance of the Subclass A-1 Notes held by such Person)
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<PAGE> 131
of the aggregate amount as may be distributable to all Holders of Subclass A-1
Notes on such Payment Date pursuant to Section 3.08 of the Indenture.
[IF THIS NOTE IS REPRESENTED BY A GLOBAL NOTE, WHETHER OR NOT AN
EXCHANGE NOTE, INSERT:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO AIRCRAFT FINANCE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.13 OF THE INDENTURE.]
[IF A TEMPORARY REGULATION S GLOBAL NOTE, INSERT:
THIS NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE WITHIN THE MEANING OF
THE TRUST INDENTURE REFERRED TO HEREINAFTER AND IS SUBJECT TO RESTRICTIONS
ON THE TRANSFER AND EXCHANGE THEREOF AND ON THE PAYMENT OF INTEREST
THEREON AS SPECIFIED IN THE TRUST INDENTURE.]
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 on the Record Date relating to such payment.
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 Holder 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.
6
<PAGE> 132
The Trustee or Paying Agent shall mail such notice of the final payment of this
Note to the Holder, specifying the date and amount of such final payment, no
later than five Business Days prior 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 Notes,
payments on a Payment Date shall be made by check mailed to each Holder of such
a Definitive 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 Holder of one or more Definitive Notes of Subclass A-1 Notes 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 Holder at a
financial institution in New York, New York. The final payment with respect to
any such Definitive Note, however, shall be made only upon presentation and
surrender of such Definitive Note by the Holder 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 this Note to the Holder,
specifying the date and amount of such final payment, no later than five
Business Days prior to such final payment.
This Subclass A-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 effective until, and such transferee shall
succeed to the rights of a Holder only upon, final registration of the transfer
by the Registrar in the Register. When this Subclass A-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 A-1 Notes of other authorized denominations
(including an
7
<PAGE> 133
exchange of this Subclass A-1 Note for an Exchange Note), 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);
provided that no exchanges of this Subclass A-1 Note for an Exchange Note shall
occur until a Registration Statement shall have been declared effective by the
Commission. No service charge shall be made for any registration of transfer or
exchange of this Subclass A-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 A-1 Note, the
Issuer and the Trustee may deem and treat the Person in whose name this Subclass
A-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
to this Subclass A-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 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, (A) without the
consent of each provider of a Credit Facility, no such amendment may modify (i)
the provisions of the Indenture relating to such Person's Credit Facility or
(ii) to the extent affecting such Person's Credit Facility, Credit Facilities
generally; provided further that, (B) without the consent of each Swap Provider,
each provider of a Credit
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<PAGE> 134
Facility and each Holder of any Notes, in each instance affected thereby, no
such amendment may, except as otherwise provided in Section 3.11 of the
Indenture, (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 or Redemption Price and
Sale 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, except as otherwise provided in Section 3.09 of the Indenture,
(iii) alter the manner or priority of payment of such subclass of Notes (each
such amendment referred to in subsection A and B, a "Basic Terms Modification").
The Indenture also permits the Trustee to agree with the Issuer, without the
consent of any Holder of the Notes, (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
subclass of Notes to correct a manifest error or an error which is of a formal,
minor or technical nature, (b) to modify the provisions of the Indenture or the
Administrative Agency Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses Incurred among the Accounts by the
Administrative Agent, (c) to add or reflect any Credit Facility, (d) to any
amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to permit the issuance of Refinancing Notes and/or Additional Notes
and the acquisition of Additional Aircraft consistent with the expense
provisions of the Indenture or (e) to comply with the requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939 (as amended, the "Trust Indenture Act"). Any amendment or
modification of the Indenture shall be
9
<PAGE> 135
binding on every Holder hereof, whether or not notation thereof is made upon
this Subclass A-1 Note.
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 Holder
of the Notes of the subclass affected thereby and each Holder 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, 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 registration
of transfer of, in 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.
The Subclass A-1 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
10
<PAGE> 136
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.
11
<PAGE> 137
IN WITNESS WHEREOF, the Issuer has caused this Subclass A-1 Note to
be signed manually or by facsimile by its Owner Trustee.
Date:______________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as the
Owner Trustee
By:___________________________________
Name:
Title: Authorized Signatory
12
<PAGE> 138
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass A-1 Notes designated above and referred to in the
within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Trustee
By: _______________________________
Authorized Signatory
13
<PAGE> 139
[FORM 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.
The undersigned covenants and agrees that it will treat this Note as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith.
Date: {Signature of Transferee}
NOTICE: to be executed by an executive
officer
{THE FOLLOWING PROVISIONS TO BE
INCLUDED ON ALL NOTES OTHER THAN
EXCHANGE NOTES AND PERMANENT
REGULATION S GLOBAL NOTES}
In connection with any transfer of this Note occurring prior to the date which
is the earlier of (i) the date the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective and this Note has been
exchanged for a freely tradable Exchange Note bearing terms substantially
identical to this Note or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
{Check One}
{ } (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
14
<PAGE> 140
{ } (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.13 of the Indenture shall have
been satisfied.
Date: {Signature of Transferor}
NOTICE: 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.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933 and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: {Signature of Transferee}
NOTICE: to be executed by an executive officer
15
<PAGE> 141
EXHIBIT A-2
FORM OF SUBCLASS A-2 FLOATING RATE NOTE
<PAGE> 142
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO AIRCRAFT FINANCE TRUST THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) IF THIS NOTE IS NOT
A CLASS D NOTE, IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE (A) THROUGH (F) 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, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE
ATTACHED HERETO AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE
TRANSFER IS PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND AIRCRAFT FINANCE TRUST SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED
2
<PAGE> 143
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.
AIRCRAFT FINANCE TRUST
$400,000,000 CLASS A-2 FLOATING RATE ASSET-BACKED NOTES, SERIES 1999-1
SUBCLASS A-2
No. ____
CUSIP:
ISIN:
Common Code:
$_________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of the State
of Delaware (herein referred to as the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, the principal sum of
________________ DOLLARS ($_________) on May 15, 2024 (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 (calculated as provided in the Indenture) plus 0.50% per annum (together
with Registration Step-Up Interest, the "Stated Rate of Interest") from the date
hereof until the Outstanding Principal Balance hereof is paid, payable on each
Payment Date. Interest on the Subclass A-2 Notes in each Interest Accrual Period
will be calculated by the Administrative Agent (as hereinafter defined) by
multiplying the Stated Rate of Interest on the Subclass A-2 Notes for the
relevant Interest Accrual Period by the Outstanding Principal Balance of the
Subclass A-2 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).
3
<PAGE> 144
This Subclass A-2 Note is one of a duly authorized issue of Notes of
the Issuer issued under the Trust Indenture dated as of May 5, 1999 (as amended
or supplemented from time to time, the "Indenture"), between the Issuer,
ReSource/Phoenix, Inc., in its capacity as Administrative Agent (the
"Administrative Agent") and Bankers Trust Company, as trustee (the "Trustee").
The Indenture also provides for the issuance of Class A Notes of any subclass
(including additional Subclass A-2 Notes) Class B Notes, Class C Notes and Class
D 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 Holders. This Subclass A-2 Note is
subject to all of the terms of the Indenture.
The Outstanding Principal Balance of this Subclass A-2 Note may be
repaid prior to the Final Maturity Date through the application on the Payment
Dates of the Available Collections to the principal hereof as provided in
Section 3.08 of the Indenture (after making payments entitled to priority under
Section 3.08 of the Indenture). In addition, the Issuer may optionally redeem
all or part of the Outstanding Principal Balance of this Subclass A-2 Note on
any Payment Date at the applicable Redemption Price (calculated as provided in
the Indenture) or, in the case of a redemption for taxation reasons specified in
the Indenture or a redemption in certain default circumstances as provided in
the Indenture, at the Outstanding Principal Balance hereof plus accrued and
unpaid interest hereon.
Any amount of premium or interest on this Subclass A-2 Note
(including Registration Step-Up Interest) that is 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
4
<PAGE> 145
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 therefor after making payments entitled to priority under
Section 3.08 of the Indenture.
If a Registration Default (as defined and determined under Section 5
of the Registration Rights Agreement) occurs, thereafter an additional
incremental interest amount ("Registration Step-Up Interest") will accrue on
this Note at an annual rate of 0.5% until such Registration Default shall no
longer be deemed to be continuing (as determined under Section 5 of the
Registration Rights Agreement). The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement.
The indebtedness evidenced by the Subclass A-2 Notes is, to the
extent and in the manner provided in the Indenture and the Security Trust
Agreement, 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 A-2
Note is issued subject to the provisions thereof providing for such
subordination. 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 and the Security Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints each of the Trustee and the Security Trustee its
attorney-in-fact for such purpose. All payments or distributions upon or with
respect to any Obligations (as defined in the Indenture), which include payment
of principal, premium and interest on this Note, that are received by the Holder
of this Note contrary to the priority of payment provisions of the Indenture or
in excess of the amounts to which the Holder of this Note is entitled under
Section 3.08 of the Indenture shall be received for the benefit of the Senior
Claimant (as defined in the Indenture), shall be segregated from other funds and
property held by
5
<PAGE> 146
the Holder of this Note and shall be forthwith paid over to the Security Trustee
in the same form as so received (with any necessary endorsement) 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 Claims (as defined in
the Indenture) in accordance with the terms of the Indenture.
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.
This Subclass A-2 Note is and will be secured, on a subordinated
basis as referred to above, 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 _____________, to
the Person in whose name this Subclass A-2 Note is registered at the close of
business on the Record Date with respect to such Payment Date, such Person's pro
rata share (based on the aggregate percentage of the Outstanding Principal
Balance of the Subclass A-2 Notes held by such Person) of the aggregate amount
as may be distributable to all Holders of Subclass A-2 Notes on such Payment
Date pursuant to Section 3.08 of the Indenture.
[IF THIS NOTE IS REPRESENTED BY A GLOBAL NOTE, WHETHER OR NOT AN
EXCHANGE NOTE, INSERT:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO AIRCRAFT FINANCE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
6
<PAGE> 147
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.13 OF THE INDENTURE.]
[IF A TEMPORARY REGULATION S GLOBAL NOTE, INSERT:
THIS NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE WITHIN THE MEANING OF
THE TRUST INDENTURE REFERRED TO HEREINAFTER AND IS SUBJECT TO RESTRICTIONS
ON THE TRANSFER AND EXCHANGE THEREOF AND ON THE PAYMENT OF INTEREST
THEREON AS SPECIFIED IN THE TRUST INDENTURE.]
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 on the Record Date relating to such payment.
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 Holder 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. The Trustee or Paying Agent shall mail such notice of the final payment
of this Note to the Holder, specifying the date and amount of such final
payment, no later than five Business Days prior 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 Notes, payments on a Payment Date shall be made by check mailed to
each Holder of such a Definitive 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 Holder of one or more Definitive Notes of Subclass
A-2 Notes 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
Holder at a financial institution in New York, New York. The final payment with
respect to any
7
<PAGE> 148
such Definitive Note, however, shall be made only upon presentation and
surrender of such Definitive Note by the Holder 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 this Note to the Holder,
specifying the date and amount of such final payment, no later than five
Business Days prior to such final payment.
This Subclass A-2 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 effective until, and such transferee shall
succeed to the rights of a Holder only upon, final registration of the transfer
by the Registrar in the Register. When this Subclass A-2 Note is presented to
the Registrar with a request to register the transfer or to exchange it for an
equal principal amount of Subclass A-2 Notes of other authorized denominations
(including an exchange of this Subclass A-2 Note for an Exchange Note), 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); provided that no exchanges of this Subclass A-2 Note for
an Exchange Note shall occur until a Registration Statement shall have been
declared effective by the Commission. No service charge shall be made for any
registration of transfer or exchange of this Subclass A-2 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.
8
<PAGE> 149
Prior to the registration of transfer of this Subclass A-2 Note, the
Issuer and the Trustee may deem and treat the Person in whose name this Subclass
A-2 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
to this Subclass A-2 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 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 Holders (voting as a single class); provided that, (A) without the
consent of each provider of a Credit Facility, no such amendment may modify (i)
the provisions of the Indenture relating to such Person's Credit Facility or
(ii) to the extent affecting such Person's Credit Facility, Credit Facilities
generally; provided further that, (B) without the consent of each Swap Provider,
each provider of a Credit Facility and each Holder of any Notes, in each
instance affected thereby, no such amendment may, except as otherwise provided
in Section 3.11 of the Indenture, (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 or Redemption Price and Sale 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, except as otherwise provided in
Section 3.09 of the Indenture, (iii) alter the manner or priority of payment of
such subclass of Notes (each such amendment referred to in subsection A and B, a
"Basic Terms Modification"). The Indenture also permits the Trustee to agree
with the Issuer, without the consent of any
9
<PAGE> 150
Holder of the Notes, (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 subclass of
Notes to correct a manifest error or an error which is of a formal, minor or
technical nature, (b) to modify the provisions of the Indenture or the
Administrative Agency Agreement relating to the timing of movement of Rental
Payments or other monies received or Expenses Incurred among the Accounts by the
Administrative Agent, (c) to add or reflect any Credit Facility, (d) to any
amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to permit the issuance of Refinancing Notes and/or Additional Notes
and the acquisition of Additional Aircraft consistent with the expense
provisions of the Indenture or (e) to comply with the requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939 (as amended, the "Trust Indenture Act"). Any amendment or
modification of the Indenture shall be binding on every Holder hereof, whether
or not notation thereof is made upon this Subclass A-2 Note.
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 Holder
of the Notes of the subclass affected thereby and each Holder 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, on behalf of the Holders of all of the Subclass A-2 Notes, to waive
compliance by the Issuer with certain
10
<PAGE> 151
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 registration of transfer of, in exchange or in
lieu of or upon the refinancing of this Subclass A-2 Note, whether or not
notation of such consent 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 registered 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.
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.
11
<PAGE> 152
IN WITNESS WHEREOF, the Issuer has caused this Subclass A-2 Note to
be signed manually or by facsimile by its Owner Trustee.
Date: _________________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By:___________________________________
Name:
Title: Authorized Signatory
12
<PAGE> 153
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subclass A-2 Notes designated above and referred
to in the within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Trustee
By: _______________________________
Authorized Signatory
13
<PAGE> 154
[FORM 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.
The undersigned covenants and agrees that it will treat this Note as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith.
Date: {Signature of Transferee}
NOTICE: to be executed by an executive
officer
{THE FOLLOWING PROVISIONS TO BE
INCLUDED ON ALL NOTES OTHER THAN
EXCHANGE NOTES AND PERMANENT
REGULATION S GLOBAL NOTES}
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the Shelf Registration Statement or
the Exchange Offer Registration Statement is declared effective and this Note
has been exchanged for a freely tradable Exchange Note bearing terms
substantially identical to this Note or (ii) the end of the period referred to
in Rule 144(k) under the Securities Act, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
14
<PAGE> 155
{Check One}
{ } (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
{ } (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.13 of the Indenture
shall have been satisfied.
Date: {Signature of Transferor}
NOTICE: 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.
TO BE COMPLETED BY PURCHASER IF (A) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933 and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: {Signature of Transferee}
NOTICE: To be executed by an executive officer
15
<PAGE> 156
EXHIBIT B
FORM OF CLASS B FLOATING RATE ASSET-BACKED NOTE, SERIES 1999-1
B-1
<PAGE> 157
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO AIRCRAFT FINANCE TRUST THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) IF THIS NOTE IS NOT
A CLASS D NOTE, IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE (A) THROUGH (F) 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, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE
ATTACHED HERETO AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE
TRANSFER IS PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND AIRCRAFT FINANCE TRUST SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED
B-2
<PAGE> 158
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.
AIRCRAFT FINANCE TRUST
$126,500,000 CLASS B FLOATING RATE ASSET-BACKED NOTE, SERIES 1999-1
No. ____
CUSIP:
ISIN:
Common Code:
$__________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of the State
of Delaware (herein referred to as the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, the principal sum of
______________________________ DOLLARS ($_________) on May 15, 2024 (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 (calculated as provided in the Indenture) plus 1.15% per annum
(together with Registration Step-Up Interest, the "Stated Rate of Interest")
from the date hereof until the Outstanding Principal Balance hereof is paid,
payable on each Payment Date. Interest on this Class B Note in each Interest
Accrual Period will be calculated by the Administrative Agent (as hereinafter
defined) by multiplying the Stated Rate of Interest on this Class B Note for the
relevant Interest Accrual Period by the Outstanding Principal Balance of this
Class B Note 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).
B-3
<PAGE> 159
This Class B Note is one of a duly authorized issue of Notes of the
Issuer issued under the Trust Indenture dated as of May 5, 1999 (as amended or
supplemented from time to time, the "Indenture"), between the Issuer,
ReSource/Phoenix, Inc., in its capacity as Administrative Agent (the
"Administrative Agent"), and Bankers Trust Company (the "Trustee"). The
Indenture also provides for the issuance of Class A Notes, Class C Notes and
Class D Notes. All capitalized terms used in this Class B 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 Class B Holders. This Class B Note is subject to
all of the terms of the Indenture.
The Outstanding Principal Balance of this Class B Note may be repaid
prior to the Final Maturity Date through the application on the Payment Dates of
the Available Collections to the principal hereof as provided in Section 3.08 of
the Indenture (after making payments entitled to priority under Section 3.08 of
the Indenture). In addition, the Issuer may optionally redeem all or part of the
Outstanding Principal Balance of this Class B Note on any Payment Date at the
applicable Redemption Price (calculated as provided in the Indenture) or, in the
case of a redemption for taxation reasons specified in the Indenture or a
redemption in certain default circumstances as provided in the Indenture, at the
Outstanding Principal Balance hereof plus accrued and unpaid interest hereon.
Any amount of premium or interest on this Class B Note (including
Registration Step-Up Interest) that is 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 from the date when due until such amount is
paid or duly provided for, payable on the next succeeding
B-4
<PAGE> 160
Payment Date, subject to the availability of the Available Collections therefor
after making payments entitled to priority under Section 3.08 of the Indenture.
If a Registration Default (as defined and determined under Section 5
of the Registration Rights Agreement) occurs, thereafter an additional
incremental interest amount ("Registration Step-Up Interest") will accrue on
this Note at an annual rate of 0.5% until such Registration Default shall no
longer be deemed to be continuing (as determined under Section 5 of the
Registration Rights Agreement). The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement.
The indebtedness evidenced by the Class B Notes is, to the extent
and in the manner provided in the Indenture and the Security Trust Agreement,
subordinate and subject in right of payment to the prior payment in full of all
Senior Claims (as defined in the Indenture), and this Class B Note is issued
subject to the provisions thereof providing for such subordination. Each Holder
of this Class B Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee and the Security Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints each
of the Trustee and the Security Trustee its attorney-in-fact for such purpose.
All payments or distributions upon or with respect to any Obligations (as
defined in the Indenture), which include payment of principal, premium and
interest on this Note, that are received by the Holder of this Note contrary to
the priority of payment provisions of the Indenture or in excess of the amounts
to which the Holder of this Note is entitled under Section 3.08 of the
Indenture, shall be received for the benefit of the Senior Claimant (as defined
in the Indenture), shall be segregated from other funds and property held by the
Holder of this Note and shall be forthwith paid over to the Security Trustee in
the same form
B-5
<PAGE> 161
as so received (with any necessary endorsement) 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 Claims (as defined in the Indenture)
in accordance with the terms of the Indenture.
The maturity of this Class B Note is subject to acceleration upon
the occurrence and during the continuance of the Events of Default specified in
the Indenture. The Class B Holders shall not be permitted to deliver a Default
Notice or to exercise or to direct the exercise of any 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 Class B Note is and will be secured, on a subordinated basis,
as referred to above, 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 ______________,
to the Person in whose name this Class B Note is registered at the close of
business on the Record Date with respect to such Payment Date, such Person's pro
rata share (based on the aggregate percentage of the Outstanding Principal
Balance of the Class B Notes held by such Person) of the aggregate amount as may
be distributable to all Holders of Class B Notes on such Payment Date pursuant
to Section 3.08 of the Indenture.
[IF THIS NOTE IS REPRESENTED BY A GLOBAL NOTE, WHETHER OR NOT AN
EXCHANGE NOTE, INSERT:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO AIRCRAFT FINANCE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
B-6
<PAGE> 162
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.13 OF THE INDENTURE.]
[IF A TEMPORARY REGULATION S GLOBAL NOTE, INSERT:
THIS NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE WITHIN THE MEANING OF
THE TRUST INDENTURE REFERRED TO HEREINAFTER AND IS SUBJECT TO RESTRICTIONS
ON THE TRANSFER AND EXCHANGE THEREOF AND ON THE PAYMENT OF INTEREST
THEREON AS SPECIFIED IN THE TRUST INDENTURE.]
All amounts payable in respect of this Class B Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof on the Record Date relating to such payment. The
final payment with respect to this Class B Note, however, shall be made only
upon presentation and surrender of this Note by the Holder 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.
The Trustee or Paying Agent shall mail such notice of the final payment of this
Note to the Holder, specifying the date and amount of such final payment, no
later than five Business Days prior to such final payment. At such time, if any,
as this Class B Note is issued in the form of one or more Definitive Notes,
payments on a Payment Date shall be made by check mailed to each Holder of such
a Definitive Note on the applicable Record Date at its address appearing on the
Register maintained with respect to Class B Notes. Alternatively, upon
application in writing to the Trustee, not later than the applicable Record
Date, by a Holder of one or more Definitive Notes of Class B Notes having an
aggregate principal amount of not less than $1,000,000, any such
B-7
<PAGE> 163
payments shall be made by wire transfer to an account designated by such Holder
at a financial institution in New York, New York. The final payment with respect
to any such Definitive Note, however, shall be made only upon presentation and
surrender of such Definitive Note by the Holder 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 this Note to the Holder,
specifying the date and amount of such final payment, no later than five
Business Days prior to such final payment.
This Class B 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 effective until, and such transferee shall
succeed to the rights of a Holder only upon, final registration of the transfer
by the Registrar in the Register. When this Subclass A-1 Note is presented to
the Registrar with a request to register the transfer or to exchange it for an
equal principal amount of Class B Notes of other authorized denominations
(including an exchange of this Class B Note for an Exchange Note), 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); provided that no exchanges of this Class B Note for an
Exchange Note shall occur until a Registration Statement shall have been
declared effective by the Commission. No service charge shall be made for any
registration of transfer or exchange of this Class B Note, but the party
requesting such new Note or Notes may be required to pay a sum
B-8
<PAGE> 164
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
Prior to the registration of transfer of this Class B Note, the
Issuer and the Trustee may deem and treat the Person in whose name this Class B
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
to this Class B 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 Class B 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, (A) without the
consent of each provider of a Credit Facility, no such amendment may modify (i)
the provisions of the Indenture relating to such Person's Credit Facility or
(ii) to the extent affecting such Person's Credit Facility, Credit Facilities
generally; provided further that, (B) without the consent of each Swap Provider,
each provider of a Credit Facility and each Holder of any Notes, in each
instance affected thereby, no such amendment may, except as otherwise provided
in Section 3.11 of the Indenture, (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 or Redemption Price and Sale 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, except as otherwise provided in
Section 3.09 of the Indenture, (iii) alter the manner or priority of payment of
such subclass of
B-9
<PAGE> 165
Notes (each such amendment referred to in subsection A and B, a "Basic Terms
Modification"). The Indenture also permits the Trustee to agree with the Issuer,
without the consent of any Holder of the Notes, (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 subclass of Notes to correct a manifest error or an error which is of a
formal, minor or technical nature, (b) to modify the provisions of the Indenture
or the Administrative Agency Agreement relating to the timing of movement of
Rental Payments or other monies received or Expenses Incurred among the Accounts
by the Administrative Agent, (c) to add or reflect any Credit Facility, (d) to
any amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to permit the issuance of Refinancing Notes and/or Additional Notes
and the acquisition of Additional Aircraft consistent with the expense
provisions of the Indenture or (e) to comply with the requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939 (as amended, the "Trust Indenture Act"). Any amendment or
modification of the Indenture shall be binding on every Holder hereof, whether
or not notation thereof is made upon this Class B Note.
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 Holder
of the Notes of the subclass affected thereby and each Holder 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, on behalf of the
B-10
<PAGE> 166
Holders of all of the Class B 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 Class B Note and of any
Class B Note issued upon the registration of transfer of, in exchange or in lieu
of or upon the refinancing of this Class B Note, whether or not notation of such
consent or waiver is made upon this Class B Note.
The term "Issuer" as used in this Class B 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 Class B Notes under the Indenture.
The Class B Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
THIS CLASS B 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
Class B Note shall not be entitled to any benefit under the Indenture, or be
valid or obligatory for any purpose.
B-11
<PAGE> 167
IN WITNESS WHEREOF, the Issuer has caused this Class B Note to be
signed manually or by facsimile by its Owner Trustee.
Date: ________________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By:___________________________________
Name:
Title: Authorized Signatory
B-12
<PAGE> 168
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Notes designated above and referred to in
the within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Trustee
By:_______________________________
Authorized Signatory
B-13
<PAGE> 169
[FORM 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.
The undersigned covenants and agrees that it will treat this Note as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith.
Date: {Signature of Transferee}
NOTICE: to be executed by an executive
officer
{THE FOLLOWING PROVISIONS TO BE
INCLUDED ON ALL NOTES OTHER THAN
EXCHANGE NOTES AND PERMANENT
REGULATION S GLOBAL NOTES}
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the Shelf Registration Statement or
the Exchange Offer Registration Statement is declared effective and this Note
has been exchanged for a freely tradable Exchange Note bearing terms
substantially identical to this Note or (ii) the end of the period referred to
in Rule 144(k) under the Securities Act, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
{Check One}
{ } (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
B-14
<PAGE> 170
{ } (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE OR OTHER
REGISTRAR SHALL NOT BE OBLIGATED TO REGISTER THIS NOTE IN THE NAME OF ANY PERSON
OTHER THAN THE HOLDER HEREOF UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH
TRANSFER OF REGISTRATION SET FORTH HEREIN AND IN SECTION 2.13 OF THE INDENTURE
SHALL HAVE BEEN SATISFIED.
Date: {Signature of Transferor}
NOTICE: 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.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: {Signature of Transferee}
NOTICE: To be executed by an executive officer
B-15
<PAGE> 171
EXHIBIT C
FORM OF CLASS C FIXED RATE ASSET-BACKED NOTE, SERIES 1999-1
C-1
<PAGE> 172
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO AIRCRAFT FINANCE TRUST THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) IF THIS NOTE IS NOT
A CLASS D NOTE, IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE (A) THROUGH (F) 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, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE
ATTACHED HERETO AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE
TRANSFER IS PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND AIRCRAFT FINANCE TRUST SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED
C-2
<PAGE> 173
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.
AIRCRAFT FINANCE TRUST
$106,000,000 CLASS C FIXED RATE ASSET-BACKED NOTES, SERIES 1999-1
No. ____
CUSIP:
ISIN:
Common Code:
$_________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of
the State of Delaware (herein referred to as the "Issuer"), for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum
of ________________________ DOLLARS ($________) on May 15, 2024 (the "Final
Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof at the rate of 8.00% per annum (together with
Registration Step-Up Interest, the "Stated Rate of Interest") from the date
hereof until the Outstanding Principal Balance hereof is paid, payable on each
Payment Date. Interest on this Class C Note for each Interest Accrual Period
shall be calculated (i) on the basis of a 360-day year and one-twelfth of an
annual interest payment, (ii) on the first Payment Date, on the basis of the
actual number of days in the first Interest Accrual Period divided by 360 and
(iii) 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 Class C Note is one of a duly authorized issue of Notes of the
Issuer issued under the Trust Indenture dated as of May 5, 1999 (as amended or
supplemented from time to time, the "Indenture"), between the Issuer,
ReSource/Phoenix, Inc., in its capacity as
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Administrative Agent (the "Administrative Agent"), and Bankers Trust Company
(the "Trustee"). The Indenture also provides for the issuance of Class A Notes,
Class B Notes and Class D Notes. All capitalized terms used in this Class C 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 Class C Holders. This Class C Note
is subject to all of the terms of the Indenture.
The Outstanding Principal Balance of this Class C Note may be repaid
prior to the Final Maturity Date through the application on the Payment Dates of
the Available Collections to the principal hereof as provided in Section 3.08 of
the Indenture (after making payments entitled to priority under Section 3.08 of
the Indenture). In addition, the Issuer may optionally redeem all or part of the
Outstanding Principal Balance of this Class C Note on any Payment Date at the
applicable Redemption Price (calculated as provided in the Indenture) or, in the
case of a redemption for taxation reasons specified in the Indenture or a
redemption in certain default circumstances as provided in the Indenture, at the
Outstanding Principal Balance hereof plus accrued and unpaid interest and
accrued and unpaid Sales Premium, if any, hereon.
Any amount of premium or interest on this Class C Note (including
Registration Step-Up Interest) that is 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 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 therefor after making payments
entitled to priority under Section 3.08 of the Indenture.
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If a Registration Default (as defined and determined under Section 5
of the Registration Rights Agreement) occurs, thereafter an additional
incremental interest amount ("Registration Step-Up Interest") will accrue on
this Note at an annual rate of 0.5% until such Registration Default shall no
longer be deemed to be continuing (as determined under Section 5 of the
Registration Rights Agreement). The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement.
The indebtedness evidenced by the Class C Notes is, to the extent
and in the manner provided in the Indenture and the Security Trust Agreement,
subordinate and subject in right of payment to the prior payment in full of all
Senior Claims (as defined in the Indenture), and this Class C Note is issued
subject to the provisions thereof providing for such subordination. Each Holder
of this Class C Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee and the Security Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints each
of the Trustee and the Security Trustee its attorney-in-fact for such purpose.
All payments or distributions upon or with respect to any Obligations (as
defined in the Indenture), which include payment of principal, Sale Premium and
interest on this Note, that are received by the Holder of this Note contrary to
the priority of payment provisions of the Indenture or in excess of the amounts
to which such the Holder of this Note is entitled under Section 3.08 of the
Indenture, shall be received for the benefit of the Senior Claimant (as defined
in the Indenture), shall be segregated from other funds and property held by the
Holder of this Note 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
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prepayment of the Senior Claims (as defined in the Indenture) in accordance with
the terms of the Indenture.
The maturity of this Class C Note is subject to acceleration upon
the occurrence and during the continuance of the Events of Default specified in
the Indenture. The Class C Holders shall not be permitted to deliver a Default
Notice or to exercise or to direct the exercise of any 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 Class C Note is and will be secured, on a subordinated basis as
referred to above, 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 ________________,
to the Person in whose name this Class C Note is registered at the close of
business on the Record Date with respect to such Payment Date, such Person's pro
rata share (based on the aggregate percentage of the Outstanding Principal
Balance of the Class C Notes held by such Person) of the aggregate amount as may
be distributable to all Holders of Class C Notes on such Payment Date pursuant
to Section 3.08 of the Indenture.
[IF THIS NOTE IS REPRESENTED BY A GLOBAL NOTE, WHETHER OR NOT AN
EXCHANGE NOTE, INSERT:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO AIRCRAFT FINANCE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL
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SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.13 OF THE INDENTURE.]
[IF A TEMPORARY REGULATION S GLOBAL NOTE, INSERT:
THIS NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE WITHIN THE MEANING OF
THE TRUST INDENTURE REFERRED TO HEREINAFTER AND IS SUBJECT TO RESTRICTIONS
ON THE TRANSFER AND EXCHANGE THEREOF AND ON THE PAYMENT OF INTEREST
THEREON AS SPECIFIED IN THE TRUST INDENTURE.]
All amounts payable in respect of this Class C Note shall be payable
in U.S. dollars in immediately available funds in the manner provided in the
Indenture to the Holder hereof on the Record Date relating to such payment. The
final payment with respect to this Class C Note, however, shall be made only
upon presentation and surrender of this Note by the Holder 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.
The Trustee or Paying Agent shall mail such notice of the final payment of this
Note to the Holder, specifying the date and amount of such final payment, no
later than five Business Days prior to such final payment. At such time, if any,
as this Class C Note is issued in the form of one or more Definitive Notes,
payments on a Payment Date shall be made by check mailed to each Holder of such
a Definitive Note on the applicable Record Date at its address appearing on the
Register maintained with respect to Class C Notes. Alternatively, upon
application in writing to the Trustee, not later than the applicable Record
Date, by a Holder of one or more Definitive Notes of Class C Notes 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 Holder at a financial
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institution in New York, New York. The final payment with respect to any such
Definitive Note, however, shall be made only upon presentation and surrender of
such Definitive Note by the Holder 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 this Note to the Holder, specifying the
date and amount of such final payment, no later than five Business Days prior to
such final payment.
This Class C 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 effective until, and such transferee shall
succeed to the rights of a Holder only upon, final registration of the transfer
by the Registrar in the Register. When this Class C Note is presented to the
Registrar with a request to register the transfer or to exchange it for an equal
principal amount of Class C Notes of other authorized denominations (including
an exchange of this Class C Note for an Exchange Note), 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);
provided that no exchanges of this Class C Note for an Exchange Note shall occur
until a Registration Statement shall have been declared effective by the
Commission. No service charge shall be made for any registration of transfer or
exchange of this Class C Note, but the party requesting such new Note or Notes
may be required to pay a sum
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<PAGE> 179
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
Prior to the registration of transfer of this Class C Note, the
Issuer and the Trustee may deem and treat the Person in whose name this Class C
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
to this Class C 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 Class C 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, (A) without the
consent of each provider of a Credit Facility, no such amendment may modify (i)
the provisions of the Indenture relating to such Person's Credit Facility or
(ii) to the extent affecting such Person's Credit Facility, Credit Facilities
generally; provided further that, (B) without the consent of each Swap Provider,
each provider of a Credit Facility and each Holder of any Notes, in each
instance affected thereby, no such amendment may, except as otherwise provided
in Section 3.11 of the Indenture, (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 or Redemption Price and Sale 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, except as otherwise provided in
Section 3.09 of the Indenture, (iii) alter the manner or priority of payment of
such subclass of
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Notes (each such amendment referred to in subsection A and B, a "Basic Terms
Modification"). The Indenture also permits the Trustee to agree with the Issuer,
without the consent of any Holder of the Notes, (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 subclass of Notes to correct a manifest error or an error which is of a
formal, minor or technical nature, (b) to modify the provisions of the Indenture
or the Administrative Agency Agreement relating to the timing of movement of
Rental Payments or other monies received or Expenses Incurred among the Accounts
by the Administrative Agent, (c) to add or reflect any Credit Facility, (d) to
any amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to permit the issuance of Refinancing Notes and/or Additional Notes
and the acquisition of Additional Aircraft consistent with the expense
provisions of the Indenture or (e) to comply with the requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939 (as amended, the "Trust Indenture Act"). Any amendment or
modification of the Indenture shall be binding on every Holder hereof, whether
or not notation thereof is made upon this Class C Note.
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 Holder
of the Notes of the subclass affected thereby and each Holder 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, on behalf of the
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Holders of all of the Class C 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 Class C Note and of any
Class C Note issued upon the registration of transfer of, in exchange or in lieu
of or upon the refinancing of this Class C Note, whether or not notation of such
consent or waiver is made upon this Class C Note.
The term "Issuer" as used in this Class C 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 Class C Notes under the Indenture.
The Class C Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
THIS CLASS C 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
Class C Note shall not be entitled to any benefit under the Indenture, or be
valid or obligatory for any purpose.
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<PAGE> 182
IN WITNESS WHEREOF, the Issuer has caused this Class C Note to be
signed manually or by facsimile by its Owner Trustee.
Date: ______________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By:___________________________________
Name:
Title: Authorized Signatory
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<PAGE> 183
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C Notes designated above and referred to in
the within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Trustee
By: __________________________
Authorized Signatory
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<PAGE> 184
[FORM 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.
The undersigned covenants and agrees that it will treat this Note as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith.
Date: {Signature of Transferee}
NOTICE: to be executed by an executive
officer
{THE FOLLOWING PROVISIONS TO BE
INCLUDED ON ALL NOTES OTHER THAN
EXCHANGE NOTES AND PERMANENT
REGULATION S GLOBAL NOTES}
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the Shelf Registration Statement or
the Exchange Offer Registration Statement is declared effective and this Note
has been exchanged for a freely tradable Exchange Note bearing terms
substantially identical to this Note or (ii) the end of the period referred to
in Rule 144(k) under the Securities Act, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
{Check One}
{ } (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
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<PAGE> 185
or
{ } (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.13 of the Indenture
shall have been satisfied.
Date: {Signature of Transferor}
NOTICE: 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.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: {Signature of Transferee}
NOTICE: To be executed by an executive
officer
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<PAGE> 186
EXHIBIT D
FORM OF CLASS D FIXED RATE ASSET-BACKED NOTE, SERIES 1999-1
D-1
<PAGE> 187
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
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 AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IF THIS NOTE IS NOT A CLASS D NOTE, 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 RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AIRCRAFT
FINANCE TRUST, A DELAWARE BUSINESS TRUST, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO AIRCRAFT FINANCE TRUST THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) IF THIS NOTE IS NOT
A CLASS D NOTE, IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE (A) THROUGH (F) 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, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE TRANSFER NOTICE
ATTACHED HERETO AND SUBMIT SUCH TRANSFER NOTICE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IF THE
TRANSFER IS PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND AIRCRAFT FINANCE TRUST SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED
D-2
<PAGE> 188
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.
THIS NOTE IS SUBJECT TO ADDITIONAL RESTRICTIONS ON THE TRANSFER HEREOF SET
FORTH IN SECTION 2.13(h) OF THE INDENTURE, INCLUDING A LIMIT ON THE NUMBER
OF DIRECT OR INDIRECT HOLDERS THEREOF A PROHIBITION ON TRANSFERS TO
NON-U.S. PERSONS AND DELIVERY BY THE TRANSFEREE OF CERTAIN CERTIFICATIONS
TO THE TRUSTEE.
AIRCRAFT FINANCE TRUST
$64,000,000 CLASS D FIXED RATE ASSET-BACKED NOTE, SERIES 1999-1
NO. ____
CUSIP:
$________
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of
the State of Delaware (herein referred to as the "Issuer"), for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum
of ________________________ DOLLARS ($_________) on May 15, 2024 (the "Final
Maturity Date") and to pay interest monthly in arrears on the Outstanding
Principal Balance hereof at the rate of 11.00% per annum (the "Stated Rate of
Interest") from the date hereof until the Outstanding Principal Balance hereof
is paid or duly provided for, payable on each Payment Date. Interest on this
Class D Note for each Interest Accrual Period shall be calculated (i) on the
basis of a 360-day year and one-twelfth of an annual interest payment, (ii) on
the first Payment Date, on the basis of the actual number of days in the first
Interest Accrual Period divided by 360 and (iii) 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.
D-3
<PAGE> 189
This Class D Note is one of a duly authorized issue of Notes of the
Issuer issued under the Trust Indenture dated as of May 5, 1999 (as amended or
supplemented from time to time, the "Indenture"), between the Issuer,
ReSource/Phoenix, Inc., in its capacity as Administrative Agent (the
"Administrative Agent") and Bankers Trust Company (the "Trustee"). The Indenture
also provides for the issuance of Class A Notes, Class B Notes and Class C
Notes. All capitalized terms used in this Class D 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 Class D Holders. This Class D Note is subject to all of the
terms of the Indenture.
The Outstanding Principal Balance of this Class D Note may be repaid
prior to the Final Maturity Date through the application on the Payment Dates of
the Available Collections to the principal hereof as provided in Section 3.08 of
the Indenture (after making payments entitled to priority under Section 3.08 of
the Indenture). In addition, the Issuer may optionally redeem all or part of the
Outstanding Principal Balance of this Class D Note on any Payment Date at the
applicable Redemption Price (calculated as provided in the Indenture) or, in the
case of a redemption for taxation reasons specified in the Indenture or a
redemption in certain default circumstances as provided in the Indenture, at the
Outstanding Principal Balance hereof plus accrued and unpaid interest and
accrued and unpaid Sales Premium, if any, hereon.
Any amount of premium or interest on this Class D Note that is 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 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
D-4
<PAGE> 190
Available Collections therefor after making payments entitled to priority under
Section 3.08 of the Indenture.
The indebtedness evidenced by the Class D Notes is, to the extent
and in the manner provided in the Indenture and the Security Trust Agreement,
subordinate and subject in right of payment to the prior payment in full of all
Senior Claims (as defined in the Indenture), and this Class D Note is issued
subject to the provisions thereof providing for such subordination. Each Holder
of this Class D Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee and the Security Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints each
of the Trustee and the Security Trustee its attorney-in-fact for such purpose.
All payments or distributions upon or with respect to any Obligations (as
defined in the Indenture), which include payment of principal, Sale Premium and
interest on this Note, that are received by the Holder of this Note contrary to
the priority of payment provisions of the Indenture or in excess of the amounts
to which the Holder of this Note is entitled under Section 3.08 of the Indenture
shall be received for the benefit of the Senior Claimant (as defined in the
Indenture), shall be segregated from other funds and property held by the Holder
of this Note 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 Claims (as defined in
the Indenture) in accordance with the terms of the Indenture.
The maturity of this Class D Note is subject to acceleration upon
the occurrence and during the continuance of the Events of Default specified in
the Indenture. The Class D Holders shall not be permitted to deliver a Default
Notice or to exercise or to direct the exercise
D-5
<PAGE> 191
of 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 Class D Note is and will be secured, on a subordinated basis as
referred to above, 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 _____________, to
the Person in whose name this Class D Note is registered at the close of
business on the Record Date with respect to such Payment Date such Person's pro
rata share (based on the aggregate percentage of the Outstanding Principal
Balance of the Class D Notes held by such Person) of the aggregate amount as may
be distributable to all Holders of Class D Notes on such Payment Date pursuant
to Section 3.08 of the Indenture.
Payments on a Payment Date shall be made by check mailed to each
Holder of a Class D Note on the applicable Record Date at its address appearing
on the Register maintained with respect to the Class D Notes. Alternatively,
upon application in writing to the Trustee, not later than the applicable Record
Date, by a Holder of one or more Class D Notes 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 Holder at a financial institution in
New York, New York. The final payment with respect to any Class D Note, however,
shall be made only upon presentation and surrender of such Note by the Holder 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 this Note to the Holder, specifying the date and amount of such final
payment, no later than five Business Days prior to such final payment.
D-6
<PAGE> 192
This Class D 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 effective until, and such transferee shall
succeed to the rights of a Holder only upon, final registration of the transfer
by the Registrar in the Register. When this Class D Note is presented to the
Registrar with a request to register the transfer or to exchange it for an equal
principal amount of Class D 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 Class D 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 Class D Note, the
Issuer and the Trustee may deem and treat the Person in whose name this Class D
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
to this Class D 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 Class D 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);
D-7
<PAGE> 193
provided that, (A) without the consent of each provider of a Credit Facility, no
such amendment may modify (i) the provisions of the Indenture relating to such
Person's Credit Facility or (ii) to the extent affecting such Person's Credit
Facility, Credit Facilities generally; provided further that, (B) without the
consent of each Swap Provider, each provider of a Credit Facility and each
Holder of any Notes, in each instance affected thereby, no such amendment may,
except as otherwise provided in Section 3.11 of the Indenture, (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 or Redemption Price and Sale 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, except as
otherwise provided in Section 3.09 of the Indenture, (iii) alter the manner or
priority of payment of such subclass of Notes (each such amendment referred to
in subsection A and B, a "Basic Terms Modification"). The Indenture also permits
the Trustee to agree with the Issuer, without the consent of any Holder of the
Notes, (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 subclass of Notes to
correct a manifest error or an error which is of a formal, minor or technical
nature, (b) to modify the provisions of the Indenture or the Administrative
Agency Agreement relating to the timing of movement of Rental Payments or other
monies received or Expenses Incurred among the Accounts by the Administrative
Agent, (c) to add or reflect any Credit Facility, (d) to any amendment (other
than a Basic Terms Modification) of an immaterial nature necessary to permit the
issuance of Refinancing Notes and/or Additional Notes and the acquisition of
Additional Aircraft consistent with the expense
D-8
<PAGE> 194
provisions of the Indenture, or (e) to comply with the requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939 (as amended, the "Trust Indenture Act"). Any amendment or
modification of the Indenture shall be binding on every Holder hereof, whether
or not notation thereof is made upon this Class D Note.
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 Holder
of the Notes of the subclass affected thereby and each Holder 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, on behalf of the Holders of all of the Class D 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 Class D Note
and of any Class D Note issued upon the registration of transfer of, in exchange
or in lieu of or upon the refinancing of this Class D Note, whether or not
notation of such consent or waiver is made upon this Class D Note.
The term "Issuer" as used in this Class D 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 Class D Notes under the Indenture.
D-9
<PAGE> 195
The Class D Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
THIS CLASS D 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 note of authentication hereon has been executed by the
Trustee whose name appears below by manual or facsimile signature, this Class D
Note shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
D-10
<PAGE> 196
IN WITNESS WHEREOF, the Issuer has caused this Class D Note to be
signed manually or by facsimile by its Owner Trustee.
Date: _____________ AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By: __________________________
Name:
Title: Authorized Signatory
D-11
<PAGE> 197
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class D Notes designated above and referred to in
the within-mentioned Indenture.
Date: _____________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Trustee
By: __________________________
Authorized Signatory
D-12
<PAGE> 198
[FORM 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.
In connection with any transfer of this Note occurring prior to the
end of the period referred to in Rule 144(k) under the Securities Act, the
undersigned confirms that without utilizing any general solicitation or general
advertising that:
{Check One}
{ } (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
{ } (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.13 of the Indenture
shall have been satisfied.
Date:
{Signature of Transferor}
NOTICE: 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.
The undersigned covenants and agrees that it will treat this Note as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith. The undersigned represents and
warrants to each other Class D Noteholder and to the Issuer that (a) (i) it is
not a pass-through entity within the meaning of Treasury Regulation Section
1.7704-1(h)(3) or (ii) a
D-13
<PAGE> 199
substantial percentage of the value of beneficial interests in it is not
attributable (directly or indirectly) to its interest in the Class D Notes or
(iii) the beneficial interests in it are held by a single person that is not
itself a flow-through entity within the meaning of Treasury Regulation Section
1.7704-1(h)(3) (as applicable), (b) it is not a "tax-exempt entity" within the
meaning of Code Section 168(h)(2) and (c) it is a "United States person" within
the meaning of Internal Revenue Code Section 7701(a)(30).
Date: {Signature of Transferee}
NOTICE: To be executed by an executive
officer
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933 and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:
{Signature of Transferee}
NOTICE: To be executed by an executive
officer
D-14
<PAGE> 200
EXHIBIT E
CONCENTRATION LIMITS
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Lessee Concentration Limits Value of Portfolio (1)
--------------------------- ----------------------
<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
Country Concentration Limits Value of Portfolio(1)
---------------------------- ---------------------
<S> <C>
Countries rated AAA/Aa2
(or the equivalent) or better (2)..... 25%
Countries rated BBB/Baa2
(or the equivalent) or Better (2)..... 20%
Other................................. 15%
</TABLE>
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Region Concentration Limits Value of Portfolio (1)
--------------------------- ----------------------
<S> <C>
Any Single Developed Market Region (3)... 50%
Any Single Emerging Market Region (3).... 25%
Asia/Pacific (3)......................... 45%
Undesignated (4)......................... 20%(4)
</TABLE>
- ---------------
(1) Percentage to be obtained by dividing the aggregate most recent Appraised
Values of all Aircraft leased or to be leased to Lessees habitually based
in the applicable country by the aggregate most recent Appraised Values of
all Aircraft then owned by the Issuer Group.
(2) 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.
(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. Asia/Pacific represents
the aggregate of the Aircraft leased to Lessees habitually based in the
Asia area of the Emerging Market Region and the Pacific area of the
Developed Market Region. The current designations are as set out below:
<PAGE> 201
Region Country
------ -------
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
UNDESIGNATED
All other countries (generally those that have small or under-developed
capital markets, including Iceland, Fiji and Guyana)
(4) In addition, within the "Undesignated" country catagory, no more than 10%
of the most recent Appraised Value of the Portfolio shall be leased to
Lessees habitually based in "Undesignated" 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
"Undesignated" countries in Africa.
Repossession Guidelines
(a) Prohibited Countries:
Cuba Myanmar
North Korea Iran
Sudan Iraq
Syria Libya
(b) Countries with respect to which Repossession Insurance must be procured:
Angola Equatorial Guinea Mongolia
Armenia Eritrea Myanmar
Azerbaijan Ethiopia Niger
Belarus Grenada North Korea
Benin Iran Sao Tome & Principe
Bhutan Iraq Somalia
Cameroon Kazakhstan Sudan
Cape Verde Islands Kirbati Syria
Chad Kyrgistan Turkmenistan
Comoros Liberia Uzbekistan
Congo Libya
Cuba Moldova
2
<PAGE> 202
EXHIBIT F
INSURANCE PROVISIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Model Minimum Limits
----- --------------
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
ATP/ATR/Dash-8/RJ/F50/F70 US$250 million
- --------------------------------------------------------------------------------
HS146/AVRO/F28/F100 US$300 million
- --------------------------------------------------------------------------------
B727/B737/A320/MD80/DC9 US$500 million
- --------------------------------------------------------------------------------
DC8/A310 US$650 million
- --------------------------------------------------------------------------------
B757/B767/A300 US$800 million
- --------------------------------------------------------------------------------
L1011/DC10/A330/A340/MD11/B777 US$600 million
- --------------------------------------------------------------------------------
B747 US$750 million
- --------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, with respect to any liability insurance
maintained by any Issuer Group Member for the benefit of any Person listed in
clause 2(h) of Schedule 6 to Annex 1 of the Servicing Agreement, such amount of
insurance shall be not less that US$750 million for wide-body Aircraft and
US$600 million for any other type of Aircraft.
<PAGE> 203
EXHIBIT G
FORM OF MONTHLY REPORT TO
EACH NOTEHOLDER
(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 the Payment Date; and
C. The balances on deposit in the Expense Account, Collections
Account, any cash collateral account, any VARIG Reserve
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 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 Collections Account Activity Balance on Preceding Calculation
Date
- Required Expense Amount (including on preceding Payment
Date);
- Net Transfer to Lessee Funded Accounts and VARIG Reserve
Accounts during period;
- Collections during period;
- Drawings under any liquidity facilities;
- Aggregate Note Payments;
- Swap Payments;
- Repayments of drawings under liquidity facilities;
Balance on relevant Calculation Date (separately stating components of the
the Required 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;
- Maturity Step-Up Interest;
- Registration Step-Up Interest;
- Additional Interest;
- Opening Outstanding Principal Balance;
- Minimum Principal Payment Amount;
<PAGE> 204
- 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)
- Applicable Interest Rate;
- 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;
(v) Floating Rate Notes 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
2
<PAGE> 205
EXHIBIT H
FORM OF CERTIFICATE
__________________ , _____
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
AIRCRAFT FINANCE TRUST
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-1000
Re: AIRCRAFT FINANCE TRUST (the "Issuer")
$512,500,000 Class A-1 Floating Rate Asset Backed Notes, Series 1999-1
$400,000,000 Class A-2 Floating Rate Asset Backed Notes, Series 1999-1
$126,500,000 Class B Floating Rate Asset Backed Notes, Series 1999-1
$106,000,000 Class C Fixed Rate Asset Backed Notes, Series 1999-1
$64,000,000 Class D Fixed Rate Asset Backed Notes, Series 1999-1
Dear Sirs:
This letter relates to U.S. $______ principal amount of Class __ Notes of the
Issuer represented by a Note which bears a legend (the "Legended Note")
outlining restrictions upon transfer of such Legended Note. Pursuant to Section
2.01 of the Indenture dated as of May 5, 1999 (the "Indenture") relating to the
Class __ Notes and certain other classes of notes, we hereby certify that we are
(or we will hold such securities on behalf of) a person outside the United
States to whom the Class __ Notes may be transferred in accordance with
Regulation S promulgated under the U.S. Securities Act of 1933, as amended
("Regulation S"). Accordingly, you are hereby requested to exchange the Legended
Note for an unlegended Note representing an identical principal amount of Class
__ Notes, all in the manner provided for in the Indenture. Each of you is
entitled to rely upon this letter and is irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Euroclear][Cedel]
By: ________________________
Authorized Signature
<PAGE> 206
EXHIBIT I
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
Bankers Trust Company ---------,-----
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
AIRCRAFT FINANCE TRUST
c/o Wilmington Trust Company
1100 North Market Square
Rodney Square North
Wilmington, Delaware 19890-1000
Re: AIRCRAFT FINANCE TRUST (the "Issuer")
Class A-1, A-2, B, C and D Notes
Dear Sirs:
In connection with our proposed sale of U.S.$________ aggregate principal amount
of the Class __ Notes, we confirm that such sale has been effected pursuant to
and in accordance with Regulation S under the Securities Act of 1933, as amended
("Regulation S") and, accordingly, we represent that:
(1) the offer of the Class __ Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the registration
requirements of the U.S. Securities Act of 1933.
Each of you is entitled to rely upon this letter and is irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
{Name of Transferor}
By: ________________________
Authorized Signature
<PAGE> 207
EXHIBIT J
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
-----, ----
AIRCRAFT FINANCE TRUST
c/o Wilmington Trust Company
1100 North Market
Rodney Square North
Wilmington, Delaware 19890
Bankers Trust Company
Four Albany Street
New York, New York 10005
Attention: Corporate Trust and Agency Group
Lehman Brothers Inc.
Merrill, Lynch, Pierce, Fenner &
Smith Incorporated
Credit Suisse First Boston Corporation
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Ladies and Gentlemen:
In connection with our proposed purchase of Class A-1, Class A-2, Class B, Class
C or Class D Notes (the "Notes") of AIRCRAFT FINANCE TRUST (the "Issuer"), we
confirm that:
1. We have received a copy of the Offering Memorandum dated April 21, 1999
(the "Offering Memorandum") relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Transfer Restrictions" of such Offering Memorandum and
the restrictions on duplication and circulation of such Offering
Memorandum.
2. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Offering Memorandum
under "Transfer Restrictions" and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Notes except in
compliance with such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, that the Notes will only be in the
form of definitive physical certificates and that the Notes may not be
offered or sold except as permitted in the following sentence. We agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes in the future, we
will do so only (1) (A) to
<PAGE> 208
the Issuer or any subsidiary thereof, (B) in accordance with Rule 144A
under the Securities Act to a "qualified institutional buyer" (as defined
therein) and if a Class D Note, only to a qualified institutional buyer
that is also a "United States person" (as defined in Internal Revenue Code
section 7701(a)(30)), (C) to an institutional "accredited investor" (as
defined below) (and if a Class D Note, only to an institutional accredited
investor that is also a "United States person" as defined in Internal
Revenue Code section 7701(a)(30)) that, prior to such transfer, furnishes
to the Trustee (as defined in the Indenture) a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the Notes an opinion of counsel acceptable to the Issuer that
such transfer is in compliance with the Securities Act, (D) if not a Class
D Note, in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available) or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein and (2) in each case, in accordance with any applicable securities
laws of any state in the United States or any other applicable
jurisdiction and in accordance with the legend to be set forth in the
Securities, which will reflect the substance of this paragraph.
4. We understand that, on any proposed resale of any Notes, we will be
required to furnish to the Issuer and the Trustee such certifications,
legal opinions and other information as the Issuer and the Trustee may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risks of our or their investment.
6. We are acquiring the Notes purchased by us for our own account or for one
or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
7. We are not acquiring the Notes with a view to distribution thereof or with
any present intention of offering or selling the Notes, except as
permitted above, provided that the disposition of our property and
property of any accounts for which we are acting as fiduciary shall remain
at all times within our control.
2
<PAGE> 209
An opinion of counsel to the effect that this purchase of Notes does not require
registration under the Securities Act is attached to this certificate. You, the
Issuer and the Trustee are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By:_________________
Name:
Title:
3
<PAGE> 210
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 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
<PAGE> 211
provisions prohibiting the assignment 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.
2
<PAGE> 212
EXHIBIT L-1
FORM OF CERTIFICATE TO DEPOSITORY REGARDING INTEREST
--------, ---
Euroclear
[address]
AND/OR
Cedel
[address]
Re: Aircraft Finance Trust -- $1,209,000,000 aggregate principal
amount of Class A-1, Class A-2, Class B, Class C and Class D
Notes, Series 1999-1
Reference is hereby made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), made by and between Aircraft Finance Trust (the "Issuer"),
ReSource/Phoenix, Inc. (the "Administrative Agent") and Bankers Trust Company
(in such capacity, the "Trustee"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
This letter relates to [__________] principal amount of Class ___ Notes
that is held in the form of a beneficial interest in the Temporary Regulation S
Global Note (CUSIP No.[ __ ]) through [insert name of Depository] by the
undersigned (the "Holder") in the name of [insert name of Participant]. The
Holder of such Temporary Regulation S Global Note hereby requests the receipt of
payment of interest, principal and Sale Premium, if any, due and payable [on the
applicable Payment Date] pursuant to Section 2.05 of the Indenture.
The Holder hereby represents and warrants that it (i) is not a U.S. person
and (ii) does not hold the above-referenced Temporary Regulation S Global Note
for the account or benefit of a U.S. person (other than a distributor). Terms in
this sentence have the meanings given to them in Regulation S under the
Securities Act of 1933, as amended.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Paying Agent.
[Insert name of Holder]
By: ___________________________
Name:
Title:
<PAGE> 213
EXHIBIT L-2
FORM OF DEPOSITORY CERTIFICATE REGARDING INTEREST
-----, ---
Bankers Trust Company, as Paying Agent
Four Albany Street
New York, New York 10006
Re: Aircraft Finance Trust -- $1,209,000,000 aggregate principal
amount of Class A-1, Class A-2, Class B, Class C and Class D
Notes, Series 1999-1
Reference is hereby made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), made by and between Aircraft Finance Trust (the "Issuer"),
ReSource/Phoenix, Inc. (the "Administrative Agent") and Bankers Trust Company
(in such capacity, the "Trustee"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
This letter relates to [__________] principal amount of Class ___ Notes
that is held in the form of beneficial interests in the Temporary Regulation S
Global Note (CUSIP No. ) through [insert name of Depository]. Certain Holders of
the beneficial interests in such Temporary Regulation S Global Note have
requested the receipt of payment of interest, principal and Sale Premium, if
any, on the applicable Payment Date pursuant to Section 2.05 of the Indenture.
We have received from such Holders certifications to the effect that they
(i) are not U.S. persons and (ii) do not hold the above-referenced Temporary
Regulation S Global Note for the account or benefit of U.S. persons (other than
distributors). Terms in this sentence have the meanings given to them in
Regulation S under the Securities Act of 1933, as amended.
Accordingly, the Holders of beneficial interests in the Temporary
Regulation S Global Note are entitled to receive interest, principal and Sale
Premium, if any, in accordance with the terms of the Indenture in the amount of
[ ].
[CEDEL][EUROCLEAR]
By: ___________________________
Name:
Title:
4
<PAGE> 1
Exhibit 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May 5, 1999
between
AIRCRAFT FINANCE TRUST
and
LEHMAN BROTHERS INC.
MERRILL, LYNCH, PIERCE, FENNER & SMITH INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May 5, 1999 by and between Aircraft Finance Trust, a special purpose
statutory business trust organized under the laws of the State of Delaware (the
"Company"), and Lehman Brothers Inc. (the "Representative," and together with
Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse First
Boston Corporation, the "Initial Purchasers"), who have agreed to purchase
$1,209,000,000 million in aggregate principal amount of Class A-1, A-2, B and C
Notes (the "Initial Registrable Notes") and Class D Notes (together with the
Initial Registrable Notes, the "Initial Notes").
This Agreement is made pursuant to the Purchase Agreement dated April 21,
1999 (the "Purchase Agreement") by and among the Company, General Electric
Capital Corporation, UniCapital Corporation and the Representative on behalf of
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Initial Registrable Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 9 of the Purchase Agreement. Capitalized terms used and not
otherwise defined herein shall have the meaning assigned to them in the Trust
Indenture (the "Indenture"), dated as of May 5, 1999, between the Company,
Resource/Phoenix, Inc. and Bankers Trust Company, relating to the Initial Notes
and the Exchange Notes.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Affiliate: 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; For purposes of this
definition, "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; provided, however that beneficial ownership of 10% or more of the
voting Stock of a Person shall be deemed to be control.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: A day on which commercial banks and foreign exchange markets
are open in New York, New York and, with respect to the determination of payment
of interest on any floating rate Notes, a day on which U.S. dollar deposits may
be dealt in on the London inter-bank market and, with respect to payments to or
withdrawals from the Non-Trustee Accounts (as defined in the Indenture), a day
on which the financial institution at which such account is located is open for
business.
Closing Date: May 5, 1999.
Commission: The U.S. Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Securities Act of the Exchange Offer Registration Statement relating to the
Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such
Exchange Offer Registration Statement continuously effective and the keeping of
the Exchange Offer open for a period not less than the period required pursuant
to Section 3(b) hereof and (c) the delivery by the Company to the Registrar
under the Indenture of Exchange Notes in the same aggregate principal amount as
the aggregate principal amount of Initial Registrable Notes properly tendered
and not withdrawn by Holders thereof pursuant to the Exchange Offer.
<PAGE> 3
Exchange Act: The U.S. Securities Exchange Act of 1934, as amended.
Exchange Notes: Any notes of the Company containing terms identical to the
Initial Registrable Notes (except to reflect the registration of the Exchange
Note under the Securities Act and that Registration Step-Up Interest shall not
apply thereto) that are issued and exchanged for the Initial Registrable Notes
pursuant to this Agreement and the Indenture either (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Initial Registrable Notes that are properly tendered and not withdrawn by such
Holders in connection with such exchange and issuance.
Exchange Offer Consummation Deadline: As defined in Section 3(a) hereof.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Legal Holiday: Any day that is not a Business Day.
Luxembourg Listing Agent: Kredietbank S.A. Luxembourg.
Notes: The Initial Registrable Notes and the Exchange Notes.
Participating Broker-Dealer: Any Broker-Dealer that holds Exchange Notes
that were acquired in the Exchange Offer in exchange for Initial Registrable
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Initial Registrable
Notes acquired directly from the Company or any of its affiliates).
Person: Any natural person, firm, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any political subdivision thereof or
any other legal entity, including public bodies.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and
<PAGE> 4
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Securities Act.
Rule 144: Rule 144 promulgated under the Securities Act.
Securities Act: The U.S. Securities Act of 1933, as amended.
Shelf Effectiveness Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Stock: 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.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Initial Registrable Note until (a)
the date on which such Note has been exchanged by a person other than a
Broker-Dealer for an Exchange Note in the Exchange Offer that is entitled to be
resold to the public by the holder thereof without complying with the prospectus
delivery requirement of the Securities Act, (b) following the exchange by a
Broker-Dealer in the Exchange Offer of such Initial Registrable Note for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser who
receives from such Broker-Dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement and is
otherwise disposed of by such broker-dealer pursuant to the "Plan of
Distribution" set forth in the Exchange Offer Registration Statement, (c) the
date on which such Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (d) the
date on which such Initial Registrable Note is distributed to the public
pursuant to Rule 144 under the Securities Act or is eligible for resale pursuant
to Rule 144(k) under the Securities Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date, (ii)
use all commercially reasonable efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, (iii)
in connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, any required post-effective
amendment to such Exchange Offer Registration Statement and (C) cause all
necessary filings, if any, in connection with the registration and qualification
of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer and (iv) upon the
<PAGE> 5
effectiveness of such Exchange Offer Registration Statement, use all
commercially reasonable efforts to commence and Consummate the Exchange Offer,
but in no event later than 270 days after the Closing Date (the "Exchange Offer
Consummation Deadline"). The Exchange Offer shall be on the appropriate form
permitting registration of the Exchange Notes to be offered in exchange for the
Initial Registrable Notes that are Transfer Restricted Securities and to permit
resales of Exchange Notes by Broker-Dealers that tendered into the Exchange
Offer for Initial Registrable Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Initial Registrable Notes acquired directly from the Company or any
of its Affiliates) as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchange Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use all commercially reasonable efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer that holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a prospectus meeting
the requirements of the Securities Act in connection with its initial sale of
any Exchange Notes received by such Broker-Dealer in the Exchange Offer and that
the Prospectus contained in the Exchange Offer Registration Statement may be
used to satisfy such prospectus delivery requirement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Exchange Notes by Broker-Dealers, the
Company agrees to use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) hereof and in conformity with the requirements of
this Agreement, the Securities Act and the policies, rules and regulations of
the Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer is Consummated, or such shorter period as will
terminate when all Transfer Restricted Securities held by such Broker-Dealers
covered by such Registration Statement have been sold pursuant thereto (unless
such period is extended pursuant to Section 6(d) below). The Company shall
promptly provide sufficient copies of the latest version of such Prospectus to
such Broker-Dealers promptly upon request, and in no event later than one day
after such request, at any time during such period.
<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or Commission policy (after the Company has complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Initial
Registrable Notes acquired directly from the Company or any of its Affiliates,
then the Company shall:
(x) use its best efforts to file a shelf registration statement with the
Commission pursuant to Rule 415 under the Securities Act (which may be an
amendment to the Exchange Offer Registration Statement (the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities, and
(y) use its best efforts to cause such Shelf Registration Statement to
become effective on or prior to 270 days after the earlier of (i) the date on
which the Company determines that the Exchange Offer Registration Statement
cannot be filed as a result of clause (a)(i) above and (ii) the date on which
the Company receives the notice specified in clause (a) (ii) above (the 270th
day from such earlier date, the "Shelf Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Shelf Effectiveness Deadline set forth in
clause (y).
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented and
amended as required by and subject to the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of at least two years
(as extended pursuant to Section 6(d)) following the date on which such Shelf
Registration Statement first becomes effective under the Securities Act, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement (i) have been sold pursuant thereto or (ii) are
no longer Restricted Securities (as defined in Rule 144 under the Securities
Act).
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, under
the Securities Act for use in connection with any Shelf Registration Statement
or Prospectus or preliminary Prospectus included therein. Each selling Holder
agrees to promptly furnish additional information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading. No Holder of Transfer Restricted Securities shall be
entitled to Registration Step-Up Interest pursuant to Section 5 hereof unless
and until such Holder shall have provided all such information.
<PAGE> 7
SECTION 5. REGISTRATION STEP-UP INTEREST
(a) If (i) the Exchange Offer has not been Consummated by the Exchange
Offer Consummation Deadline, (ii) the Exchange Offer has not been Consummated
within 30 Business Days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission or the Exchange Offer is not
kept open for a period of at least 20 Business Days, (iii) if obligated to file
the Shelf Registration Statement pursuant to Section 4(a) of this Agreement, the
Shelf Registration Statement has not been declared effective by the Shelf
Effectiveness Deadline or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (except as
permitted in paragraph (b) of this Section 5; such period of time during which
any such Registration Statement is not effective or any such Registration
Statement or the related Prospectus is not usable being referred to as a
"Blackout Period") (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then Registration Step-Up Interest of an additional
0.5% per annum shall be payable on each subclass of Initial Registrable Notes as
provided for in the Indenture. Notwithstanding anything to the contrary set
forth herein, any Registration Default shall be deemed to be no longer
continuing (1) upon Consummation of the Exchange Offer, in the case of (i)
above, (2) upon Consummation of the Exchange Offer or the extension of the
period such Exchange Offer is open, in the case of (ii) above, (3) upon the
effectiveness of the Shelf Registration Statement, in the case of (iii) above,
and (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, and
thereupon Registration Step-Up Interest shall cease to be payable on each such
subclass of Initial Registrable Notes, as provided in the Indenture.
(b) A Registration Default referred to in Section 5(a)(iv) shall be deemed
not to have occurred and be continuing in relation to a Registration Statement
or the related Prospectus if (i) the Blackout Period has occurred solely as a
result of (x) the filing of a post-effective amendment to such Shelf
Registration Statement to incorporate annual audited financial information with
respect to the Company where such post-effective amendment is not yet effective
and needs to be declared effective to permit Holders to use the related
Prospectus or (y) the occurrence of other material events with respect to the
Company that would need to be described in such Registration Statement or the
related Prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement (including by way of filing
documents under the Exchange Act which are incorporated by reference into the
Registration Statement) such Registration Statement and the related Prospectus
to describe such events: provided, however, that in any case if such Blackout
Period occurs for a continuous period in excess of 30 days, a Registration
Default shall be deemed to have occurred on the 31st day of such Blackout Period
and Registration Step-Up Interest shall be payable in accordance with the above
paragraph from the day such Registration Default occurs until such Registration
Default is cured or until the Company is no longer required pursuant to this
Agreement to keep such Registration Statement effective or such Registration
Statement or the related Prospectus usable; provided further, however, that in
no event shall the total of all Blackout Periods exceed 60 days in the aggregate
in any 12-month period.
Registration Step-Up Interest shall be paid to the Holders entitled
thereto, in the manner, and subject to the priorities, provided for in the
Indenture, on each Interest Payment Date, all as set forth in the Indenture and
the Notes.
<PAGE> 8
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer and subject to Section 3(a) hereof, the Company shall comply with all
applicable provisions of Section 6(c) below, shall use its best efforts to
effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Initial Registrable Notes
that such Broker-Dealer acquired for its own account as a result of its market
making activities or other trading activities (other than Initial Registrable
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the
Company to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company hereby agrees to pursue the issuance of such a
decision to the Commission staff level. In connection with the foregoing,
the Company hereby agrees to take all such other actions as may be
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring
the Exchange Notes in its ordinary course of business. Each Holder using
the Exchange Offer to participate in a distribution of the Exchange Notes
hereby acknowledges and agrees that, if the resales are of Exchange Notes
obtained by such Holder in exchange for Initial Registrable Notes acquired
directly from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling (available July 2, 1993), and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
Inc.
<PAGE> 9
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling (available July 2, 1993), and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Transfer Restricted Securities in accordance with the intended method or methods
of distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable;
upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required, use
its best efforts to cause such amendment to be declared effective as soon
as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition of
all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B)
of any written request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under
<PAGE> 10
the Securities Act or of the suspension by any state securities commission
of the qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchasers and, if requested by any
selling Holder, to such Holder, named in any Registration Statement or
Prospectus in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Holders in connection
with such sale, if any, for a period of at least five Business Days, and
the Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which the selling Holders of the Transfer Restricted Securities covered by
such Registration Statement in connection with such sale, if any, shall
reasonably object within five Business Days after the receipt thereof. A
selling Holder shall be deemed to have reasonably objected to such filing
if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the
Securities Act;
(vi) upon the reasonable request of any selling Holder, promptly
prior to the filing of any document that is to be incorporated by
reference into a Registration Statement or Prospectus, provide copies of
such document to the selling Holders in connection with such sale, if any,
make the Company's representatives reasonably available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as any selling
Holder may reasonably request;
(vii) in the case of any Shelf Registration, make available at
reasonable times for inspection by the selling Holders participating in
any disposition pursuant to such Registration Statement and any attorney
or accountant retained by such selling Holders, all financial and other
records, pertinent corporate documents of the Company and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such selling
<PAGE> 11
Holder, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness, in each case as shall reasonably
be necessary to enable such persons to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided, however,
that the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers and such selling Holders
by you and on behalf of the other parties, by one counsel designated by
and on behalf of such other parties as described in Section 7 hereof,
provided, further, that any records, documents, properties or information
that are designated by the Company as confidential at the time of delivery
of such records, documents, properties or information shall be kept
confidential by such persons, unless (i) such records, documents,
properties or information are in the public domain or otherwise publicly
available, (ii) disclosure of such records, documents, properties or
information is required by court or administrative order or (iii)
disclosure of such records, documents, properties or information, in the
written opinion of counsel to such person, is otherwise required by law
(including, without limitation, pursuant to the requirements of the
Securities Act);
(viii) subject to Section 4(b) hereof, if reasonably requested by
selling Holders of a majority of the principal amount of Transfer
Restricted Securities being sold in connection with such offering, if any,
promptly include in any Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment if necessary, such information as
such selling Holders may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities; and make all required
filings of such Prospectus supplement or post-effective amendment as soon
as practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any action
pursuant to this Section 6(c)(viii) that would, in the opinion of counsel
for the Company reasonably satisfactory to the Initial Purchasers, violate
applicable law;
(ix) furnish to each selling Holder in connection with such sale, if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all documents incorporated by reference therein
and all exhibits (including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such selling Holder reasonably may
request; the Company hereby consents to the use (in accordance with law
and subject to the provisions of this Agreement) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any applicable Registration
Statement contemplated by this Agreement as may be reasonably requested by
any Holder of Transfer Restricted Securities in connection with any sale
or resale pursuant to any applicable Registration Statement, and in such
connection, the Company shall:
<PAGE> 12
(A) Upon the request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each selling Holder, upon the effectiveness of the
Shelf Registration Statement or upon Consummation of the Exchange
Offer, as the case may be:
(1) a certificate, dated and addressing the matters
covered therein as of such date, signed on behalf of the
Company by the Equity Trustee of the Company, covering matters
similar to those set forth in Section 9(v) of the Purchase
Agreement and such other similar matters as are customary and
as the selling Holders may reasonably request;
(2) an opinion, dated and addressing the matters covered
therein as of the date of Consummation of the Exchange Offer,
or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company
covering matters similar to those set forth in of Section 9(c)
or 9(o) of the Purchase Agreement and such other matters as
the selling Holders may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers of the Company and
with the independent public accountants for the Company
concerning the preparation of the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may
be, and although such counsel has made certain inquiries and
investigations in connection with such preparation, it is not
passing upon and does not assume any responsibility for the
accuracy or completeness of the statements contained in such
Registration Statements, except insofar as such statements
relate to such counsel, and on the basis of the foregoing,
such counsel's work in connection with this matter did not
disclose any information that gave such counsel reason to
believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective
amendment thereto became effective, or the Prospectus
contained in such Registration Statement as of its date, and,
in the case of the Exchange Offer Registration Statement, as
of the date of Consummation of the Exchange Offer, contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; and
(3) a customary comfort letter, dated and addressing the
matters covered therein as of the date of Consummation of the
Exchange Offer, or as of the date of effectiveness of the
Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and meeting the requirements set forth in the
comfort letters delivered pursuant to Section 9(u) of the
Purchase Agreement;
(B) Set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) Deliver such other customary documents and certificates as
may be reasonably requested by the selling Holders to evidence
compliance with clause (A) above and with any customary conditions
contained in any agreement entered into by the Company pursuant to
this clause (xi).
If at any time the representations and warranties of the
Company set forth in the certificate contemplated in clause (A)(1)
above cease to be true and correct, the Company
<PAGE> 13
shall so advise the Initial Purchasers and the underwriter(s), if
any, and each selling Holder promptly and, if requested by such
Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject
it to the service of process in suits, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) issue, upon the request of any Holder of Initial Registrable
Notes covered by any Registration Statement contemplated by this
Agreement, Exchange Notes having a principal amount equal to the principal
amount of Initial Registrable Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Exchange
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Exchange Notes, as the case may be; in return, the
Initial Registrable Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the selling Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities pursuant to such
Registration Statement;
(xv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with The Depository Trust
Company;
(xvii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Securities Act);
(xviii) (A) if the Notes have been rated prior to the initial sale
of such Notes, use its best efforts to confirm that such ratings will
apply to the Transfer Restricted Securities covered by a Registration
Statement, or (B) if the Notes were not previously rated, use commercially
reasonable efforts to cause the Transfer Restricted Securities covered by
the Registration
<PAGE> 14
Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority of the principal amount of Notes
covered thereby or the managing underwriter(s), if any;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such 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 that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(xxi) 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 and to make all documents relating
to the Exchange Offer available at the offices of the Luxembourg Listing
Agent;
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension
Notice"), such Holder will promptly discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
maintenance of the effectiveness of such Registration Statement set forth in
Section 3 or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing of Prospectuses), messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of
counsel for the Company and one firm of counsel designated by the Holders of a
majority of the principal amount of Transfer Restricted Securities to act as
counsel for the Holders in connection therewith; (v) all application and filing
fees in connection with listing the Exchange Notes on a national securities
exchange or automated quotation system; and (vi) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
<PAGE> 15
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Milbank, Tweed, Hadley & McCloy LLP, New York, New York, unless another firm
shall be chosen by the Holders of a majority of the principal amount of Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
(c) Each Holder of Transfer Restricted Securities will pay all
underwriting discounts, if any, and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Transfer Restricted
Securities.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Transfer Restricted Securities, its officers and employees and each person, if
any, who controls any such Holder within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Transfer
Restricted Securities), to which that Holder, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(in each case as amended or supplemented) or (ii) the omission or alleged
omission to state in any Registration Statement, preliminary prospectus or
Prospectus (in each case as amended or supplemented) any material fact required
to be stated therein or necessary to make the statements therein not misleading;
and shall reimburse each such Holder and each such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Holder, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Registration Statement, preliminary prospectus or
Prospectus (in each case as amended or supplemented) in reliance upon and in
conformity with written information concerning such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion therein and
provided further, however, that the Company shall not be liable to any Holder
under the indemnity agreement in this subsection (a) with respect to any
preliminary prospectus to the extent that any such loss, claim, damage or
liability of such Holder results from the fact that such Holder sold Transfer
Restricted Securities to a person as to whom there was not sent or given, at or
prior to written confirmation of such sale, a copy of the Prospectus or of the
Prospectus as then amended or supplemented if the Company had previously
furnished copies thereof in the quantity requested and in a timely manner in
accordance with Section 6(c)(x) hereof to such Holder and the loss, claim,
damage or liability of such Holder results from an untrue statement or omission
of a material fact contained in the preliminary prospectus and corrected in the
Prospectus or the Prospectus as amended or supplemented. The foregoing
<PAGE> 16
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Holder or to any officer, employee or controlling person
of that Holder.
(b) Each Holder of Transfer Restricted Securities, severally and not
jointly, shall indemnify and hold harmless the Company, its officers and
employees, each of its directors, and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (in each case as
amended or supplemented) or (ii) the omission or alleged omission to state in
any Registration Statement, preliminary prospectus or Prospectus (in each case
as amended or supplemented) any material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information concerning such Holder furnished to the Company by or on behalf of
that Holder specifically for inclusion therein, and shall reimburse the Company
and any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Holder may otherwise have to the Company or any such
director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 8. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Holders shall have the right to employ counsel to represent jointly the
Holders and their respective officers, employees and controlling persons who may
be subject to liability arising out of any claim in respect of which indemnity
may be sought by the Holders against the Company under this Section 8 if, in the
reasonable judgment of the Holders, it is advisable for the Holders, officers,
employees and controlling persons to be jointly represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall be paid
by the Company. Such counsel shall be designated in writing by the Holders of a
majority in principal amount of Transfer Restricted Securities which are subject
to such claim. No indemnifying party shall (i) without the prior written consent
of the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable
<PAGE> 17
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with the
consent of the indemnifying party or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
from the offering and sale of the Notes, on the one hand, and the Holders from
their sale of Transfer Restricted Securities, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Holders on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and any such Holder on
the other shall be deemed to be in the same proportion as (x) in the case of the
Company, the total net proceeds from the offering pursuant to the Purchase
Agreement (before deducting expenses, but after deducting fees and commissions
payable to the Initial Purchasers) received by the Company with respect to the
Notes sold by such Holder (the "Net Proceeds") bear to (y) in the case of such
Holder, the aggregate principal amount of Notes sold by such Holder, less the
amount of the Net Proceeds relating to such Notes. Notwithstanding the
provisions of this Section 8, no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Holders, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute as provided in this
Section 8(d) are several in proportion to the respective principal amount of the
Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
<PAGE> 18
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers 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 Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. 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 Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. The Company will not take any action,
or permit any change to occur, with respect to the Notes that would materially
and adversely affect the ability of the Company or the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
<PAGE> 19
(f) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Telecopier No.: (302) 651-8882
Attention: Corporate Trust Administrator
With copies to:
UniCapital Corporation
10800 Biscayne Boulevard
Suite 300
Miami, Florida 33161
Telecopier No.: (305) 899-5050
Attention: Wayne D. Lippman
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Telecopier No.: (212) 530-5219
Attention: Drew S. Fine, Esq.
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 receipt
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.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Lehman Brothers Inc.
on behalf of the Initial Purchasers (in the form attached hereto as Exhibit A)
and shall be addressed to: Attention: Compliance Department, 3 World Financial
Center, New York, New York 10285.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing
<PAGE> 20
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities 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,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(h) 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.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
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.
(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AIRCRAFT FINANCE TRUST
By: Wilmington Trust Company, as
Trustee
By: /s/ Donald G. MacKelcan
---------------------------------
Name: Donald G. MacKelcan
Title: Vice President
<PAGE> 22
LEHMAN BROTHERS INC.
MERRILL, LYNCH, PIERCE, FENNER & SMITH INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
BY: LEHMAN BROTHERS INC., as Representative of the Initial Purchasers
By: /s/ Peter I. Wexler
---------------------------------
Name: Peter I. Wexler
Title: Managing Director
<PAGE> 23
B15a
<PAGE> 24
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Lehman Brothers Inc.
Compliance Department
3 World Financial Center
New York, NY 10285
From: Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Re: $512,500,000 Class A-1 Floating Rate Asset Backed Notes, Series 1999-1
$400,000,000 Class A-2 Floating Rate Asset Backed Notes, Series 1999-1
$126,500,000 Class B Floating Rate Asset Backed Notes, Series 1999-1
$106,000,000 Class C Fixed Rate Asset Backed Notes, Series 1999-1
Date __________________, ____
For your information only (NO ACTION REQUIRED):
Today, _______, ____, we filed [an Initial Registrable Note/Exchange Note
Exchange Offer Registration Statement/a Shelf Registration Statement] with the
Securities and Exchange Commission. We currently expect this registration
statement to be declared effective within ____ business days of the date hereof.
<PAGE> 1
Exhibit 5.1
July 2, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Re: Offer to Exchange up to $1,145,000,000 aggregate principal
amount of Class A-1 Floating Rate Asset Backed Notes, Series
1999-1, Class A-2 Floating Rate Asset Backed Notes, Series
1999-1 Class B Floating Rate Asset Backed Notes, Series 1999-1
and Class C Fixed Rate Asset Backed Notes, Series 1999-1 for an
equal aggregate principal amount of Class A-1 Floating Rate
Asset Backed Notes, Series 1999-1, Class A-2 Floating Rate
Asset Backed Notes, Series 1999-1, Class B Floating Rate Asset
Backed Notes, Series 1999-1 and Class C Fixed Rate Asset Backed
Notes, Series 1999-1.
Ladies and Gentlemen:
We are acting as your special counsel in connection with the filing
by Aircraft Finance Trust, a Delaware business trust (the "Company") of a
Registration Statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") for the purpose of
registering the issuance of up to $1,145,000,000 aggregate principal amount of
the Company's Class A-1 Floating Rate Asset Backed Notes, Series 1999-1, Class
A-2 Floating Rate Asset Backed Notes, Series 1999-1, Class B Floating Rate
Asset Backed Notes, Series 1999-1 and Class C Fixed Rate Asset Backed Notes,
Series 1999-1 (the "Exchange Notes") under the Securities Act of 1933, as
amended (the "Act"). The Exchange Notes are to be issued in exchange for an
equal aggregate principal amount of the Company's Class A-1 Floating Rate Asset
Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series
1999-1, Class B Floating Rate Asset Backed Notes, Series 1999-1 and Class C
Fixed Rate Asset Backed Notes, Series 1999-1 (the "Restricted Notes") pursuant
to the Registration Rights Agreement by and between the Company and Lehman
Brothers Inc., Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Credit
Suisse First Boston Corporation, filed as Exhibit 4.4 to the Registration
Statement. The Exchange Notes are to be issued pursuant to the terms of the
Indenture between the Company, ReSource/Phoenix, Inc., in its capacity as
Administrative Agent, and Bankers Trust Company, as trustee (the "Trustee"),
filed as Exhibit 4.1 to the Registration Statement (the "Indenture"). The
Indenture is to be qualified under the Trust Indenture Act of 1939, as amended
(the "TIA"). Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Indenture.
<PAGE> 2
2
In rendering the opinions expressed below, we have examined an
executed copy of the Indenture. We also have examined originals, or copies
certified to our satisfaction, of such corporate records of the Company,
agreements and other instruments, certificates of public officials,
certificates of representatives of the Company and other documents as we have
deemed necessary as a basis for the opinions hereinafter expressed. As to
various questions of fact material to such opinions, we have, when relevant
facts were not independently established, relied upon certifications by
Trustees of the Company and public officials and representations and warranties
made in or pursuant to the Indenture by the parties thereto as to matters of
fact.
In rendering the opinions expressed below, we have assumed, without
independent verification, that:
(a) the signatures of persons signing all documents in connection
with which this opinion is rendered are genuine and authorized;
(b) all documents submitted to us as originals or duplicate originals
are authentic;
(c) all documents submitted to us as copies, whether certified or
not, conform to original documents and such originals are
authentic; and
(d) all parties to the documents reviewed by us (other than the
Company) are duly organized and validly existing and have full
power and authority to execute, deliver and perform their
obligations under such documents, that all such documents have
been duly authorized by all necessary action on the part of the
parties thereto, that such documents have been duly executed and
delivered by such parties, and that such documents are valid,
binding and enforceable obligations of such parties.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
(1) When (i) the Registration Statement has been declared effective,
(ii) the Indenture has been duly qualified under the TIA and
(iii) the Exchange Notes have been duly executed by the Company
and authenticated in accordance with the provisions of the
Indenture and issued and delivered against exchange of the Notes
in accordance with the terms set forth in the prospectus included
as part of the Registration Statement, the Exchange Notes will
have been legally issued and will constitute valid and binding
obligations of the Company, enforceable in accordance with their
terms except as (x) may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer or
similar laws relating to or affecting creditors' rights generally
and (y) the enforceability thereof is subject to the application
of general principles of equity (regardless of whether considered
in a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy, (b)
concepts of materiality, reasonableness, good faith and fair
dealing and (c) possible judicial action giving effect to foreign
governmental actions or foreign laws.
(2) The statements in the prospectus under the caption "U.S. Federal
Income Tax Considerations" insofar as such statements constitute
summaries of the legal matters, documents or proceedings under
the laws of the United States, fairly summarize the matters
referred to therein.
<PAGE> 3
3
We hereby consent to the filing of this opinion as Exhibit 5.1 and
Exhibit 8 to the Registration Statement and to the use of our name under the
caption "Legal Matters" and "U.S. Federal Income Tax Considerations" in the
prospectus which is included in the Registration Statement.
We express no opinion herein other than as to matters of New York law
and the federal laws of the United States of America. To the extent that the
law of Delaware may be relevant to the opinion expressed herein, we have, with
your permission, and without having made any independent investigation with
respect thereto, assumed the correctness of the opinions of Morris, James,
Hitchens & Williams; which opinion has been delivered to you on the date hereof
for filing with the Commission as Exhibit 5.1 to the Registration Statement.
This opinion is rendered to the Company in connection with the filing
of the Registration Statement and for no other purpose.
Very truly yours,
/s/ Milbank, Tweed, Hadley & McCloy LLP
<PAGE> 1
EXHIBIT 5.2
[LETTERHEAD OF MORRIS, JAMES, HITCHENS & WILLIAMS]
July 1, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Ladies and Gentlemen:
We have acted as special Delaware counsel to Aircraft Finance Trust (the
"Company"), a Delaware business trust, in connection with the filing by the
Company of a Registration Statement on Form S-4 (the "Registration Statement")
with the Securities and Exchange Commission for the purpose of registering the
issuance of up to $1,145,000,000 aggregate principal amount of the Company's
Class A-1 Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating
Rate Asset Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed
Notes, Series 1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1
(the "Exchange Notes") under the Securities Act of 1933, as amended (the "1933
Act"). The Exchange Notes are to be issued in exchange for an equal aggregate
principal amount of the Company's Class A-1 Floating Rate Asset Backed Notes,
Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series 1999-1, Class
B Floating Rate Asset Backed Notes, Series 1999-1 and Class C Fixed Rate Asset
Backed Notes, Series 1999-1 (the "Restricted Notes") pursuant to the
Registration Rights Agreement by and between the Company and Lehman Brothers
Inc., Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse
First Boston Corporation, filed as Exhibit 4.4 to the Registration Statement.
The Exchange Notes are to be issued pursuant to the terms of the Indenture among
the Company, ReSource/Phoenix, Inc., in its capacity as Administrative Agent,
and Bankers Trust Company, as trustee (the "Trustee"), filed as Exhibit 4.1 to
the Registration Statement (the "Indenture"). The Indenture is to be qualified
under the Trust Indenture Act of
<PAGE> 2
2
1939, as amended. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Indenture.
In giving this opinion, we have examined, among other things, executed copies of
the following documents (collectively, the "Documents"):
A. the Indenture governed by the laws of the State of New York;
B. the resolutions adopted in writing by the Controlling Trustees of the
Company dated as of May 4, 1999; and
C. the Trust Agreement, dated as of April 13, 1999, between UniCapital
AFT-I, Inc., UniCapital AFT-II, Inc. and Wilmington Trust Company, as
amended and restated by the Amended and Restated Trust Agreement, dated
as of May 4, 1999 (as amended and restated, the "Trust Agreement").
We have also examined the originals or copies, certified or otherwise identified
to our satisfaction, of certificates of public officials and such corporate
documents and other records, documents and certificates as we have considered
relevant and necessary as the basis for the opinions set forth below. In our
examination, we have assumed the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such latter documents. As to any question of fact material to the opinions
expressed herein, we have relied upon the representations and warranties of the
parties to, and as contained in, the Documents. In this regard, we have assumed
the due authorization, execution and delivery of the Documents by all parties
thereto (other than the Company) and that all parties to the Documents (other
than the Company) have all requisite legal right, power and authority to enter
into and perform their obligations under the Documents and to consummate the
transactions contemplated thereby.
For the purpose of this opinion, we have further assumed:
(a) the genuineness of all the signatures on all the Documents and the
completeness, and the conformity to original Documents, of all copies
submitted to us; and
(b) due compliance with all matters of form, validity and enforceability of
the Documents under the laws by which Documents are expressed to be
governed.
Based upon and subject to the foregoing, we are of the opinion that [(a) the
Company has been duly formed and is validly existing in good standing as a
business trust under the Delaware Business Trust Act 12 Del. C. Section 3801, et
seq. (the "Act"), (b) the Company has the power and authority under the Trust
Agreement and the Act to issue, execute, deliver and perform its obligations
under the Indenture and the Exchange Notes and (c)] the Exchange Notes have been
<PAGE> 3
3
duly authorized, and when executed, authenticated and delivered by the Company
in accordance with the resolutions authorizing the Exchange Notes and the
Indenture, will have been duly executed, authenticated and delivered by the
Company.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including Federal laws
and rules and regulations relating thereto.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the prospectus which is included in the Registration Statement. We
further consent to the incorporation of this opinion by reference into any
subsequent registration statement filed by the Company pursuant to Rule 462(b)
under the Act relating to the offering covered by the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the 1933 Act.
Sincerely,
/s/ Morris, James, Hitchens & Williams
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
MASTER AIRCRAFT PURCHASE AGREEMENT
dated as of May 5, 1999
among
GENERAL ELECTRIC CAPITAL CORPORATION
and
THE OTHER SELLERS LISTED ON ANNEX A HERETO
and
AIRCRAFT FINANCE TRUST
and
AFT TRUST-SUB I
<PAGE> 2
1. INTERPRETATION.........................................................1
2. SALE AND PURCHASE......................................................9
3. DELIVERY AND ACCEPTANCE................................................9
4. SUBSTITUTE AND UNDELIVERED AIRCRAFT...................................11
5. PAYMENTS..............................................................13
6. CONDITIONS PRECEDENT - SELLER.........................................16
7. CONDITIONS PRECEDENT - PURCHASER......................................18
8. REPRESENTATIONS AND WARRANTIES OF GECC AND EACH OTHER SELLER..........22
9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................26
10. INDEMNITY.............................................................28
11. TAXES.................................................................29
12. WARRANTIES AND DISCLAIMERS............................................30
13. ASSIGNMENT............................................................31
14. MISCELLANEOUS.........................................................31
15. SUBROGATION...........................................................34
<PAGE> 3
LIST OF ATTACHMENTS:
ANNEX A - Sellers
EXHIBIT A - Form of Bill of Sale
EXHIBIT B - Form of Acknowledgement of Delivery
EXHIBIT C - Form of Guaranty
SCHEDULE 1 - Aircraft Information
SCHEDULE 2 - Documents and Conditions - Delivery
SCHEDULE 3 - Documents and Conditions - Post-Delivery
SCHEDULE 4 - State of Incorporation
ii
<PAGE> 4
THIS MASTER AIRCRAFT PURCHASE AGREEMENT (this "Agreement") is dated as of May 5,
1999 among: (i) GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation;
(ii) THE OTHER SELLERS LISTED ON ANNEX A HERETO; (iii) AIRCRAFT FINANCE TRUST, a
Delaware business trust; and (iv) AFT TRUST-SUB I, a Delaware business trust.
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For all purposes of this Agreement, the following terms shall have the
following meanings:
"Acknowledgement of Delivery" means, for any Aircraft title to which
passes as a result of being physically delivered pursuant to the terms and
conditions of this Agreement, an executed acknowledgement of delivery from
the Purchaser thereof to the Seller thereof substantially in the form of
Exhibit B.
"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 AFT and its
Subsidiaries, on the one part, and GECC and its Subsidiaries, on the other
part, shall not be considered to be Affiliates of each other.
"AFT" means Aircraft Finance Trust, a Delaware statutory business trust.
"AFT Sub I" means AFT Trust-Sub I, a Delaware statutory business trust.
"Agreed Form" means, when used in relation to any draft certificate,
document, agreement or opinion referred to in this Agreement, (a)
substantially in the form agreed between GECC and AFT on or before the
Initial Closing Date with such changes thereto as may subsequently be
agreed between GECC and AFT and (b) in the case of any opinion, such form
as each of the Rating Agencies shall approve.
"Air Authority" means each Person who is vested with the control and
supervision of, or has jurisdiction over, the registration, airworthiness
and operation of aircraft and other matters relating to civil aviation in
the State of Registration of the relevant Aircraft.
"Aircraft" means each aircraft described in Schedule 1 or, where any such
aircraft has become a Remaining Aircraft pursuant to Section 4.1(a), and
unless the context otherwise requires, any Substitute Aircraft designated
in lieu thereof pursuant to Sections 4.1(b) and (c) and described in the
applicable Substitute Aircraft Supplement, together with the Engines, and
includes where the context admits, a separate reference to the Engines,
Parts and Aircraft Documents.
<PAGE> 5
"Air Madagascar Aircraft" means the Boeing 767-300ER Aircraft (MSN 25403)
subject to the Lease (the "Air Madagascar Lease") dated October 2, 1998
between Polaris Aircraft (Pacific Coast), Inc. and Air Madagascar listed
in Schedule 1 hereto.
"Aircraft Documents" means, for any Aircraft, all records, logs, technical
data, manuals and other documents defined as "Aircraft Documents" under
the relevant Lease therefor, title to which is vested in the Seller
thereof at Delivery.
"Aircraft No." means, for any Aircraft, the reference number assigned to
such Aircraft in Schedule 1 or the Substitute Aircraft Supplement, as
applicable.
"Aircraft Purchase Price" means on any date, in respect of any Aircraft,
90.43156003256% of the Initial Appraised Value of such Aircraft.
"Aircraft Value" means, in respect of any Aircraft, the product of (i) the
Aircraft Purchase Price of such Aircraft and (ii) the Depreciation Factor
for such Aircraft as of the Delivery Date for such Aircraft.
"Appraised Value" means, for any Aircraft, the average of the three most
recent "Base Value" appraisals for such Aircraft, as obtained by GECC from
the Appraisers.
"Appraisers" means Aircraft Information Services, Inc., BK Associates,
Inc. and Morten Beyer & Agnew, Inc. or such other appraisers reasonably
acceptable to AFT.
"Assigned Lease" means, for any Lease the subject of an Assignment of
Lease, such Lease as assigned to the relevant Purchaser or an Affiliate of
such Purchaser ("New Lessor"), and as amended by the applicable Assignment
of Lease.
"Assignment of Lease" means, for any Aircraft, a lease assignment and
assumption agreement in the Agreed Form between the Purchaser thereof and
the Seller thereof to be entered into between such Seller or an Affiliate
of such Seller ("Existing Lessor"), such Purchaser and/or New Lessor and
the relevant Lessee, under which the relevant Lease will be assigned,
assumed and amended so that such Purchaser or New Lessor (as appropriate)
will be substituted as lessor of such Aircraft in place of Existing
Lessor.
"Assignment of Warranties" means, for any Aircraft, an assignment in the
Agreed Form and consented to by the Manufacturer, of the relevant Seller's
right, title and interest in the Manufacturer's warranties in respect of
such Aircraft, subject to the interests of the relevant Lessee.
"Bill of Sale" means, for any Aircraft, an executed bill of sale from the
Seller thereof to the Purchaser thereof substantially in the form of
Exhibit A and, as necessary, any FAA Bill of Sale executed by the Seller
thereof.
"Collections Account" has the meaning specified in the Indenture.
2
<PAGE> 6
"Delivery" means, for any Aircraft, transfer of title to such Aircraft
from the Seller thereof to the Purchaser thereof, in accordance with
Section 3.4(a) and the other provisions of this Agreement.
"Delivery Date" means, for any Aircraft, the date on which Delivery
therefor occurs in accordance with this Agreement.
"Delivery Expiry Date" means the date that is 210 days after the Initial
Closing Date.
"Delivery Location" means, for any Aircraft, the location of such Aircraft
at the time of Delivery as GECC shall designate, subject to Section 3.
"Delivery Period" means the period from and including the Initial Closing
Date to and including the Delivery Expiry Date.
"Disclosure Letter" means the First Disclosure Letter or a Supplemental
Disclosure Letter.
"Dollars" and "$" means the lawful currency for the time being of the
United States of America.
"Engine" means, in respect of any Aircraft, each engine for such Aircraft
as described in Schedule 1 or the Substitute Aircraft Supplement, as
applicable, concerning such Aircraft 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 Seller thereof, such replacement
engine as described in the relevant Bill of Sale or Acknowledgement of
Delivery as the case may be, together with all equipment, parts and
accessories belonging to, installed in or appurtenant to such engine and
includes, where the context permits, a separate reference to the Aircraft
Documents concerning such engine.
"Event of Loss" means, for any Aircraft, any event defined as such or as
"Casualty Occurrence" or "Total Loss" or the like in the relevant Lease.
"Expense Reimbursement Amount" means the amount so specified in the letter
agreement of even date herewith (the "Expense Letter") between GECC and
AFT relating to the payment of certain costs and expenses incurred by AFT
in connection with the offering of the Notes.
"FAA Bill of Sale" means, with respect to any Aircraft, a Federal Aviation
Administration Bill of Sale (AC Form 8050-2) to be executed by the Seller
in favor of the Purchaser, and upon Delivery, filed with the Air Authority
of the United States of America.
"First Disclosure Letter" means a letter from GECC to the Purchaser
setting out certain information as at the date hereof.
"Guaranty" means the Guaranty of GECC in respect of the transactions
contemplated hereby in substantially the form of Exhibit C hereto.
3
<PAGE> 7
"GECAS" means GE Capital Aviation Services, Limited, an Irish corporation.
"GECC" means General Electric Capital Corporation, a New York corporation.
"GECC Closing Expenses" means the amounts so specified in the Expense
Letter.
"Government Entity" means:
(1) any national government, political sub-division thereof, or
local jurisdiction therein;
(2) any instrumentality, board, commission, department, division,
organ, court, exchange control authority, or agency of any
thereof, however constituted; or
(3) any association, organization, or institution of which any of
the above is a member or to whose jurisdiction any thereof is
subject or in whose activities any thereof is a participant.
"Head Lease" means, for any Aircraft, any lease therefor in the Agreed
Form between the Purchaser thereof as lessor and an Affiliate of the
Purchaser as lessee.
"Indenture" means the Indenture dated as of the date hereof between AFT,
Resource/Phoenix, Inc., in its capacity as the Administrative Agent and
Bankers Trust Company.
"Initial Appraised Value" means, for any Aircraft, the Appraised Value of
such Aircraft as set forth in Schedule 1 or the Substitute Aircraft
Supplement, as applicable, for such Aircraft.
"Initial Closing Date" means May 5, 1999.
"Intercompany Lease" means, individually or collectively as the context
indicates, the Intermediate Leases and/or the Head Leases.
"Intermediate Lease" means, for any Aircraft, a lease therefor in the
Agreed Form between an Affiliate of the Purchaser as lessor and another
Affiliate of the Purchaser as lessee.
"Lease" means, for any Aircraft, the aircraft lease agreement (as amended
or supplemented by any relevant Lease Document) between the Existing
Lessor thereof and the relevant Lessee identified as such in Schedule 1 or
the Substitute Aircraft Supplement, as applicable, concerning such
Aircraft.
"Lease Assignment Documents" has the meaning ascribed thereto in the
Security Trust Agreement.
4
<PAGE> 8
"Lease Documents" means, for any Aircraft, all agreements identified as
such in Schedule 1 or the Substitute Aircraft Supplement, as applicable,
concerning such Aircraft, as such may be amended by any Disclosure Letter
the contents of which have been agreed to by AFT.
"Lease Novation" means, for any Aircraft, a lease novation and amendment
agreement therefor in the Agreed Form, to be entered into between the
Purchaser thereof and/or New Lessor, the Existing Lessor thereof as lessor
and the relevant Lessee, under which the relevant Lease will be novated
and amended so that such Purchaser or New Lessor (as appropriate) will be
substituted as lessor of such Aircraft in place of such Existing Lessor.
"Lessee" means, for any Aircraft, the lessee of such Aircraft as
identified in Schedule 1 or the Substitute Aircraft Supplement, as
applicable, and includes where the context permits a separate reference to
the lessee under an Intercompany Lease.
"Lessee Encumbrance" means, for any Aircraft, any Encumbrance which is
created by or is attributable to the debts or liabilities of the
applicable Lessee or its Affiliates.
"Lessee Furnished Equipment" means, for any Aircraft, those appliances,
parts, accessories, instruments, navigational and communications
equipment, furnishings modules, components and other items of equipment
installed in or furnished with such Aircraft at Delivery and ownership of
which is not required pursuant to the relevant Lease to vest in or be
transferred to the lessor or owner of such Aircraft, as the case may be.
"Losses" has the meaning given to it in Section 10.1.
"Maintenance Reserves" means, for any Aircraft, any amount defined under
the Lease for such Aircraft as a "Maintenance Accrual", "Maintenance Fund"
or "Maintenance Reserve" or the like or as "Supplemental Rent" or
"Variable Rent" in relation to any and/or all of (as the context may
require) airframes, Engines, auxiliary power units and landing gear, in
each case being the amounts held by the lessor under such Lease and being
all amounts due under such Lease.
"Manufacturer" means, for any Aircraft, the manufacturer thereof as
identified in Schedule 1 or the Substitute Aircraft Supplement, as
applicable, and includes where the context admits a separate reference to
the manufacturer of each Engine as identified in Schedule 1 or the
Substitute Aircraft Supplement, as applicable.
"Material Default" means, for any Lease:
(1) any Event of Default as defined in such Lease; or
(2) any default (a "Payment Default") in the making of any payment
when due and payable under such Lease which shall include,
without limitation, defaults that have been cured by either
(i) debiting the Security Deposit with respect to such Lease
unless such Security Deposit has been
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<PAGE> 9
replenished by the applicable Lessee, (ii) restructuring such
Lease to eliminate such default and/or (iii) by waiver; or
(3) any other default under such Lease known to GECC;
unless, in any such case (other than a Payment Default under a Varig
Lease), such Event of Default, Payment Default or other default has
been disclosed to each Rating Agency prior to the Initial Closing
Date.
"Non-Delivered Aircraft Adjustment Amount" means, with respect to any
Aircraft to which the payment provisions of Section 4.2 applies, the
remainder, which may be a negative number, of (A) all Maintenance Reserves
received by or on behalf of the relevant lessor under the Lease of such
Aircraft and paid to AFT pursuant to Section 5.3 hereof, minus (B) the
amount of maintenance or other expenditures made by or on behalf of AFT
for such Aircraft on or after the Initial Closing Date.
"Novated Lease" means, for any Lease subject to a Lease Novation, such
Lease as novated to the Purchaser or New Lessor (as appropriate) of the
Aircraft the subject of such Lease, and as amended by the applicable Lease
Novation.
"Operative Documents" means, for any Aircraft, (i) this Agreement, (ii)
the Guaranty, (iii) the Bill of Sale or Acknowledgement of Delivery
therefor, as applicable, and (iv) either (A) the Lease Novation or (B) the
Assignment of Lease therefor.
"Parts" shall mean any part, component, appliance, accessory, instrument
or other item of equipment (other than any of the Engines) installed in or
furnished with or attached to any of the Aircraft at Delivery (or part
thereof) except Lessee Furnished Equipment.
"Permitted Encumbrance" means:
(1) any Purchaser Encumbrance;
(2) the rights conferred by the Lease Documents; and
(3) any Lessee Encumbrances.
"Purchaser" means, for any Aircraft, the purchaser of such Aircraft
pursuant to this Agreement, which shall be, for an Aircraft described in
Schedule 1, AFT Sub I or as designated in writing by AFT at least three
Business Days (or such shorter period as may be agreed) prior to Delivery
of such Aircraft.
"Purchaser Encumbrance" means any Encumbrance which is created by or
results from debts or liabilities or actions or omissions of any Purchaser
or its Affiliates.
"Purchaser Indemnitees" means AFT, each other Purchaser, the Security
Trustee, the Owner Trustee, the Controlling Trustees, the Trustee, the
Holders, the Certificateholders and any of their respective successors and
assigns, shareholders, subsidiaries, Affiliates, directors, servants,
agents and employees.
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<PAGE> 10
"Remaining Aircraft" has the meaning given to it in Section 4.1(a).
"Security Deposit" means, for any Aircraft, the amount (whether in the
form of cash, a letter of credit, guarantee or otherwise) set forth
opposite the term "Security Deposit" in respect of such Aircraft on
Schedule 1 or the Substitute Aircraft Supplement, as applicable.
"Seller" means, for any Aircraft, the seller (as specified in Schedule 1)
of such Aircraft pursuant to this Agreement as listed on Annex A hereto.
"Seller Indemnitees" means, for any Aircraft, the Seller thereof (and each
party named as an Indemnitee with respect to the Lease of such Aircraft
prior to amendment thereof by an Assignment of Lease or Lease Novation, as
the case may be), GECC and any of their respective successors and assigns,
shareholders, subsidiaries, Affiliates, directors, servants, agents, and
employees.
"State of Registration" means, for any Aircraft, the country identified in
Schedule 1 or the Substitute Aircraft Supplement, as applicable,
concerning such Aircraft.
"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 controls exists.
"Substitute Aircraft" has the meaning given to it in Section 4.1(b).
"Substitute Aircraft Adjustment Amount" means, with respect to a
Substitute Aircraft and the related Remaining Aircraft, the excess, which
may be a negative number, of (A) for such Remaining Aircraft, all rent or
other sums received by or on behalf of the relevant lessor under the Lease
of such Aircraft and paid to AFT pursuant to Section 5.3 hereof less the
amount of maintenance or other expenditures made by or on behalf of AFT
for such Aircraft on or after the Initial Closing Date, over (B) for such
Substitute Aircraft, all rent or other sums received by or on behalf of
the relevant lessor under the Lease of such Aircraft in respect of the
same period less the amount of maintenance or other expenditures made by
the relevant lessor for such Aircraft on or after the Initial Closing
Date.
"Substitute Aircraft Supplement" means, for any Substitute Aircraft, a
supplement to this Agreement in the Agreed Form which, among other things,
sets forth such matters as GECC and AFT shall agree apply specifically to
such Substitute Aircraft, as provided in Section 4.1(c).
"Supplemental Disclosure Letter" means, for any Aircraft, a letter from
GECC to AFT setting out certain information as of the Delivery Date for
such Aircraft.
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<PAGE> 11
"Taxes" means any and all present and future sales, use, personal
property, customs, ad valorem, value added, turnover, stamp, interest
equalization, income, gross receipts or other taxes, fees, withholdings,
imposts, duties, deductions, levies, or other charges of any nature,
together with any penalties, fines, or interest thereon, imposed, levied,
or assessed by, or otherwise payable to, any Government Entity.
"Termination Date" means the earliest to occur of: (i) the first rent
payment date under the TWA Lease, (ii) the Delivery Date of a Substitute
Aircraft for the Air Madagascar Aircraft, (iii) the date on which the loss
proceeds in respect of the Air Madagascar Aircraft shall become payable to
AFT in accordance with the terms of this Agreement and (iv) the Delivery
Expiry Date.
"TWA Lease" means that certain Aircraft Lease Agreement dated as of March
31, 1999 between (prior to the novation thereof) Polaris Aircraft (Pacific
Coast), Inc, as Lessor and Trans World Airways, Inc. as Lessee, relating
to the Air Madagascar Aircraft.
"Varig Deposit Amount" means, in respect of each Varig Aircraft,
$3,375,000.
"Varig Lease" means either or both of the Leases described in Schedule 1
under which Viacao Aerea Rio-Grandense (Varig, S.A.) is the Lessee of the
Aircraft (individually, a "Varig Aircraft" and collectively, the "Varig
Aircraft").
1.2 In addition to the terms defined in Section 1.1, and for all purposes of
this Agreement, all capitalized terms used but not otherwise defined
herein shall have the respective meanings assigned to such terms in the
Indenture.
1.3 (a) In this Agreement, unless the contrary intention is stated, a
reference to:
(i) each of "GECC", any "Seller", "AFT", "AFT Sub I", any
"Purchaser" or any other Person includes without prejudice to
the provisions of this Agreement any successor in title to it
or any permitted assignee;
(ii) words importing the plural include the singular and vice
versa;
(iii) any document includes that document as amended, novated or
supplemented, in each case in accordance with its terms;
(iv) a law (1) includes any statute, decree, constitution,
regulation, order, judgment or directive of any Government
Entity; (2) includes any treaty, pact, compact or other
agreement to which any Government Entity is a signatory or
party; (3) includes any judicial or administrative
interpretation or application thereof; and (4) is a reference
to that provision as amended, substituted or re-enacted; and
(v) a Section or a Schedule is a reference to a clause of or a
schedule to this Agreement.
(b) The headings in this Agreement are to be ignored in construing this
Agreement.
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<PAGE> 12
2. SALE AND PURCHASE
2.1 With respect to each Aircraft, each Seller agrees to sell to the Purchaser
thereof and each such Purchaser agrees to purchase from the relevant
Seller, such Aircraft, including, without limitation, the Aircraft
Documents and any applicable Security Deposit, but excluding any
Maintenance Reserves paid to such Seller or any of its Affiliates prior to
the Initial Closing Date, on and subject to the terms and conditions
contained in this Agreement (including, without limitation, the execution
of a Lease Novation or Assignment of Lease (as the case may be) in respect
of such Aircraft and delivery of the Lease Documents therefor), each in
its "AS IS" and "WHERE IS" condition at the relevant Delivery Location,
free from any Encumbrances other than Permitted Encumbrances. The parties
hereto acknowledge, consent and agree that from and after the Initial
Closing Date, each of the Aircraft shall be subject to the Servicing
Agreement on the terms and conditions provided therein whether or not such
Aircraft shall have been delivered hereunder provided always that (without
prejudice to the terms of the Servicing Agreement) from and after the
Delivery Expiry Date an Aircraft shall cease to be subject to the
Servicing Agreement upon payment by GECC of the amount specified in the
first sentence of Section 4.2 in respect of such Aircraft.
3. DELIVERY AND ACCEPTANCE
3.1 Each of the Sellers and the Purchasers shall use all reasonable efforts to
cause Delivery of each of the Aircraft to occur on a date occurring as
soon as reasonably practicable after the Initial Closing Date, subject to
the other terms and conditions of this Agreement, but in no event later
than the Delivery Expiry Date. Delivery of the Aircraft need not take
place concurrently or in the order set out in Schedule 1.
3.2 GECC and any other Seller of any Aircraft shall cause the Delivery
Location for such Aircraft to be in a jurisdiction:
(a) where GECC has determined, in its sole discretion, that there are no
Taxes (other than income taxes imposed on the Seller thereof) that
would be imposed upon such Seller, the Purchaser thereof or the
Aircraft as a result of the transfer of title to the applicable
Aircraft to such Purchaser, provided that the Seller may (but shall
not be obligated to) complete any sale where such Taxes would be
imposed on such Seller and, with the prior written consent of the
Purchaser thereof, such Seller may (but shall not be obligated to)
complete any sale where such Taxes would be imposed on such
Purchaser; and
(b) where the security, if any, contemplated by the applicable
Assignment of Lease, Lease Novation or any related Lease Document to
be granted to the Purchaser or New Lessor thereof would be effective
relative to such Aircraft.
3.3 GECC shall use reasonable efforts to keep AFT advised as to any
information of which GECC becomes aware as to the intended whereabouts of
each Aircraft on the expected Delivery Date therefor. Each Purchaser
shall, subject to the terms and conditions of this Agreement and using
reasonable efforts, cooperate with the Seller of each Aircraft (at
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<PAGE> 13
such Seller's cost) so as to allow the Delivery to occur when such
Aircraft is at the Delivery Location therefor. In the event that GECC
reasonably believes that the jurisdiction of the Delivery Location is a
jurisdiction where there may be Taxes imposed upon any Seller Indemnitee
or any Purchaser Indemnitee as a result of the transfer of the Seller's
interest in the applicable Aircraft to the Purchaser, the Seller may, to
the extent a favorable Delivery Location cannot be arranged, elect to
treat such Aircraft as a Remaining Aircraft.
3.4 (a) On the date that any Aircraft is to be delivered pursuant to Section
3.1, subject to satisfaction of the conditions precedent set out in
Sections 6 and 7.1, the Seller thereof shall tender such Aircraft
for Delivery. Delivery and acceptance of any Aircraft hereunder
shall take place while such Aircraft is located at the Delivery
Location therefor, by such Seller either (i) subject to Section
3.4(b), delivering physical possession of such Aircraft to the
Purchaser thereof or (ii) executing and delivering to such Purchaser
a Bill of Sale. Thereupon, full legal and beneficial title to such
Aircraft, free from Encumbrances other than Permitted Encumbrances,
shall pass from the Seller thereof to the Purchaser thereof.
Simultaneously with physical delivery of any Aircraft or delivery to
the Purchaser of the Bill of Sale (as the case may be), title to the
Aircraft Documents therefor shall pass as provided in the Lease
Novation or the Assignment of Lease, as applicable, the Lease
related thereto shall be novated or assigned (as the case may be)
upon the Delivery of such Aircraft. Where Delivery is effected by
delivering physical possession of any Aircraft, the Seller thereof
shall execute and deliver to the Purchaser thereof an
Acknowledgement of Delivery and, at any time after Delivery upon
reasonable request of the Purchaser, a confirmatory bill of sale
substantially in the form of the Bill of Sale, mutatis mutandis;
notwithstanding the foregoing, the parties hereto agree that each
Seller may refuse any such request of any Purchaser to deliver a
confirmatory bill of sale if such delivery would result in the
imposition of any Taxes, including without limitation, documentary
taxes on such Seller, such Purchaser or the Aircraft.
(b) Each Seller of an Aircraft agrees that it will elect to deliver such
Aircraft to the Purchaser thereof pursuant to Section 3.4(a)(ii)
unless Delivery of such Aircraft pursuant to Section 3.4(a)(ii) will
result in any documentary Taxes or other Taxes being imposed upon
such Seller or Purchaser or the Aircraft and/or the opinion
delivered in accordance with Section 7.1(g)(vi) states that delivery
pursuant to Section 3.4(a)(ii) is not a valid transfer of title.
3.5 The risk of loss of, or damage to, each Aircraft (other than a Substitute
Aircraft) and the Aircraft Documents relating thereto shall pass from the
Seller thereof to the Purchaser thereof on the Initial Closing Date
(provided that if Delivery of any such Aircraft shall not occur on or
before the Delivery Expiry Date such risk of loss or damage with respect
to such undelivered Aircraft (and the Aircraft Documents relating thereto)
shall return to the Seller thereof), and the risk of loss of, or damage
to, each Substitute Aircraft and the Aircraft Documents related thereto
shall pass from the Seller thereof to the Purchaser thereof upon physical
delivery of the Substitute Aircraft to such Purchaser or upon
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<PAGE> 14
delivery of the Bill of Sale for such Aircraft to such Purchaser by such
Seller, as the case may be, pursuant to Section 3.4(a).
3.6 Each Aircraft to be sold hereunder shall be delivered to the Purchaser "AS
IS" and "WHERE IS", at the Delivery Location and SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET OUT IN SECTION 12 but
without limiting any representation, warranty or covenant of GECC or any
other Seller expressly set forth herein and/or in the Bill of Sale or
Acknowledgement of Delivery (as the case may be) for such Aircraft or any
certificate delivered pursuant to this Agreement. Subject to receipt or
satisfaction of the conditions precedent referred to in Section 7.1 and
the other provisions of this Agreement, each Purchaser of an Aircraft
shall unconditionally accept such Aircraft for all purposes hereunder upon
tender for Delivery in accordance with Section 3.4 and the other
provisions of this Agreement in the condition in which such Aircraft
exists on the Delivery Date. Acceptance by any Purchaser of physical
delivery of an Aircraft or of the Bill of Sale when such Aircraft is
tendered for Delivery by the Seller thereof shall constitute an
acknowledgement by such Purchaser for the purposes of this Agreement that
such Aircraft is in every respect satisfactory to such Purchaser, provided
that the foregoing is not intended nor shall the same be construed as a
waiver by such Purchaser of any claim that it may have against GECC or any
other Seller for breach of any representation, warranty or covenant
expressly contained in this Agreement.
4. SUBSTITUTE AND UNDELIVERED AIRCRAFT
4.1 (a) If any Seller is unable to effect Delivery of any Aircraft at any
time on or before the date 180 days after the Initial Closing Date
for any reason (including, without limitation, the failure of one or
more of the conditions set forth in Section 7.1) other than an Event
of Loss with respect to such Aircraft, then, in each such case, such
Aircraft shall become a "Remaining Aircraft" and the provisions of
Section 4.1(b) and (c) and Section 4.2 shall apply. If an Event of
Loss occurs in respect of any Aircraft that has not been delivered
prior to the date that is 180 days after the Initial Closing Date,
then GECC may (but shall not be obligated to) elect to designate a
Substitute Aircraft in lieu thereof, in which case the Aircraft
subject to such Event of Loss shall become a "Remaining Aircraft"
and the provisions of Section 4.1(b) and (c) and Section 4.2 shall
apply.
(b) If an Aircraft becomes a Remaining Aircraft, then GECC shall
promptly inform AFT thereof specifying the reason therefor and shall
use reasonable commercial efforts to designate in lieu thereof a
substitute aircraft to be delivered on or before the Delivery Expiry
Date that (i) is subject to an operating lease contract containing
the Core Lease Provisions, (ii) will not result in the weighted
average age of all Aircraft computed as of the Initial Closing Date
to exceed 4.7 years (determined on the basis of the Appraised Value
of each of the Aircraft including the Substitute Aircraft), (iii) is
of the same type as such undelivered Remaining Aircraft, (iv) does
not result in a Concentration Default under the Indenture, and (v)
in respect of which GECC shall have obtained a Rating Agency
Confirmation
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<PAGE> 15
with respect to the substitution of such Remaining Aircraft (each, a
"Substitute Aircraft").
(c) Upon the Delivery of a Substitute Aircraft, the Remaining Aircraft
which was replaced by such Substitute Aircraft shall cease to be
subject to this Agreement and all rights and obligations of the
parties hereunder concerning such Remaining Aircraft shall cease,
and such Substitute Aircraft shall become and thereafter be subject
to the terms and conditions of this Agreement to the same extent as
such Remaining Aircraft, except as to any matters (other than the
matters referred to in Section 4.1(b)) which may be agreed as to
such Substitute Aircraft, which shall be set forth in a Substitute
Aircraft Supplement, except that the substitution of any Aircraft
shall not effect GECC's obligations under Section 4.2 (provided
always that, for the avoidance of doubt, until a Substitute Aircraft
is so delivered for a Remaining Aircraft, such Remaining Aircraft
shall continue to be subject to this Agreement). On the Delivery
Date of a Substitute Aircraft, GECC shall pay or cause the Seller
thereof to pay to the Purchaser thereof, an amount, or, if such
amount is a negative number, AFT shall pay or cause the Purchaser
thereof to pay to GECC, an amount equal to the difference between
(a) the Aircraft Value of the Remaining Aircraft and (b) the sum of
(1) the Aircraft Value of such Substitute Aircraft (which for
purposes of this clause (c) shall be deemed not to exceed the
Aircraft Value of the related Remaining Aircraft) and (2) the
Substitute Aircraft Adjustment Amount. AFT shall promptly thereafter
repay to GECC the amount of the cash Security Deposits, if any, AFT
then holds for such Remaining Aircraft together with, in the case of
a Varig Aircraft, the then unused amount of the related Varig
Deposit Amount, if any, then held by AFT and GECC shall promptly pay
to AFT the amount of the cash Security Deposits, if any, GECC or the
Existing Lessor then holds for such Substitute Aircraft.
(d) If an Aircraft shall have suffered an Event of Loss and no
Substitute Aircraft shall have been designated therefor as provided
above, then the Seller shall have no obligation to deliver and the
Purchaser shall have no obligation to accept delivery of such
Aircraft hereunder.
4.2 If any Aircraft shall not have been delivered on or prior to the Delivery
Expiry Date for any reason, and provided no Substitute Aircraft shall have
been delivered in substitution therefor on or prior to the Delivery Expiry
Date, then (unless such Aircraft shall have suffered an Event of Loss in
respect of which GECC shall be obligated to account to the Purchaser for
any and all loss proceeds received in respect thereof in accordance with
the provisions of Section 5.3 hereof) on such date GECC irrevocably and
unconditionally agrees to pay, or cause the Seller thereof to pay, to AFT
an amount equal to the Aircraft Value of such Aircraft minus the
Non-Delivered Aircraft Adjustment Amount. In addition, AFT shall promptly
thereafter repay to GECC the amount of the cash Security Deposits, if any,
AFT then holds for such Aircraft together with, in the case of a Varig
Aircraft, the then unused amount of the related Varig Deposit Amount, if
any, then held by AFT. If on the Delivery Expiry Date the Lessee of any
such Aircraft (other than a Varig Aircraft) is then in default in the
payment of basic rent under its Lease of such Aircraft in respect of the
period prior to the Delivery Expiry Date, GECC agrees to pay to
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<PAGE> 16
AFT, promptly following GECC's (or the Existing Lessor's) receipt thereof,
the amount of any such basic rent thereafter received by or on behalf of
the Lessor of such Aircraft in respect of the period from and including
the fourth day prior to the Initial Closing Date to but excluding the
Delivery Expiry Date.
4.3 Save as otherwise expressly provided in Sections 4.1 and 4.2, if Delivery
of an Aircraft under this Agreement is delayed or does not occur for any
reason outside the control of the Seller of such Aircraft, including by
reason of the lack of cooperation of any Lessee or other person (other
than such Seller or any of its Affiliates), neither GECC nor any Seller
thereof will be responsible for any damages, losses, including loss of
profit, costs, expenses, liabilities, demands, payments, claims or action
arising from or in connection with the delay or failure suffered or
incurred by the Purchaser.
5. PAYMENTS
5.1 On the Initial Closing Date, and upon the issuance of the Initial
Securities, AFT shall pay for the account of the Purchaser of each
Aircraft to GECC for the account of the Seller thereof the Aircraft
Purchase Price for such Aircraft less the Expense Reimbursement Amount
subject only to the receipt by AFT of each of the following:
(a) the Varig Deposit Amount for each Varig Aircraft for credit to the
applicable Varig Reserve Account under the Indenture;
(b) the rents referred to in Section 5.2 hereof together with a
statement addressed to AFT identifying the same;
(c) the Security Deposits referred to in Section 5.4 hereof;
(d) the Guaranty duly executed and delivered by GECC;
(e) an opinion of independent and in-house counsel as applicable to GECC
as applicable in the Agreed Form as to the due execution and
delivery of the Guaranty and as to such other matters relating
thereto as AFT may reasonably request;
(f) a certification in the Agreed Form from a duly authorized officer of
GECC to the effect that the representations and warranties of GECC
set forth herein are true and correct as of the Initial Closing
Date;
(g) a copy, certified by a duly authorized officer of GECC to be a true,
complete and up-to-date, of the articles of incorporation and
by-laws of GECC; and
(h) a copy, certified by a duly authorized officer of GECC to be a true,
complete and up-to-date, of the resolutions of the Board of
Directors (or duly authorized committee thereof) of GECC, (i)
approving the transactions contemplated by this Agreement and the
Guaranty and the other Operative Documents to which GECC is a party,
and (ii) authorizing a Person or Persons to sign and deliver on
behalf of GECC, this Agreement, the Guaranty and the other Operative
Documents to
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<PAGE> 17
which GECC is a party and any notices or other documents to be given
pursuant hereto or thereto.
Concurrently with the payment of the Aircraft Purchase Price to GECC, GECC
shall pay to the Persons entitled thereto the GECC Closing Expenses due
under the Expense Letter on the Initial Closing Date and thereafter shall
pay the other fees and expenses specified in the Expense Letter.
5.2 If, on or before the Initial Closing Date (and, for the avoidance of
doubt, irrespective of whether or not the Delivery Date for any Aircraft
shall have occurred), GECC, any Seller or any Existing Lessor shall have
received from any Lessee any rent (which for avoidance of doubt shall not
include any Maintenance Reserves) under any Lease in respect of the period
subsequent to the date four Business Days prior to the Initial Closing
Date, then on the Initial Closing Date GECC shall pay or cause the Seller
of the Aircraft subject to such Lease to pay to AFT (for account of the
Purchaser thereof) an amount equal to the portion of any rent received by
or on behalf of such Seller or Existing Lessor, as applicable which
relates to the period subsequent to the date four Business Days before the
Initial Closing Date.
5.3 From and after the Initial Closing Date and to and including the earlier
to occur of the Delivery Expiry Date and the Delivery Date for any
Aircraft (if other than the Initial Closing Date), GECC shall collect, or
cause to be collected, on behalf of the relevant Purchaser any and all
rent or other sums paid by the Lessees under the Leases and shall cause
any and all such sums received by or on behalf of the relevant Existing
Lessor under the related Lease in respect of any period from and after the
Initial Closing Date, and with respect to amounts received in payment of
rent under such Lease, in respect of any period from and after the date
four Business Days before the Initial Closing Date, in each instance, to
be paid to AFT (for account of the relevant Purchaser) within two Business
Days of receipt thereof and each such payment to be accompanied by a
statement identifying the Lease under which such payment was received and
the nature of the payment whether constituting basic rent, Maintenance
Reserves, loss proceeds or otherwise (it being acknowledged and agreed
that to the extent the Security Deposit referred to in Schedule I hereto
in respect of the TWA Lease is paid on the Initial Closing Date as
provided in Section 5.1(c), no further Security Deposit payment need be
made by any Seller in respect of such Lease). Notwithstanding the
foregoing, if an Aircraft suffers an Event of Loss prior to its Delivery
and a Substitute Aircraft shall have been designated therefor in
accordance with the provisions of Section 4 hereof, neither GECC nor the
Seller shall be obligated to pay to the Purchaser thereof any loss
proceeds received in respect thereof and in respect of any Aircraft which
suffers an Event of Loss after the Initial Closing Date but prior to the
Delivery Expiry Date and in respect of which no Substitute Aircraft has
been designated pursuant to the terms of this Agreement, GECC shall
collect on behalf of the relevant Purchaser any and all insurance proceeds
paid in respect of such Aircraft, and upon the receipt thereof, pay the
same to AFT (net of any amount required to be paid by the relevant
Lessee). Further, from and after the date of the termination of the Air
Madagascar Lease (other than by reason of the occurrence of an event of
loss or an event of default thereunder) to, but not including, the
Termination Date, GECC agrees to pay to AFT on each Madagascar Payment
Date (including, without
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limitation, the Termination Date) occurring after the date of termination
of the Air Madagascar Lease an amount equal to $618,500 (pro rated on a
daily basis for any period of less than 30 calendar days) (such amounts
being "Madagascar Rent"). For the purposes of this Section 5.3 a
"Madagascar Payment Date" is the earliest of 30 calendar days after the
Initial Closing Date and the Termination Date provided always that each
subsequent Madagascar Payment Date shall be the earlier of the date
falling 30 calendar days after the previous Madagascar Payment Date and
the Termination Date and provided further that no further payment of
Madagascar Rent shall be payable in respect of any period after the
Termination Date. In addition, GECC agrees to pay (without any right to
re-imbursement from AFT) the costs and expenses required to put the Air
Madagascar Aircraft in the delivery condition required by the TWA Lease.
5.4 On the Initial Closing Date, GECC shall cause an amount equal to the
Security Deposit held by or on behalf of each Existing Lessor in cash (if
any) for each Aircraft to be paid and delivered by the Seller thereof to
AFT (for account of the Purchaser thereof).
5.5 All amounts payable under this Agreement will be made for value on the due
date in Dollars in immediately available funds (and to the extent not
expressly provided herein) to such account as (in the case of any payment
due to GECC or any Seller) GECC or as (in the case of any payment due to
AFT or any Purchaser) AFT may notify AFT or GECC, as the case may be, from
time to time (upon three Business Days' prior written notice). In
furtherance of the foregoing, each Purchaser hereby instructs GECC and
each Seller to make each payment due to AFT or any other Purchaser
hereunder to the Collection Account with advice of credit to the
Administrative Agent and in sufficient detail to enable the Administrative
Agent to determine the Lease under or in respect of which such payment is
being made and the nature thereof.
5.6 If the party making payment (the "Paying Party") fails to pay any amount
payable under this Agreement on the due date, the Paying Party will pay on
demand from time to time to the other party (the "Receiving Party")
interest (both before and after judgment) on that amount, from the due
date to the date of payment in full by the Paying Party to the Receiving
Party, at the rate of LIBOR. All such interest will be compounded monthly
and calculated on the basis of the actual number of days elapsed and a 360
day year.
5.7 Each Purchaser and AFT irrevocably and unconditionally:
(i) guarantees, as a primary obligation, to each Seller and GECC the due
and punctual payment to such Seller or GECC, as the case may be, by
each other Purchaser of all monies due from such other Purchaser
hereunder and will pay to such Seller from time to time, on the
first Payment Date falling at least 5 Business Days after written
demand therefor, any and every sum of money which such other
Purchaser shall at any time be liable to pay to such Seller
hereunder;
(ii) undertakes as a primary obligation to indemnify each Seller and GECC
from time to time on demand from and against any loss incurred by
such Seller or GECC, as the case may be, as a result of any
obligation of any other Purchaser to pay to such Seller or GECC, as
the case may be, any amounts hereunder being or
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becoming void, voidable, unenforceable or ineffective as against
such other Purchaser, for any reason (whether or not known to any
Seller or GECC), the amount of such loss being the amount which such
Seller would otherwise have been entitled to recover from such other
Purchaser; and
(iii) authorizes each Seller and GECC (in their sole discretion by notice
to AFT) from time to time to set off, apply or combine all or any
amounts for the time being due from any Seller or GECC, as the case
may be, to any Purchaser towards the repayment or discharge of any
amount for the time being due to a Seller or GECC from AFT pursuant
to the above.
Each Purchaser acknowledges that:
(a) neither its above-described liability nor the rights, powers and
remedies conferred on a Seller or GECC by this Section or by law
shall be discharged, impaired or otherwise affected by any act,
event or omission which would otherwise operate to discharge, impair
or otherwise affect such liability or such rights, powers or
remedies, and
(b) so long as it is under the above-described liability, it shall not
exercise any rights or remedies which it may at any time have to be
indemnified by or claim any contribution from any other Purchaser.
5.8 GECC authorizes AFT (in its sole discretion by notice to GECC) from time
to time to set off, apply or combine all or any amounts for the time being
due from AFT or any other Purchaser to GECC or any other Seller towards
the repayment or discharge of any and all amounts for the time being due
to AFT or any other Purchaser from GECC or any other Seller hereunder or
under the Guaranty.
6. CONDITIONS PRECEDENT - SELLER
6.1 The obligations of any Seller to deliver any Aircraft hereunder are
subject to the satisfaction of the following express conditions precedent
on or prior to the Delivery Date for such Aircraft:
(a) the relevant Operative Documents for such Aircraft have been entered
into by the parties thereto (other than GECC and any other Seller);
(b) the Servicing Agreement and the Administrative Agency Agreement
shall have been entered into by the parties thereto (other than GECC
and any other Seller);
(c) GECC shall be satisfied that the Delivery Location does not give
rise to any Taxes;
(d) Seller thereof shall have received payment of all amounts due by the
Purchaser of such Aircraft.
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6.2 The obligations of any Seller to deliver any Aircraft hereunder are
further subject to the condition that on or prior to the Delivery Date for
such Aircraft, such Seller has received:
(a) a copy of the constitutional documents of the Purchaser and any
other Affiliate of such Purchaser which is a party to any Operative
Document in respect of such Aircraft, certified, or subject to a
certificate confirming no change thereto, such certification to be
dated not more than ten (10) days prior to the expected Delivery
Date for such Aircraft to be a true, complete and up-to-date copy;
(b) a copy of resolutions of the Controlling Trustees or other
applicable governing body of such Purchaser and any other Affiliate
of such Purchaser which is a party to any Operative Document in
respect of such Aircraft certified, or subject to a certificate
confirming no change to such resolutions, such certification to be
dated not more than ten (10) days prior to the expected Delivery
Date for such Aircraft to be a true, complete and up-to-date copy:
(i) approving the transactions contemplated by this Agreement and
the other Operative Documents to which such Purchaser is or is
to be a party; and
(ii) authorizing a Person or Persons to execute and deliver on
behalf of such Purchaser this Agreement and the other
Operative Documents to which it is or is to be a party and any
notices or other documents to be given pursuant hereto or
thereto;
(c) evidence that all governmental and other licenses, approvals,
certificates, exemptions, consents, registrations and filings
necessary in the relevant State of Registration and any other
relevant jurisdiction (including the domicile of the Lessee of such
Aircraft) for any matter or thing contemplated by this Agreement and
the other applicable Operative Documents for such Aircraft, and any
notices or other documents to be given pursuant hereto or thereto
and for the legality, validity, enforceability, admissibility in
evidence and effectiveness hereof and thereof have been obtained or
effected on an unconditional basis and remain in full force and
effect (or in the case of effecting any licenses, approvals,
consents, certificates, exemptions, registrations and filings, that
arrangements reasonably satisfactory to such Seller have been made
for the effectiveness of the same within any applicable time limit);
(d) a favorable opinion of independent counsel to such Purchaser dated
as of such Delivery Date reasonably acceptable to such Seller in the
Agreed Form as to (1) certain of the matters set out in Section 9
and (2) such other matters as such Seller may reasonably request
with regard to the subject matter contemplated herein or in each
case such Aircraft;
(e) if such Aircraft is to be subject to an Intercompany Lease, a quiet
enjoyment letter in the Agreed Form addressed to the relevant Lessee
from such Purchaser and any Affiliate of the Purchaser that is a
lessor under such Intercompany Lease;
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<PAGE> 21
(f) a quiet enjoyment letter from the Security Trustee addressed to the
relevant Lessee (and if applicable, the relevant sub-lessee) in
substantially the form attached to the relevant Operative Document;
and
(g) a certification from the Purchaser that the representations and
warranties of such Purchaser are true and correct as of the Initial
Closing Date and as of such Delivery Date.
7. CONDITIONS PRECEDENT - PURCHASER
7.1 The obligations of any Purchaser to accept Delivery of any Aircraft
hereunder are subject to satisfaction of the following express conditions
precedent on or prior to the Delivery Date for such Aircraft, subject to
the right of the Purchaser to waive any condition pursuant to Section
7.2(a), and to the rights of such Seller under Section 7.2(b):
(a) the relevant Operative Documents for such Aircraft have been entered
into by the parties thereto (other than AFT or any other Purchaser
or any Affiliate thereof);
(b) AFT shall have received confirmation from the Servicer that such
Aircraft will, upon Delivery to such Purchaser, become an "Aircraft
Asset" under and as defined in the Servicing Agreement;
(c) with respect to any Aircraft other than the Varig Aircraft, no
Material Default shall have occurred and been continuing as of the
Initial Closing Date, or in the case of any Varig Aircraft, no
Material Default shall have occurred and been continuing as of the
Delivery Date of such Aircraft; provided that the parties hereto
agree that with respect to the Varig Leases, no Material Default
that is a Payment Default shall be deemed to be continuing if on the
Delivery Date thereof the Varig Deposit amount for the relevant
Varig Aircraft is $3,375,000 and no other amounts are past due and
payable under such Varig Lease on the Delivery Date;
(d) Purchaser thereof shall have received payment of all amounts due by
the Seller thereof or GECC in respect of such Aircraft;
(e) no Event of Loss shall have occurred with respect to such Aircraft
and such Aircraft shall be free of all Encumbrances other than
Permitted Encumbrances;
(f) a certification from each Seller that the representations and
warranties of such Seller set forth herein are true and correct as
of the date or dates on which they are stated to be given hereunder;
(g) receipt of the following documents by such Purchaser:
(i) a copy certified, or subject to a certificate confirming no
change to such documents, such certification to be dated not
more than ten (10) days prior to the expected Delivery Date
for such Aircraft, by the Secretary of such
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<PAGE> 22
Seller to be a true, complete and up-to-date copy of the
constitutional documents of such Seller;
(ii) a copy certified, or subject to a certificate confirming no
change to such resolutions, such certification to be dated not
more than ten (10) days prior to the expected Delivery Date
for such Aircraft, by the Secretary of such Seller to be a
true copy, and as being in full force and effect and not
amended or rescinded, of resolutions of the Board of Directors
(or duly authorized committee thereof) of such Seller:
(1) approving the transactions contemplated by this
Agreement and the other Operative Documents to which
such Seller is a party;
(2) authorizing a Person or Persons to sign and deliver on
behalf of such Seller or, as the case may be,
authorizing the execution by the relevant Person of this
Agreement and the other Operative Documents to which it
is a party and any notices or other documents to be
given pursuant hereto or thereto;
(iii) a certificate of solvency dated as of such Delivery Date in
the Agreed Form relating to such Seller issued by a director
or authorized officer thereof and, if such Seller is other
than GECC, a certificate of solvency dated as of such Delivery
Date in the Agreed Form relating to GECC issued by a director
or authorized officer of GECC;
(iv) a favorable opinion of independent counsel to GECC dated as of
such Delivery Date reasonably acceptable to such Purchaser in
the Agreed Form, that the sale of such Aircraft constitutes a
"true-sale" and a valid transfer of title to such Aircraft and
that after Delivery such Seller retains no interest in such
Aircraft and as to such other matters as such Purchaser may
reasonably request with regard to the subject matter
contemplated herein;
(v) an opinion dated as of such Delivery Date in the Agreed Form
from counsel to the relevant Seller in the relevant State of
Registration to the effect that (1) the terms of the relevant
Lease or Novated Lease or Assigned Lease and the relevant
Operative Documents and the other Lease Documents are legal,
valid, binding and enforceable under the laws of such country
to the extent necessary to enable such Purchaser to receive
the full benefits of its rights thereunder, (2) such Purchaser
shall be recognized as the owner of such Aircraft under the
applicable laws of such jurisdiction, (3) it is not necessary
for such Purchaser as a result of its ownership of such
Aircraft to qualify to do business in such jurisdiction as a
result of its ownership of such Aircraft and it is not
necessary for the Purchaser to qualify to do business in such
jurisdiction, for the purpose of exercising any remedies under
any Lease Document relating to such Aircraft or otherwise and
(4) payments of rent under the Lease are not
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<PAGE> 23
subject to withholding under the applicable laws of such
jurisdiction or, if subject to withholding, the gross up
provisions of such Lease will be enforceable;
(vi) an opinion dated as of such Delivery Date in the Agreed Form
from counsel to the relevant Seller in the Delivery Location
concerning the Delivery of such Aircraft and any required
filing or recording of the relevant Lease;
(vii) opinions from independent counsel to GECC dated as of such
Delivery Date in any jurisdiction determined to be
appropriate by any Rating Agency and acceptable to such
Purchaser and such Rating Agency, concerning Delivery of such
Aircraft and in any jurisdiction relevant to an Intercompany
Lease concerning such Lease and the parties thereto;
(viii) originals, or certified or faxed copies, of certificates
evidencing the insurance required to be maintained pursuant
to the relevant Assigned Lease or the Novated Lease as
appropriate together with, as applicable, a letter or letters
as required by the Assigned Lease or the Novated Lease in
line with prudent industry practice from time to time and
reasonably acceptable to the Purchaser and to Servicer and
the Advisor under the Servicing Agreement;
(ix) (1) an original of the applicable Lease (together with the
related Lease Assignment Documents) and (2) all originals in
the possession of GECC and/or such Seller of each other Lease
Document that is to be transferred to such Purchaser
(otherwise a copy certified to be true and correct), provided
that, if any such Lease Document contains a material right
for the benefit of the lessor thereunder and such Seller does
not have an original of such Lease Document in its
possession, such Seller shall provide such other assurances
as to the enforceability and admissibility of such Lease
Document in any court in the State of New York as such
Purchaser may reasonably request;
(x) copies of all notices, consents or acknowledgements of such
Seller or the applicable Lessee as are required under the
terms of the Operative Documents;
(xi) a copy of the currently valid certificate of airworthiness
for such Aircraft issued by the appropriate Air Authority;
(xii) evidence that all governmental and other licenses, approvals,
consents, certificates, exemptions, registrations and filings
necessary in the state of incorporation of GECC, any other
Seller, or any Purchaser and any other relevant jurisdiction
(including the domicile of the Lessee) and the relevant State
of Registration for any matter or thing contemplated by this
Agreement and the other applicable Operative Documents for
such
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Aircraft, the bank accounts provided for under the
Administrative Agency Agreement, the Servicing Agreement and
the Indenture and any notices or other documents to be given
pursuant hereto or thereto and for the legality, validity,
enforceability, admissibility in evidence and effectiveness
hereof and thereof have been obtained or effected on an
unconditional basis and remain in full force and effect (or
in the case of effecting any certificates, exemptions,
registrations and filings, that arrangements satisfactory to
such Purchaser have been made for the effectiveness of the
same within any time limit provided therefor under
applicable law and Rating Agency Confirmation has been
received with respect thereto);
(xiii) for any Aircraft where there are Maintenance Reserves or a
Security Deposit held in cash, a certificate provided at
least three Business Days prior to the Initial Closing Date
and at least three Business Days but not more than five
Business Days prior to such Delivery Date from such Seller
stating the amount of Maintenance Reserves or such cash
Security Deposit then held under the Lease of such Aircraft
as the case may be;
(xiv) the documents or satisfaction of the conditions listed in
Schedule 2 relevant to such Aircraft;
(xv) the Disclosure Letter;
(xvi) the report of AFT's and/or such Purchaser's insurance
adviser in the Agreed Form;
(xvii) a copy of the Assignment of Warranties executed by each of
the parties thereto (other than AFT, the relevant Purchaser
or any Affiliate of such Purchaser) with respect to such
Aircraft;
(xviii) a copy of the currently valid Certificate of Registration
for such Aircraft, issued by the appropriate Air Authority;
(xix) notice of expected Delivery Date; and
(xx) a certificate of GECC confirming that so far as is known to
GECC, no Event of Loss has occurred;
(h) the matters disclosed in the First Disclosure Letter, if any, shall
be in substance satisfactory to AFT; and
(i) Subject to Section 7.2(b), on such Delivery Date, if the Security
Deposit held under the Lease for such Aircraft is in the form of a
letter of credit, guarantee or other instrument, GECC shall cause
such letter of credit, guarantee or other instrument to be duly
endorsed, amended or reissued in favor of the Purchaser thereof (or
the relevant Affiliate of such Purchaser) and GECC shall have taken
such other actions as may be necessary to effectuate the assignment
of all right,
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title and interest of such Seller in and to such letter of credit,
guarantee or instrument to such Purchaser.
7.2 (a) Each Purchaser of an Aircraft may, at the request of the Seller
thereof, at its absolute discretion agree to waive satisfaction of
any one or more of the conditions precedent set out in Section 7.1
and in the event of any waiver such Purchaser may impose such
conditions to such waiver as it reasonably thinks fit, provided that
any such waiver is subject to a Rating Agency Confirmation; and
(b) In the event that any letter of credit or guarantee to be issued on
behalf of the relevant Lessee pursuant to the relevant Operative
Documents has not been delivered, the Seller of the Aircraft in
respect of such Lease may at such Seller's own election:
(i) subject to a Rating Agency Confirmation, deliver a letter of
credit in lieu (and until delivery) of any letter of credit or
guarantee to be issued on behalf of the relevant Lessee
pursuant to the Operative Documents, so long as the issuer
thereof is rated at least the same as the issuer (or, if
higher, any confirming bank) of the undelivered letter of
credit or guarantee, such letter of credit to be on
substantially the same terms as the undelivered letter of
credit or guarantee; or
(ii) subject to a Rating Agency Confirmation, have the relevant
Lessee deliver to the Purchaser thereof (or the relevant
Affiliate of such Purchaser) acting as lessor under an
Assigned Lease or Novated Lease therefor a letter of credit or
guarantee or cash (in Dollars) in lieu of and in the amount of
any letter of credit or guarantee set out in Schedule 1 or the
Substitute Aircraft Supplement, as applicable, in each case so
long as such letter of credit or guarantee is on substantially
the same terms as the undelivered letter of credit or
guarantee.
8. REPRESENTATIONS AND WARRANTIES OF GECC AND EACH OTHER SELLER
8.1 GECC and each other Seller (in respect of itself only in the case of each
Seller other than GECC) represents and warrants to each Purchaser as of
the date of this Agreement and on each Delivery Date that:
(a) GECC and each other Seller is a company or trust duly incorporated
and validly existing under the laws of its state of incorporation
and has the corporate or other power to own its assets and carry on
its business as it is contemplated herein;
(b) GECC and each other Seller has the corporate power to enter into and
perform, and has taken all necessary corporate or other action to
authorize the entry into, performance and delivery of, this
Agreement and each other Operative Document to which it is a party;
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(c) the relevant Operative Documents to which GECC and each other Seller
is a party have been, or when executed and delivered will have been,
duly entered into by GECC and each other Seller party thereto and
delivered by GECC and each other Seller party thereto and constitute
or, in the case of any Operative Document to be executed on or about
the applicable Delivery Date, will constitute on such Delivery Date,
the legal, valid and binding obligation of GECC and each other
Seller party thereto, enforceable in accordance with their terms
(subject to customary qualifications in any relevant legal opinion);
(d) the entry into and performance by GECC and each other Seller of, and
the transactions contemplated by, the relevant Operative Documents
to which it is a party do not and will not:
(i) conflict with any laws binding on GECC or any other Seller; or
(ii) result in any breach of, or constitute a default under the
constitutional documents of GECC or any other Seller; or
(iii) result in any breach of, or constitute a default under any
document which is binding upon GECC or any other Seller or any
of their respective assets nor result in the creation of any
Encumbrance (other than the Novated Lease or the Assigned
Lease as the case may be) over any of their respective assets
to be transferred to the relevant Purchaser hereunder;
(e) the provisions of Section 14 concerning applicable law, service of
process and jurisdiction are valid and binding on GECC and each
other Seller under the laws of its jurisdiction of establishment,
and no provision purporting to be binding on GECC or any other
Seller of this Agreement or any of the other applicable Operative
Documents is prohibited, unlawful or unenforceable under the laws of
its state of incorporation;
(f) no liquidator, provisional liquidator, analogous or similar officer
has been appointed in respect of all or any part of the assets of
GECC or any other Seller nor has any application been made to a
court which is still pending for an order for, or any act, matter or
thing been done which with the giving of notice, lapse of time or
satisfaction of some other condition (or any combination thereof)
will lead to, the appointment of any such officers or equivalent in
any jurisdiction;
(g) except if and as advised by GECC to the relevant Purchaser in a
Disclosure Letter, no litigation, arbitration or claim before any
court, arbitrator, governmental or administrative agency or
authority which would have a material adverse effect on the ability
of GECC or any other Seller to observe or perform their respective
obligations under this Agreement or any other applicable Operative
Documents to which GECC or such Seller is a party is in progress, or
to the knowledge of GECC, threatened against GECC or any other
Seller; and
(h) its jurisdiction of incorporation or organization is as specified on
Schedule 4.
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8.2 GECC and each other Seller (in respect of itself only in the case of each
Seller other than GECC) of an Aircraft further represents and warrants on
the Delivery Date for such Aircraft as follows and in respect of such
Aircraft:
(a) except if and as advised by GECC to the Purchaser thereof in a
Disclosure Letter, so far as concerns the obligations of GECC and
any such Seller (and except for the registration of particulars of
the relevant Lease Novation or Assignment of Lease with the
appropriate Air Authority, if applicable) all authorizations,
consents, registrations and notifications required in connection
with the entry into, performance, validity and enforceability of,
this Agreement, the transactions contemplated by this Agreement and
the other applicable Operative Documents to which it is a party,
have been (or will on or before the Delivery Date of such Aircraft
have been) obtained or effected (as appropriate) and are (or will on
their being obtained or effected be) in full force and effect;
(b) except if and as advised by GECC to the Purchaser thereof in a
Disclosure Letter, the Lease Documents listed in Schedule 1 or the
Substitute Aircraft Supplement, as applicable constitute the whole
agreement between the relevant lessor and the relevant Lessee
immediately prior to Delivery relating to such Aircraft and includes
a complete list (other than the Operative Documents) of all
amendments, supplements, novations, and written consents, approvals
and waivers relevant to the Lease, and there are no oral waivers in
effect that would modify or amend the terms thereof;
(c) except if and as advised by GECC to the Purchaser thereof in the
First Disclosure Letter, to GECC's knowledge no Material Default has
occurred and is continuing under the relevant Lease on and as of the
Initial Closing Date;
(d) except if and as advised by GECC to the Purchaser thereof in a
Disclosure Letter, there are no claims which have been asserted by
the Lessee against GECC or any other Seller arising out of the
relevant Lease (other than claims constituting Permitted
Encumbrances);
(e) such Seller has, or at Delivery will have, full legal and beneficial
title to such Aircraft, free from Encumbrances other than Permitted
Encumbrances and the Bill of Sale or physical delivery (as
acknowledged in the Acknowledgement of Delivery pertaining thereto),
as applicable, is effective to convey title to the Purchaser
thereof;
(f) to GECC's knowledge, and except if and as advised by GECC to the
Purchaser thereof in the First Disclosure Letter, there are no
Lessee Encumbrances on and as of the Initial Closing Date which is
not permitted pursuant to the terms of the relevant Lease Document;
(g) to GECC's knowledge, (i) such Aircraft has not, except if and as
advised by GECC to the Purchaser thereof in the First Disclosure
Letter, been involved in any incident on or before the Initial
Closing Date which caused damage in excess
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of the amount required to be disclosed to the relevant lessor under
the relevant Lease or which would materially adversely affect the
residual value of such Aircraft, and (ii) the information provided
by GECC and its representatives to the Appraisers with respect to
such Aircraft and on which the Appraisers relied in making their
Appraisals is true and correct in all material respects and there
are no facts or circumstances known to GECC as of the Initial
Closing Date which would render any of the assumptions contained in
the Appraisals for such Aircraft to be materially inaccurate;
(h) to GECC's knowledge, except if and as advised by GECC to the
Purchaser thereof in the First Disclosure Letter, no compulsory
airworthiness directives are outstanding on and as of the Initial
Closing Date against such Aircraft which would require GECC or any
other Seller or such Purchaser to make any contributions to the cost
of compliance therewith pursuant to the terms of the relevant Lease;
(i) to GECC's knowledge, except if and as disclosed by GECC to the
Purchaser thereof in the First Disclosure Letter, no options to
purchase such Aircraft, extend or terminate the relevant Lease have
been exercised on or before the Initial Closing Date by the relevant
Lessee under the relevant Lease Documents;
(j) the information set forth in each of the Disclosure Letters with
respect to such Aircraft is or will be when issued true and accurate
in all material respects as of its date;
(k) except if and as advised by GECC to the Purchaser thereof in a
Disclosure Letter, to GECC's knowledge, the provisions of each Lease
relating to the granting of any Security Deposit thereunder remain
in full force and effect;
(l) to GECC's knowledge and except if and as advised by GECC to the
Purchaser thereof in a Disclosure Letter, no event has occurred or
act or thing done or omitted to be done by GECC or any other Seller
pursuant to which or as a result of which the relevant Lease can be
terminated or the obligations of any such party thereunder would be
rendered invalid or unenforceable;
(m) to GECC's knowledge, except if and as advised by GECC to the
Purchaser thereof in the First Disclosure Letter, such Aircraft is
not as of the Initial Closing Date subject to any sub-lease from the
relevant Lessee;
(n) to GECC's knowledge, the information provided by GECC to the
Purchaser thereof prior to the Delivery Date as to the identities of
all of such Seller's predecessors in title to such Aircraft thereof
is complete and accurate;
(o) to GECC's knowledge, except if and as advised by GECC to the
Purchaser thereof in a Disclosure Letter, such Aircraft has been
accepted by the relevant Lessee under the Lease thereof without
qualification or exception or to the extent that any such acceptance
was given subject to any qualification or exception or subject to
any liability on the part of such Seller or relevant Affiliate of
the Seller to pay or
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reimburse any costs or expenses or to undertake any repairs or
modifications at the expense of such Seller, such qualifications and
exceptions have been discharged or waived by the Lessee and have
ceased to apply and no such costs or expenses remain to be
reimbursed and all defects referred to therein have been duly
rectified or waived by such Lessee;
(p) the information and statements as to and relating to such Aircraft,
the relevant Lease and the Lease Documents set forth in Schedule 1
or the Substitute Aircraft Supplement, as applicable, are true and
complete;
(q) the sale of such Aircraft contemplated hereby constitutes a valid
transfer of such Aircraft to the Purchaser thereof and after
Delivery of such Aircraft such Seller shall retain no right, title
or interest in such Aircraft; and
(r) the Seller of such Aircraft shall have paid to the relevant Lessee
all amounts then due and payable by such Seller to such Lessee in
respect of maintenance theretofore performed on such Aircraft.
8.3 As used herein "to GECC's knowledge" means the awareness of facts or other
information by any person at GECC or GECAS actively involved in the
transactions contemplated by this Agreement or (in respect of any
Aircraft), the leasing of such Aircraft and something being "known to
GECC" shall be construed accordingly.
8.4 GECC and each other Seller acknowledges that each Purchaser is entering
into this Agreement and the other Operative Documents in reliance upon the
accuracy of each of the representations and warranties, which
representations and warranties have been given by GECC and the other
Sellers so as to induce each Purchaser to enter into this Agreement and
the other Operative Documents.
8.5 The representations and warranties may at the sole discretion of the
relevant Purchaser be waived by such Purchaser with or without conditions.
8.6 The benefit of the representations and warranties shall run to the
Security Trustee.
8.7 The representations and warranties in respect of any Aircraft shall
continue and survive in full force and effect after the Delivery Date
therefor for a period of three years after the Initial Closing Date.
8.8 Each of the representations and 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, the other Operative Documents or any other representation
or warranty.
9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
9.1 AFT hereby represents and warrants to the Seller as of the date of this
Agreement and on each Delivery Date that:
26
<PAGE> 30
(a) AFT is a business trust validly existing under the laws of the State
of Delaware, and each other Purchaser is a company or trust duly
established and validly existing under the laws of its jurisdiction
of establishment, and each has the trust or corporate power (as the
case may be) to own its assets and carry on its business as it is
being conducted;
(b) AFT and each other Purchaser has the trust or corporate power (as
the case may be) to enter into and perform, and has taken all
necessary action to authorize the entry into, performance and
delivery of, this Agreement and the other applicable Operative
Documents to which it is a party;
(c) this Agreement and the other applicable Operative Documents to which
it is a party have been, or when executed and delivered will have
been, duly entered into and delivered by AFT and each other
Purchaser and constitute or, in the case of any Operative Document
to be executed on or about the applicable Delivery Date, will
constitute on such Delivery Date, each such Person's legal, valid
and binding obligations;
(d) the entry into and performance by AFT and any other Purchaser of,
and the transactions contemplated by, this Agreement and the other
applicable Operative Documents to which it is a party do not and
will not:
(i) conflict with any laws binding on AFT or any other Purchaser;
or
(ii) result in any breach of, or constitute a default under the
constitutional documents of AFT or any other Purchaser; or
(iii) result in any breach of, or constitute a default under or
result in default under any document which is binding upon AFT
or any other Purchaser or any of their respective assets;
(e) so far as concerns the obligations of AFT and any other Purchaser,
all authorizations, consents, registrations and notifications
required in connection with the entry into, performance, validity
and enforceability of, this Agreement and the other applicable
Operative Documents to which any such Person is a party and the
Servicing Agreement and the transactions contemplated by this
Agreement and the other applicable Operative Documents to which any
such Person is a party, have been obtained or effected (as
appropriate) and are (or will on their being obtained or effected
be) in full force and effect;
(f) the provisions of Section 14 concerning applicable law, service of
process and jurisdiction are valid and binding on AFT and each other
Purchaser under the laws of the State of New York, and no provision
purporting to be binding on AFT or any other Purchaser, this
Agreement or any of the other applicable Operative Documents is
prohibited, unlawful or unenforceable under the laws of the State of
New York;
27
<PAGE> 31
(g) no liquidator, provisional liquidator, official manager, trustee,
receiver or receiver and manager or similar officer has been
appointed in respect of all or any part of the assets of AFT or any
other Purchaser nor has any application been made to a court which
is still pending for an order for, or any act, matter or thing been
done which with the giving of notice, lapse of time or satisfaction
of some other condition (or any combination thereof) will lead to
the appointment of any such officers;
(h) no litigation, arbitration or claim before any court, arbitrator,
governmental or administrative agency or authority which would have
a material adverse effect on the ability of AFT or any other
Purchaser to observe or perform its obligations under this Agreement
is in progress, or to the knowledge of any such Person, threatened
against any such Person; and
(i) AFT and each other Purchaser intends for the sale of any Aircraft
contemplated hereby to constitute a valid transfer of such Aircraft
to the relevant Purchaser and intends that after Delivery of such
Aircraft the Seller thereof shall retain no right, title or interest
in such Aircraft.
10. INDEMNITY
10.1 Each Purchaser of an Aircraft agrees to indemnify the Seller on its behalf
and on behalf of each other Seller Indemnitee from and against any claims,
damages, losses, costs, expenses, fees, payments, demands, liabilities,
actions, proceedings, penalties or fines ("Losses") (other than, in each
case, on account of any Taxes resulting from any Delivery) which any
Seller Indemnitee may incur in relation to such Aircraft to the extent it
arises out of a loss or liability incurred after Delivery thereof, except
to the extent such Losses are due to the gross negligence or willful
misconduct of any Seller Indemnitee.
10.2 Without derogation to the disclaimer in Section 12, each Seller of an
Aircraft agrees to indemnify the Purchaser thereof on its behalf and on
behalf of each Purchaser Indemnitee from and against any Losses which any
Purchaser Indemnitee may incur in relation to such Aircraft to the extent
it arises out of a loss or liability incurred prior to Delivery thereof,
except to the extent such Losses are due to the gross negligence or
willful misconduct of any Purchaser Indemnitee.
10.3 If a written claim is made against a party (the "first party") for any sum
which is the subject of an indemnity by the other party (the "indemnifying
party") under this Section 10, the first party will promptly notify the
indemnifying party. If reasonably requested by the indemnifying party in
writing within thirty (30) days following receipt by the indemnifying
party of such notice, and provided the first party is indemnified by the
indemnifying party against costs and expenses, the first party will in
good faith contest in its name (or, at the indemnifying party's election
if such contest may be undertaken by the indemnifying party in its own
name or on behalf of the indemnifying party, permit the indemnifying party
to contest) the validity, applicability and amount of such claim in
appropriate administrative and judicial proceedings; provided that the
first party shall
28
<PAGE> 32
have no such obligation if any such contest would expose the first party
itself to a liability claim.
10.4 The relevant Seller shall pay, within forty-five (45) days after receipt
of an approved invoice therefor, costs and expenses, including legal fees
and disbursements, which the relevant Purchaser incurs as a result of (but
subject to the provisions of Section 4.3 in the case of clauses (ii) and
(iii) below):
(i) the application of Section 4.1 (including, without limitation,
costs incurred in arranging or taking steps to arrange the
preparation, execution and delivery of any documents in
anticipation of Delivery of a Substitute Aircraft); or
(ii) any of the documents or conditions referred to in Schedule 2
not being satisfied on or before Delivery of the relevant
Aircraft or any of the documents or conditions referred to in
Schedule 3 not being satisfied on or before Delivery of the
relevant Aircraft; or
(iii) any condition referred to in Section 7.2(a) or (b) not being
satisfied on or before Delivery of the relevant Aircraft.
10.5 If and to the extent that any sums constituting (directly or indirectly)
an indemnity to the first party but paid by the indemnifying party
pursuant to this Agreement are treated as taxable in the hands of the
first party, the indemnifying party will pay to the first party such sums
as will after the tax liability has been fully satisfied indemnify the
first party to the same extent as it would have been indemnified in the
absence of such liability together with interest on the amount payable by
the indemnifying party under this sub-clause at the rate of interest
stated in Section 5.6 in respect of the period commencing on the date on
which the payment of taxation is finally due until payment by the
indemnifying party (both before and after judgment), but the indemnifying
party will be under no liability to make any payment under this Section
10.5 to the first party to the extent the first party would be in a better
position than if no payment by way of indemnity had needed to have been
made.
11. TAXES
11.1 (a) Each Seller of an Aircraft hereby covenants to pay all Taxes imposed
on the Purchaser thereof or on such Aircraft or the Lease Documents
or the Operative Documents as a result of (i) the execution of,
delivery of or performance under this Agreement, (ii) the Delivery
of such Aircraft, (iii) any required re-registration of title to or
the lease of such Aircraft with any Government Entity that is
necessary or advisable to reflect or record the Operative Documents
or the events occurring pursuant to the Operative Documents, (iv)
the purchase by such Purchaser of such Aircraft hereunder or (v)
such Purchaser's entering into of the Lease Documents and the
Operative Documents, other than (x) Taxes that the relevant Lessee
is liable to pay or reimburse under the relevant Lease and/or the
Operative Documents, (y) any Taxes imposed on the Purchaser of such
Aircraft or
29
<PAGE> 33
any other Purchaser or that are based on or measured by gross or
net income or receipts (other than sales or use Taxes or Taxes in
the nature of the foregoing) (including, without limitation,
withholding and Taxes on tax preference items) of such Purchaser or
any other Purchaser or that are capital, doing business, accumulated
earnings, personal holding company, excess profits, successor,
estate or net worth Taxes of such Purchaser (including interest,
additions to Tax, penalties, or other charges in respect thereof),
in each case to the extent imposed on the Purchaser or any other
Purchaser or by reason of such Purchaser or an Affiliate thereof
being organized in the jurisdiction imposing such Taxes or
conducting activities in such jurisdiction unrelated to the
transaction contemplated by the Operative Documents or (z) Taxes
resulting from the gross negligence or willful misconduct of such
Purchaser.
(b) The Purchaser covenants not to bring into the United Kingdom any
document subject to stamp duty in the United Kingdom and covered by
the indemnity in Section 11.1(a) above unless it is necessary to do
so to enforce the same, whereupon the Purchaser shall notify the
Seller that it has brought such a document into the United Kingdom
and the Seller shall be responsible for the payment of such duty.
12. WARRANTIES AND DISCLAIMERS
12.1 WITHOUT PREJUDICE TO THE EXPRESS TERMS AND CONDITIONS STATED HEREIN AND IN
THE OTHER OPERATIVE DOCUMENTS, EACH AIRCRAFT WILL BE DELIVERED AND SOLD IN
ITS "AS IS, WHERE IS" CONDITION, AND EXCEPT AS EXPRESSLY STATED IN SECTION
8 OF THIS AGREEMENT AND AS OTHERWISE REPRESENTED AND WARRANTED HEREIN IN
THE OTHER OPERATIVE DOCUMENTS AND/OR IN THE BILL OF SALE OR
ACKNOWLEDGEMENT OF DELIVERY (AS THE CASE MAY BE) FOR SUCH AIRCRAFT OR ANY
CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLER MAKES NO
WARRANTIES, GUARANTEES OR REPRESENTATIONS, EXPRESS OR IMPLIED, ARISING BY
LAW OR OTHERWISE, WITH RESPECT TO ANY OF THE AIRCRAFT.
12.2 SUBJECT AS PROVIDED IN SECTION 12.1 EACH PURCHASER WAIVES RELEASES AND
RENOUNCES ALL WARRANTIES, OBLIGATIONS AND LIABILITIES OF ANY SELLER
INCLUDING BUT NOT LIMITED TO (1) ANY IMPLIED WARRANTY AS TO THE
DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
VALUE, CONDITION, DESIGN, DATE PROCESSING, 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
30
<PAGE> 34
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.
12.3 THIS SECTION 12 SHALL NOT BE MODIFIED EXCEPT BY A WRITTEN AGREEMENT SIGNED
ON BEHALF OF THE SELLER AND THE PURCHASER BY THEIR RESPECTIVE DULY
AUTHORIZED REPRESENTATIVES.
13. ASSIGNMENT
13.1 No Purchaser of an Aircraft shall assign, transfer or otherwise convey
this Agreement or all or any part of its rights hereunder to any Person
without the prior written consent of the Seller of such Aircraft other
than in favor of the Security Trustee under the Security Trust Agreement,
to which the Seller hereby consents.
13.2 No Seller of an Aircraft shall assign, transfer or otherwise convey this
Agreement or all or any part of its rights hereunder to any Person without
the prior written consent of the Purchaser of such Aircraft other than so
far as concerns assignments to existing owners or financiers or Affiliates
of such Seller of amounts or its rights to receive amounts payable to such
Seller hereunder on terms and conditions which do not increase any
obligation of such Purchaser hereunder or otherwise expose such Purchaser
to any increased liability cost or expense. Notwithstanding the foregoing,
the Seller may at any time and from time to time assign its rights under
this Agreement (but not its obligations) with respect to one or more of
the Aircraft to Chicago Deferred Exchange Corporation ("CDEC") and CDEC
may subsequently reassign such rights to the Seller, in each case without
having to obtain the prior written consent of the Purchaser but in each
case giving the Purchaser written notice of such assignment and in the
exercise of such rights, CDEC shall be bound by the terms and provisions
of Section 14.2 hereof.
14. MISCELLANEOUS
14.1 GECC shall indemnify, hold harmless and defend AFT, each other Purchaser
and their respective successors and assigns from and against all
liabilities, obligations, claims, demands, judgements, causes of action,
damages, costs, losses and expenses (including reasonable legal fees,
costs) rising out of or pertaining to any claim which results from any
breach by GECC or any other Seller of any of its obligations,
representations, warranties or covenants under this Agreement, any
Acknowledgement of Delivery or any Bill of Sale.
14.2 None of GECC or any other Seller shall 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 AFT or any other Purchaser or in respect of any of their
respective liabilities, including, without limitation, as a result of any
claim or interest of any of GECC or any other Seller.
31
<PAGE> 35
14.3 No amendment or waiver of any provision of this Agreement, and no consent
to any departure herefrom by any party hereto, shall in any event be
effective unless the same shall be in writing and signed by each party
hereto, 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 any party hereto 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.
14.4 In the event that any provision of this Agreement or the application
thereof to any party hereto or to any circumstance or in any jurisdiction
governing this Agreement 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 Agreement, 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 Agreement.
14.5 All notices and other communications provided for hereunder shall be in
writing (including telecopier) and mailed, telecopied or delivered to the
intended recipient at its address specified in Section 12.05 of the
Indenture or
in the case of GECC or any Seller, as follows:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927-9400
Attention: Senior Vice President-Corporate Treasury and
Global Funding Operation of GE Capital
Facsimile: (203) 357-4975
With a copy to:
GE Capital Aviation Services, Inc.
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Contracts Leader
Facsimile: (203) 357-4585
and, in the case of any Purchaser, as follows:
AIRCRAFT FINANCE TRUST
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
32
<PAGE> 36
Facsimile: (302) 651-8882
with a copy to:
Resource/Phoenix, Inc., Administrative Agent
2401 Kerner Boulevard
San Rafael, CA 94901
Attention: Financial Services
Facsimile: (415) 485-4823
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 14.5. Each such notice 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.
14.6 (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE .
(b) Each party hereto hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New
York and of any New York State court sitting in New York City for
the purposes of all legal proceedings arising out of or relating to
this agreement and each other operative document or the transactions
contemplated hereby or thereby. GECC and each other Seller
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 proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in
an inconvenient forum. Each Seller (other than GECC so long as GECC
is a New York corporation) hereby irrevocably appoints CT
Corporation System, with an office on the date hereof at 1633
Broadway, New York, New York 10019, as its agent to receive on its
behalf and on behalf of its property, service of copies of the
summons and complaint and any other process that may be served in
any such action or proceeding. As an alternative method of service,
each of GECC and each other Seller hereby irrevocably consents to
the service of any and all process in any such action or proceeding
by the mailing of copies to it or in any other manner permitted by
Applicable Law.
(c) To the extent permitted by Applicable Law, each of the parties
hereto hereby irrevocably waives the right to demand a trial by
jury, in any such suit, action or other proceeding arising out of
this agreement, the other operative documents, or the subject matter
hereof or thereof or the overall transaction brought by any of the
parties hereto or their successors or assigns.
33
<PAGE> 37
14.7 Nothing in Section 14.4 limits the right of AFT or any other Purchaser to
bring proceedings against GECC or any other Seller in connection with this
Agreement:
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction.
14.8 Each party hereto will promptly and duly execute and deliver such further
documents to make such further assurances for and take such further action
reasonably requested by any party to whom such first party is obligated,
all as may be reasonably necessary to carry out more effectively the
intent and purpose of this Agreement and the other Operative Documents.
14.9 This Agreement may be executed in any number of counterparts and by any
party hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which, when taken together,
shall constitute one and the same agreement.
15. SUBROGATION
15.1 Upon the provision of substitute collateral by GECC or any other Seller
pursuant to Section 7.2(b)(i), and upon any claim being made against GECC
or any other Seller for breach of any representation or warranty in
Section 8.2, GECC or such other Seller, as the case may be, shall be
subrogated to all rights, remedies and claims of AFT and each other
Purchaser against the Lessee or any Affiliate of the Lessee under the
applicable Novated Lease or Assigned Lease, the Operative Documents, the
Lease Documents and otherwise, with respect to such provision of
substitute collateral or such claim, and AFT shall cooperate, and shall
cause each other Purchaser to cooperate, in taking such action as GECC or
such other Seller may reasonably request in connection with exercising any
such right, remedy or claim (and the reasonable costs and expenses thereof
shall be paid by GECC).
34
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have entered into this Master Aircraft
Purchase Agreement the day and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Norman Liu
-----------------------------------------
Name: Norman Liu
Title: Vice President
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By
-----------------------------------------
Name:
Title:
ALCYONE FSC CORPORATION
By
-----------------------------------------
Name:
Title:
BIRDS OF PARADISE I
By: POLARIS PACIFIC - 1 CORPORATION,
as managing venturer
By /s/ Norman Liu
-------------------------------------
Name: Norman Liu
Title: Vice President
BIRDS OF PARADISE II
By: POLARIS PACIFIC - 2 CORPORATION,
as managing venturer
By /s/ Norman Liu
-------------------------------------
Name: Norman Liu
Title: Vice President
AVIATION FINANCIAL SERVICES, INC.
By /s/ Norman Liu
-----------------------------------------
Name: Norman Liu
Title: Vice President
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have entered into this Master Aircraft
Purchase Agreement the day and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By
------------------------------------------
Name:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By /s/ Brett R. King
-----------------------------------------
Name: Brett R. King
Title: Assistant Vice President
ALCYONE FSC CORPORATION
By
-----------------------------------------
Name:
Title:
BIRDS OF PARADISE I
By: POLARIS PACIFIC - 1 CORPORATION,
as managing venturer
By
-------------------------------------
Name:
Title:
BIRDS OF PARADISE II
By: POLARIS PACIFIC - 2 CORPORATION,
as managing venturer
By
-------------------------------------
Name:
Title:
AVIATION FINANCIAL SERVICES, INC.
By
-----------------------------------------
Name:
Title:
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have entered into this Master Aircraft
Purchase Agreement the day and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By
-----------------------------------------
Name:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By
-----------------------------------------
Name:
Title:
ALCYONE FSC CORPORATION
By /s/ [ILLEGIBLE]
-----------------------------------------
Name:
Title:
BIRDS OF PARADISE I
By: POLARIS PACIFIC - 1 CORPORATION,
as managing venturer
By
-------------------------------------
Name:
Title:
BIRDS OF PARADISE II
By: POLARIS PACIFIC - 2 CORPORATION,
as managing venturer
By
-------------------------------------
Name:
Title:
AVIATION FINANCIAL SERVICES, INC.
By
-----------------------------------------
Name:
Title:
<PAGE> 41
GECAS BRUSSELS FSC, INC
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ALDEBARAN FSC - ONE CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ALDEBARAN FSC - TWO CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ALDEBARAN FSC - THREE CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ANTARES FSC - TWO CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ANTARES FSC - THREE CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
<PAGE> 42
ALNITAK FSC ONE CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ALNITAK FSC TWO CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ALNITAK FSC THREE CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
ARCTURUS FSC CORPORATION
By /s/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
POLARIS AIRCRAFT (PACIFIC COAST), INC
By
------------------------------------------
Name:
Title:
<PAGE> 43
ALNITAK FSC ONE CORPORATION
By
------------------------------------------
Name:
Title:
ALNITAK FSC TWO CORPORATION
By
------------------------------------------
Name:
Title:
ALNITAK FSC THREE CORPORATION
By
------------------------------------------
Name:
Title:
ARCTURUS FSC CORPORATION
By
------------------------------------------
Name:
Title:
POLARIS AIRCRAFT (PACIFIC COAST), INC
By /s/ Norman Liu
-----------------------------------------
Name: Norman Liu
Title: Vice President
<PAGE> 44
POLARIS HOLDING COMPANY
By /s/ Norman Liu
-----------------------------------------
Name: Norman Liu
Title: Vice President
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By
-----------------------------------------
Name:
Title:
AFT TRUST - SUB I
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By
-----------------------------------------
Name:
Title:
<PAGE> 45
POLARIS HOLDING COMPANY
By
-----------------------------------------
Name:
Title:
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By /s/ Donald G. MacKelcan
-----------------------------------------
Name: Donald G. MacKelcan
Title: Vice President
AFT TRUST - SUB I
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By /s/ Donald G. MacKelcan
-----------------------------------------
Name: Donald G. MacKelcan
Title: Vice President
<PAGE> 46
B1a
<PAGE> 47
ANNEX A
SELLERS
<TABLE>
<CAPTION>
Aircraft Nos.
Name of Seller (See Schedule 1)
<S> <C>
1. ALDEBARAN FSC - TWO CORPORATION, a Barbados foreign 1
sales corporation
2. FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national1 2 & 3
banking association, not in its individual capacity,
but solely as Owner Trustee (GECC as Owner
Participant)
3. ALCYONE FSC CORPORATION, a Barbados foreign sales 4, 11 & 12
corporation
4. BIRDS OF PARADISE I, a Californian General US 5
Partnership
5. BIRDS OF PARADISE II, a Californian General US 6
Partnership
6. GENERAL ELECTRIC CAPITAL CORPORATION, a New York 7, 9, 10, 13,
corporation 14, 20, 23, 24,
25, 29 34, 35 &
36
7. AVIATION FINANCIAL SERVICES INC., a Delaware 8, 21 & 22
corporation
8. GECAS BRUSSELS FSC, INC., a Barbados foreign sales 15
corporation
9. ALDEBARAN FSC - ONE CORPORATION, a Barbados foreign 16
sales corporation
10. ALDEBARAN FSC - THREE CORPORATION, a Barbados foreign 17
sales corporation
11. ANTARES FSC - TWO CORPORATION, a Barbados foreign 18
sales corporation
12. ANTARES FSC - THREE CORPORATION, a Barbados foreign 19
sales corporation
13. ALNITAK FSC ONE CORPORATION, a Barbados foreign sales 26
corporation
14. ALNITAK FSC TWO CORPORATION, a Barbados foreign sales 27
corporation
15. ALNITAK FSC THREE CORPORATION, a Barbados foreign 28
sales corporation
16. ARCTURUS FSC CORPORATION, a Barbados foreign sales 30
corporation
17. POLARIS AIRCRAFT (PACIFIC COAST), INC., a California 31
Corporation
18. POLARIS HOLDING COMPANY, a Delaware corporation 32 & 33
</TABLE>
<PAGE> 48
B1b
<PAGE> 49
EXHIBIT A
BILL OF SALE
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, [_______________], a corporation organized and existing under the
laws of [_______________] and having its registered office at [_______________]
(the "Seller"), owner of the full legal and beneficial title (subject to the
Aircraft Lease Agreement referred to below) to the aircraft, engines, equipment
and documents described below (hereinafter referred to as the "Aircraft"):
1. one (1) [_______________] aircraft bearing manufacturer's serial no.
[_______________] and registration mark [_______________]; and
2. [_______________] [_______________] engines bearing the following
manufacturer's serial nos.: [_______________], [_______________],
[_______________];
3. all equipment, accessories and parts belonging to, installed in or
appurtenant to such Aircraft or Engines to the extent title thereto has
been vested in the Seller in under the Aircraft Lease Agreement referred
to below; and
4. all Aircraft Documents relating to the Aircraft and such Engines;
does hereby sell, grant, transfer and deliver all its right, title and interest
in and to the Aircraft (subject to the Aircraft Lease Agreement dated as of
[_______________], between [_______________] and [______________]) unto
[_______________] (the "Purchaser") and its successors and assigns, to have and
to hold the Aircraft forever.
The Seller hereby warrants to the Purchaser, its successors and assigns, that
there is hereby conveyed to the Purchaser good and marketable title to the
Aircraft, free and clear of all Encumbrances (other than Permitted
Encumbrances). The Seller agrees with the Purchaser, and its successors and
assigns, that the Seller will warrant and defend such title forever against all
claims and demands whatsoever. Except as otherwise provided herein or in such
Master Aircraft Purchase Agreement, the Aircraft is sold "AS IS" and "WHERE IS."
This Bill of Sale shall be governed by and construed in accordance with the laws
of the State of New York. Capitalized terms used but not otherwise defined
herein shall have the same meanings as used in such Master Aircraft Purchase
Agreement.
<PAGE> 50
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be duly executed
as of this [__] day of [__________], 1999.
_______________________________
By_____________________________
Name:
Title:
The representation, warranties, and
covenants of the above named Seller
under this Bill of Sale are hereby
irrevocably and unconditionally
guaranteed and confirmed:
General Electric Capital Corporation
By___________________________
Name:
Title:
<PAGE> 51
B1c
<PAGE> 52
EXHIBIT B
ACKNOWLEDGEMENT OF DELIVERY
This Acknowledgement of Delivery is given in connection with the Master Aircraft
Purchase Agreement (the "Agreement") dated as of May ___, 1999 among
[_______________], a corporation organized and existing under the laws of
[_______________] and having its registered office at [_______________] (the
"Seller"), [______________], a [company/trust] duly established and existing
pursuant to the laws of [_______________] and having its principal place of
business at _______________ (the "Purchaser") and the other parties thereto.
The Seller hereby acknowledges to the Purchaser that the full legal and
beneficial title (subject to the Aircraft Lease Agreement referred to below) to
the aircraft, engines, equipment and documents described below (hereinafter
referred to as the "Aircraft"):
1. one (1) [_______________] aircraft bearing manufacturer's serial no.
[_______________] and registration mark [_______________]; and
2. [_______________] [_______________] engines bearing the following
manufacturer's serial nos.: [_______________], [_______________],
[_______________];
3. all equipment, accessories and parts belonging to, installed in or
appurtenant to such Aircraft or Engines to the extent title thereto has
been vested in the Seller in under the Aircraft Lease Agreement referred
to below; and
4. all Aircraft Documents relating to the Aircraft and such Engines;
has passed by physical delivery from the Seller to the Purchaser in accordance
with the terms of the Agreement (subject to the Aircraft Lease Agreement dated
as of [_______________], between [_______________] and [_______________]).
The Seller hereby warrants to the Purchaser, its successors and assigns, that
there was conveyed to the Purchaser good and marketable title to the Aircraft,
free and clear of all Encumbrances (other than Permitted Encumbrances). The
Seller agrees with the Purchaser, and its successors and assigns, that the
Seller will warrant and defend such title forever against all claims and demands
whatsoever. Except as otherwise provided herein and in the Agreement, the
Aircraft was sold "AS IS" and "WHERE IS".
This Acknowledgement of Delivery shall be governed by and construed in
accordance with the laws of the State of New York. Capitalized terms used but
not otherwise defined herein shall have the same meanings as used in the
Agreement.
<PAGE> 53
IN WITNESS WHEREOF, the Seller has caused this Acknowledgement of Delivery to be
duly executed as of this [__] day of [__________], 1999.
_______________________________
By_____________________________
Name:
Title:
The representation, warranties, and
covenants of the above named Seller
under this Acknowledgement of
Delivery are hereby irrevocably and
unconditionally guaranteed and
confirmed:
General Electric Capital Corporation
By___________________________
Name:
Title:
2
<PAGE> 54
Exhibit C
GUARANTY
GUARANTY (the "Guaranty") dated as of May 5, 1999 of General
Electric Capital Corporation, a New York corporation ("GECC") in favor of
Aircraft Finance Trust, a Delaware business trust ("AFT") and AFT Trust - Sub I,
a Delaware business trust ("AFT Sub I") (AFT, together with AFT Sub I,
collectively, the "Purchasers").
Reference is made to that certain Master Aircraft Purchase Agreement
dated as of May __, 1999 (the "Asset Purchase Agreement") among GECC, the other
Sellers named therein and AFT and the other Purchasers. All capitalized terms
used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Asset Purchase Agreement. To induce the Purchasers
to acquire the Aircraft under the Asset Purchase Agreement and to pay the
purchase price thereof on the Initial Closing Date in advance of the Delivery of
the Aircraft and to otherwise perform their respective obligations thereunder,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, GECC is willing to execute and deliver this
Guaranty to the Purchasers and accordingly GECC does hereby agree as follows:
Section 1. Guaranty by GECC. (a) From and after the date hereof,
GECC hereby irrevocably and unconditionally guarantees to the Purchasers the
payment and performance in full when due of each of the obligations of each of
the Sellers under the Asset Purchase Agreement and each Bill of Sale,
Acknowledgment of Delivery, Lease Novation and/or Assignment of Lease delivered
pursuant thereto (collectively, the "Guaranteed Obligations"), in each case
after any applicable grace periods or notice requirements, according to the
terms of the Asset Purchase Agreement; provided, however, that with respect to
any payment obligation of any Seller thereunder, GECC shall not be liable to
make any such payment until 15 Business Days (as used herein, a "Business Day"
shall refer to a day other than a Saturday or a Sunday on which commercial banks
are open for business in New York City) following receipt by GECC of a written
demand for payment from AFT. GECC hereby agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of (i) the validity,
regularity or enforceability of the Asset Purchase Agreement, any other
Operative Document or any other agreement or instrument referred to herein or
therein, any change therein or amendment thereto, the absence of any action to
enforce the same, any waiver or consent by the Purchasers with respect to any
provision thereof, the recovery of any judgment against any of the Sellers or
any action to enforce the same, or any other circumstances which may otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor
and (ii) any difference between the law selected as the governing law of the
Asset Purchase Agreement or the other Operative Documents and the law selected
as the governing law of this Guaranty; provided, however, that nothing contained
herein shall be construed to be a waiver by GECC of the foregoing demand for
payment. GECC covenants that this Guaranty will not be discharged except by
complete and final performance of the Guaranteed Obligations.
(b) GECC shall be subrogated to all rights of the Purchasers in
respect of any amounts paid by GECC pursuant to the provisions of this Guaranty;
provided, however, that
<PAGE> 55
GECC shall be entitled to enforce, or to receive any payments arising out of or
based upon, such right of subrogation only after all of the Guaranteed
Obligations have been finally paid in full.
(c) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by any Purchaser upon the
insolvency, bankruptcy or reorganization of any Seller or otherwise, all as
though such payment had not been made.
Section 2.1. Notices. All notices to GECC under this Guaranty and
copies of all notices to the Sellers under the Asset Purchase Agreement shall,
until GECC furnishes written notice to the contrary, be in writing and mailed,
faxed or delivered to GECC at 260 High Ridge Road, Stamford, Connecticut
06927-9400, and directed to the attention of the Senior Vice President-Corporate
Treasury and Global Funding Operation of GE Capital (facsimile no. (203)
357-4975).
Section 2.2. Governing Law. This Guaranty shall be construed and
enforced in accordance with, and governed by, the laws of the State of New York,
United States of America.
Section 2.3. Interpretation. The headings of the sections and other
subdivisions of this Guaranty are inserted for convenience only and shall not be
deemed to constitute a part hereof.
Section 2.4. Attorney's Cost. GECC agrees to pay all reasonable
attorney's fees and disbursements and all other reasonable and actual costs and
expenses which may be incurred by the Purchasers in the enforcement of this
Guaranty.
Section 2.5 Currency of Payment. Any payment to be made by GECC
shall be made in the same currency as designated for payment in the Asset
Purchase Agreement and such designation of the currency of payment is of the
essence.
Section 2.6 No Set-Off. By acceptance of this Guaranty, AFT and each
of the other Purchasers shall be deemed to have waived any right to set-off,
combine, consolidate or otherwise appropriate and apply (i) any assets of GE
Capital at any time held by any Purchaser or (ii) any indebtedness or other
liabilities at any time owing by any Purchaser to GECC, as the case may be,
against, or on account of, any obligations or liabilities owed by GECC to the
Purchasers under this Guaranty.
2
<PAGE> 56
GENERAL ELECTRIC CAPITAL
CORPORATION
By:__________________________
Senior Vice President
Corporate Treasury and
Global Funding Operation
ACKNOWLEDGMENT AND AGREEMENT
AFT for and on behalf of itself and each of the Purchasers does hereby
acknowledge and consent to the provisions of the foregoing Guaranty.
Aircraft Finance Trust
By:__________________________
Title:
3
<PAGE> 1
Exhibit 10.2
EXECUTION COPY
SECURITY TRUST AGREEMENT
Dated as of May 5, 1999
between
AIRCRAFT FINANCE TRUST
and
THE ADDITIONAL GRANTORS REFERRED TO HEREIN
as the Grantors
and
BANKERS TRUST COMPANY,
as the Security Trustee and the Operating Bank
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..........................................................1
Section 1.01 Definitions..............................................1
Section 1.02 Construction and Usage...................................6
ARTICLE II SECURITY............................................................6
Section 2.01 Grant of Security........................................6
Section 2.02 Security for Obligations.................................9
Section 2.03 Representations and Warranties of the Grantors...........9
Section 2.04 Grantors Remain Liable..................................10
Section 2.05 Delivery of Collateral..................................11
Section 2.06 Maintenance of Security Trustee Accounts................11
Section 2.07 The Grantor and the Accounts............................12
Section 2.08 As to the Assigned Documents............................13
Section 2.09 As to Security Collateral, Beneficial Interest
Collateral and Investment Collateral....................15
Section 2.10 Further Assurances......................................16
Section 2.11 Place of Perfection; Records............................17
Section 2.12 Voting Rights; Dividends; Etc...........................17
Section 2.13 Transfers and Other Encumbrances; Additional
Shares or Interests.....................................18
Section 2.14 Security Trustee Appointed Attorney-in-Fact.............18
Section 2.15 Security Trustee May Perform............................19
Section 2.16 Covenant to Pay.........................................19
Section 2.17 Delivery of Collateral Supplements......................19
Section 2.18 Annual Opinion..........................................19
ARTICLE III REMEDIES..........................................................20
Section 3.01 Remedies................................................20
ARTICLE IV SECURITY INTEREST ABSOLUTE.........................................21
Section 4.01 Security Interest Absolute..............................21
ARTICLE V THE SECURITY TRUSTEE AND THE OPERATING BANK.........................22
Section 5.01 Authorization and Action................................22
Section 5.02 Absence of Duties.......................................22
Section 5.03 Representations or Warranties...........................22
Section 5.04 Reliance; Agents; Advice of Counsel.....................23
Section 5.05 No Individual Liability.................................24
Section 5.06 The Operating Bank......................................25
<PAGE> 3
ARTICLE VI SUCCESSOR TRUSTEES AND OPERATING BANK..............................25
Section 6.01 Resignation and Removal of Security Trustee.............25
Section 6.02 Appointment of Successor................................25
Section 6.03 The Operating Bank......................................25
ARTICLE VII AGREEMENT AMONG SECURED PARTIES...................................26
Section 7.01 Subordination and Priority..............................26
Section 7.02 Exercise of Remedies....................................27
Section 7.03 Further Agreements of Subordination.....................27
Section 7.04 Rights of Subrogation...................................29
Section 7.05 Further Assurances of Subordinated Representatives......29
Section 7.06 No Change in Rights in Collateral.......................29
Section 7.07 Waiver of Marshalling and Similar Rights................29
Section 7.08 Enforcement.............................................30
Section 7.09 Obligations Not Affected................................30
Section 7.10 Waiver..................................................30
Section 7.11 Senior Obligations and Subordinated Obligations
Unimpaired..............................................31
Section 7.12 Upon Discharge of Obligations...........................31
ARTICLE VIII INDEMNITY AND EXPENSES...........................................31
Section 8.01 Indemnity...............................................31
Section 8.02 Holders' Indemnity......................................32
Section 8.03 No Compensation from Secured Parties....................32
Section 8.04 Security Trustee Fees...................................32
ARTICLE IX MISCELLANEOUS......................................................33
Section 9.01 Amendments; Waivers; Etc................................33
Section 9.02 Addresses for Notices...................................33
Section 9.03 No Waiver; Remedies.....................................34
Section 9.04 Severability............................................34
Section 9.05 Continuing Security Interest; Assignments...............35
Section 9.06 Release and Termination.................................35
Section 9.07 Currency Conversion.....................................35
Section 9.08 Governing Law...........................................36
Section 9.09 Jurisdiction............................................36
Section 9.10 Counterparts............................................36
Section 9.11 Table of Contents, Headings, Etc........................37
<PAGE> 4
SCHEDULES
Schedule I Pledged Stock, Pledged Beneficial Interest 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
EXHIBITS
Exhibit A Form of Secured Party Supplement
Exhibit B-1 Form of Collateral Supplement
Exhibit B-2 Form of Grantor Supplement
Exhibit C Form of Non-Trustee Account Letter
Exhibit D Form of Consent and Agreement
<PAGE> 5
SECURITY TRUST AGREEMENT
This SECURITY TRUST AGREEMENT (this "Agreement"), dated as of May 5,
1999, is made between AIRCRAFT FINANCE TRUST, a Delaware statutory business
trust (the "Issuer"), the ISSUER SUBSIDIARIES listed on the signature pages of,
or who otherwise become grantors under, this Agreement (together with the
Issuer, the "Grantors") and BANKERS TRUST COMPANY, a New York banking
corporation ("Bankers Trust").
PRELIMINARY STATEMENTS:
(1) The Issuer and Bankers Trust have entered into the Indenture
pursuant to which the Issuer is issuing the Notes and Bankers Trust has been
appointed the Trustee.
(2) The Issuer is the owner of (i) all of the beneficial interest
(the "Pledged Beneficial Interest") in certain Issuer Subsidiaries and all of
the outstanding shares of capital stock of the other Issuer Subsidiaries (the
"Pledged Stock"), all as described in the attached Schedule I and (ii) the
indebtedness of certain Issuer Subsidiaries (the "Pledged Debt"), all as
described in the attached Schedule I.
(3) The Issuer Subsidiaries are or may from time to time be parties
to lease and sub-lease contracts and servicing agreements with respect to the
Initial Aircraft, and they may enter into lease and sub-lease contracts and
servicing agreements with respect to Additional Aircraft.
(4) The Issuer and the Issuer Subsidiaries may from time to time
grant additional security for the benefit of the Secured Parties.
(5) It is a condition precedent to the issuance of the Notes by the
Issuer that each Grantor grant the security interests required by this
Agreement.
(6) Each Grantor will derive substantial direct and indirect benefit
from the issuance of the Notes and from the Related Documents.
(7) Bankers Trust is willing to act as the Security Trustee and the
Operating Bank under this Agreement.
NOW, THEREFORE, in consideration of the premises, each Grantor
hereby agrees with the Security Trustee for its benefit and the benefit of the
other Secured Parties as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. (a) Certain Defined Terms. For the purposes of
this Agreement, the following terms have the meanings indicated below:
"Account Collateral" has the meaning specified in Section 2.01.
<PAGE> 6
"Account Letters" has the meaning specified in Section 2.07(a).
"Additional Grantor" has the meaning specified in Section 9.01.
"Agreed Currency" has the meaning specified in Section 9.07.
"Agreement" has the meaning specified in the recital of parties to
this Agreement.
"Agreement Collateral" means, collectively, the Assigned Agreement
Collateral, the Lease Collateral and the Servicing Collateral.
"Assigned Agreements" has the meaning specified in Section 2.01
"Assigned Agreement Collateral" has the meaning specified in Section
2.01.
"Assigned Documents" means, collectively, the Assigned Agreements,
the Assigned Leases and the Service Provider Documents included in the Servicing
Collateral.
"Assigned Leases" has the meaning specified in Section 2.01.
"Bankers Trust" has the meaning specified in the recital of parties
to this Agreement.
"Bankers Trust Fee Letter" means the fee agreement dated as of May
5, 1999 between the Issuer and Bankers Trust.
"Beneficial Interest Collateral" has the meaning specified in
Section 2.01.
"Certificated Security" means a certificated security (as defined in
Section 8-102(a)(4) of the UCC) other than a Government Security.
"Collateral" has the meaning specified in Section 2.01.
"Collateral Supplement" means a supplement to this Agreement in
substantially the form attached as Exhibit B-1 executed and delivered by a
Grantor.
"Government Security" means any security issued or guaranteed by the
United States of America or an agency or instrumentality thereof that is
maintained in book-entry on the records of the Federal Reserve Bank of New York
and is subject to Revised Book-Entry Rules.
"Grantors" has the meaning specified in the recital of parties to
this Agreement.
"Grantor Supplement" means a supplement to this Agreement in
substantially the form attached as Exhibit B-2 executed and delivered by an
Issuer Group Member.
2
<PAGE> 7
"Indenture" means the Trust Indenture dated as of May 5, 1999
between the Issuer, the Administrative Agent and the Trustee.
"Indenture Obligations" means, in respect of any class of Notes, all
obligations of the Issuer under and in respect of such class of Notes including
all obligations of the Issuer to make payments of principal of, interest on
(including Registration Step-Up Interest, Maturity Step-Up Interest, Additional
Interest and interest following the filing of a petition initiating any
proceeding referred to in Section 7.03(a)) and premium (including Sale Premium),
if any, on such class of Notes, all obligations to pay any fees, expenses or
other amounts under or in respect of such class of Notes, the Indenture or any
Related Document in respect of such class of Notes, and all obligations in
respect of any amendment, modification, extension, renewal or refinancing of
such class of Notes.
"Instrument" means any "instrument" as defined in Section
9-105(1)(i) of the UCC.
"Investment Collateral" has the meaning specified in Section 2.01.
"Issuer" has the meaning specified in the recital of parties to this
Agreement.
"Lease Assignment Documents" means, in respect of any Assigned
Lease, (a) any agreement providing for the novation thereof to substitute, or
the assignment thereof to, an Issuer Group Member as the lessor, (b) any
agreement or instrument supplemental to this Agreement for the purpose of
effecting and/or perfecting the assignment of, and the grant of a lien upon,
such Assigned Lease in favor the Security Trustee under any Applicable Law
(other than the law of the State of New York), (c) any notice provided to the
lessee thereof of the assignment thereof pursuant to this Agreement and/or such
supplement, (d) any acknowledgment of such assignment by such lessee and (e) any
undertaking of quiet enjoyment given by the Security Trustee in respect thereof.
"Lease Collateral" has the meaning specified in Section 2.01.
"Non-Trustee Account Banks" has the meaning specified in Section
2.07.
"Non-Trustee Account Collateral" has the meaning specified in
Section 2.01.
"Obligor" has the meaning specified in Section 2.07.
"Operating Bank" means the Person acting, at the time of
determination, as the operating bank under this Agreement. The initial Operating
Bank is Bankers Trust.
"Owner Trustee Fee Agreement" means the fee agreement dated as of
May 5, 1999 between the Owner Trustee and the Issuer.
"Pledged Beneficial Interest" has the meaning specified in the
preliminary statements to this Agreement.
3
<PAGE> 8
"Pledged Debt" has the meaning specified in the preliminary
statements to this Agreement.
"Pledged Stock" has the meaning specified in the preliminary
statements to this Agreement.
"Received Currency" has the meaning specified in Section 9.07.
"Relevant Collateral" has the meaning specified in Section 2.09(a).
"Revised Book-Entry Rules" means 31 C.F.R. ss. 357 (Treasury bills,
notes and bonds); 12 C.F.R. ss. 615 (book-entry securities of the Farm Credit
Administration); 12 C.F.R. ss.ss. 910 and 912 (book-entry securities of the
Federal Home Loan Banks); 24 C.F.R. ss. 81 (book-entry securities of the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation);
12 C.F.R. ss. 1511 (book-entry securities of the Resolution Funding
Corporation); 31 C.F.R. ss. 354 (book-entry securities of the Student Loan
Marketing Association); and any substantially comparable book-entry rules of any
other Federal agency or instrumentality.
"Secured Collateral Provider" means any of or, in its plural form,
all of the Secured Service Providers, Secured Swap Providers and Secured Credit
Facility Providers.
"Secured Collateral Provider Document" means any of or, in its
plural form, all of the Service Provider Documents, Swap Agreements and Credit
Facilities.
"Secured Credit Facility" means any Eligible Credit Facility in
respect of which the provider has delivered to the Security Trustee a Secured
Party Supplement.
"Secured Credit Facility Obligations" means the obligations of the
Issuer now or hereafter existing under any Secured Credit Facilities to Secured
Credit Facility Providers.
"Secured Credit Facility Provider" means the provider of any Secured
Credit Facility.
"Secured Obligations" means, collectively, the Indenture Obligations
with respect to all classes of Notes, the Secured Service Provider Obligations,
the Additional Servicer Amounts, the Secured Credit Facility Obligations and the
Secured Swap Provider Obligations.
"Secured Party" means any of or, in the plural form, all of the
Security Trustee, each other Secured Service Provider, each Holder, each Secured
Credit Facility Provider and each Secured Swap Provider.
"Secured Party Supplement" means a supplement to this Agreement in
substantially the form attached as Exhibit A executed and delivered to the
Security Trustee by a Service Provider, a Swap Provider or a Secured Credit
Facility Provider.
4
<PAGE> 9
"Secured Service Provider" means any of the Security Trustee, the
Trustee, the Operating Bank, the Servicer, the Administrative Agent, the
Reference Agent, the Financial Advisor, the Capital Markets Advisor and each
other provider (including any Authorized Agent) of a Secured Service Provider
Document.
"Secured Service Provider Document" means any of any Service
Provider Document listed under clause (a) of the definition of that term and any
other service agreement entered into by an Issuer Group Member in accordance
with the Indenture in respect of which the counterparty has executed and
delivered to the Security Trustee a Secured Party Supplement.
"Secured Service Provider Obligations" means, collectively, the
obligations now or hereafter existing of any Issuer Group Member to a Service
Provider under a Secured Service Provider Document other than the Additional
Servicer Amounts.
"Secured Swap Agreement" means a Swap Agreement in respect of which
the Swap Provider has executed and delivered to the Security Trustee a Secured
Party Supplement.
"Secured Swap Provider" means the Swap Provider of a Secured Swap
Agreement.
"Secured Swap Provider Obligations" means the obligations of the
Issuer now or hereafter existing under the Secured Swap Agreements.
"Securities Account" means a securities account as defined in
Section 8-501(a) of the UCC maintained in the name of the Security Trustee as
"entitlement holder" (as defined in Section 8-102(a)(7) of the UCC) on the books
and records of the Operating Bank or another Securities Intermediary in the
State of New York.
"Securities Intermediary" means any "securities intermediary" of the
Security Trustee as defined in 31 C.F.R. Section 357.2 or Section 8-102(a)(14)
of the UCC.
"Security Collateral" has the meaning specified in Section 2.01(a).
"Security Trustee" means the Person appointed, at the time of
determination, as the security trustee under this Agreement. The initial
Security Trustee is Bankers Trust.
"Security Trustee Account" means any Account other than a
Non-Trustee Account.
"Senior Creditors" means the Secured Parties to whom the Senior
Obligations are owed.
"Senior Obligations" means, with respect to any Secured Obligation
(other than Secured Service Provider Obligations and all Secured Credit Facility
Obligations that constitute Expenses), all other Obligations the payment of
which constitute a Prior Ranking Amount.
5
<PAGE> 10
"Senior Representative" means the Controlling Party.
"Service Provider Documents" means (a) the Administrative Agency
Agreement, the Trust Agreement (with respect to the obligations of the Issuer to
the Owner Trustee), the Indenture (with respect to the obligations of the Issuer
to the Trustee), the Reference Agency Agreement, the Servicing Agreement, the
Financial Advisory Agreement, the Capital Markets Advisory Agreement, any
Additional Servicing Agreement, the Bankers Trust Fee Agreement, the Owner
Trustee Fee Agreement and this Agreement (with respect to the obligations of the
Grantors to the Security Trustee and the Operating Bank) and (b) any other
service agreement entered into by any Issuer Group Member pursuant to the
Indenture.
"Subordinated Creditors" means, at any time, the holders and owners
of Subordinated Obligations.
"Subordinated Obligations" means (a)with respect to the Secured
Service Provider Obligations and Secured Credit Facility Obligations that
constitute Expenses, all other Obligations and (b) with respect to any other
Secured Obligations, all Obligations as to which the payment of such Secured
Obligation constitutes a Prior Ranking Amount.
"Subordinated Representative" means, at any time, any trustee or
representative of any holders or owners (or, in the absence of any such person,
such holders and owners) of any Secured Obligations other than the Senior
Representative at such time.
"UCC" means the Uniform Commercial Code as in effect on the date of
determination 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 of this Agreement relating to such perfection or effect of perfection
or non-perfection.
"Uncertificated Security" means an uncertificated security (as
defined in Section 8-102(a)(18) of the UCC) other than a Government Security.
(b) Terms Defined in the Indenture. For all purposes of this
Agreement, all capitalized terms used, but not defined in, this Agreement 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 Section 1.02 of the Indenture are hereby incorporated by
reference in this Agreement.
ARTICLE II
SECURITY
Section 2.01 Grant of Security. To secure the Secured Obligations, each
Grantor hereby assigns and pledges to the Security Trustee for its benefit and
the benefit of the Secured
6
<PAGE> 11
Parties (except, with respect to any Secured Collateral Provider Documents under
clause (h) or clause (i) below, the related Secured Collateral Provider), and
hereby grants to the Security Trustee for its benefit and the benefit of the
Secured Parties (except, with respect to any Secured Collateral Provider
Documents under clause (h) or clause (i) below, the related Secured Collateral
Provider) a security interest in, all of such Grantor's 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) the Pledged Stock 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 the Pledged Stock;
(ii) the Pledged Debt and the instruments evidencing the 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 the Pledged Debt;
(iii) all additional shares of the capital stock of any Issuer Group
Member from time to time acquired by such Grantor in any manner, including the
capital stock of any Issuer Group Member that may be formed from time to time,
and the certificates representing such additional shares of the capital 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 such additional shares; and
(iv) all additional indebtedness from time to time owed to such
Grantor by any Issuer 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 (the
"Beneficial Interest Collateral"):
(i) the Pledged Beneficial Interests, all certificates, if any, from
time to time representing all of such Grantor's right, title and interest in the
Pledged Beneficial Interest, any contracts and instruments pursuant to which any
such Pledged Beneficial Interests are created or issued and all distributions,
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 Pledged
Beneficial Interest; and
(ii) all of such Grantor's right, title and interest in all
additional beneficial interests from time to time acquired by such Grantor in
any manner, all certificates, if any, from time to time representing such
additional beneficial interests and all distributions, 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 beneficial
interests;
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(c) 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 to be
held in, 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; 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;
(d) with respect to each Grantor, all right of such Grantor in and
to each Security Trustee Account at any time or from time to time established
and all cash, investment property, Permitted Account Investment, other
Investments, securities, instruments or other property (including all "financial
assets" within the meaning of Section 8-102(a)(9) of the UCC) at any time or
from time to time credited to any such Security Trustee Account (collectively,
the "Account Collateral");
(e) all other investment property (as defined in Section 9-115(1)(f)
of the UCC) of each Grantor including written notification 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 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; and
(ii) 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;
(f) with respect to the Issuer, all of the following (the "Assigned
Agreement Collateral"):
(i) all of such Grantor's right, title and interest in and to all
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 or other property held in such deposit accounts, all
certificates and instruments, if any, from time to time representing or
evidencing such deposit accounts and all other property of
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whatever nature, in each case pledged, assigned or transferred to it or
mortgaged or charged in its favor pursuant to any Assigned Agreement;
(g) with respect to each Grantor, 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 any leasing arrangements among Issuer Group Members with
respect to such Leases (all such Leases, the "Assigned Leases"), including (i)
all rights of such Grantor to receive moneys due and to become due under or
pursuant to such Assigned Leases, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to such
Assigned Leases, (iii) claims of such Grantor for damages arising out of or for
breach or default under such Assigned Leases, (iv) all rights under any such
Assigned Lease with respect to any subleases of the Aircraft subject to such
Assigned Lease and (v) the right of such Grantor to terminate such Assigned
Leases and to compel performance of, and otherwise to exercise all remedies
under, any Assigned Lease, whether arising under such Assigned Leases or by
statute or at law or in equity (the "Lease Collateral");
(h) with respect to each Grantor, all of such Grantor's right, title
and interest in and to all Service Provider Documents (the "Servicing
Collateral");
(i) with respect to each Grantor, all of such Grantor's right, title
and interest in and to all Credit Facilities not consisting of a Cash Collateral
Account and Swap Agreements and all rights to administer, draw upon and
otherwise deal with each such Credit Facility and to administer and otherwise
deal with each such Swap Agreement;
(j) with respect each Grantor, all of such Grantor's right, title
and interest in and to the personal property identified in a Grantor Supplement
or a Collateral Supplement executed and delivered by such Grantor to the
Security Trustee; and
(k) all proceeds of any and all of the foregoing Collateral
(including proceeds that constitute property of the types described in
subsections (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j) of this Section
2.01);
provided that the Collateral shall not include Excluded Payments.
Section 2.02 Security for Obligations. This Agreement secures the payment
and performance of all Secured Obligations of the Grantor to each Secured Party
(subject to the subordination provision of this Agreement and the Indenture) and
shall be held by the Security Trustee in trust for the Secured Parties. 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 any Secured Parties 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 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 and each Delivery Date on which such Grantor accepts an
Aircraft, as follows:
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(a) The Grantors are the legal and beneficial owner of the
Collateral free and clear of any Encumbrance (other than Permitted
Encumbrances), other than that of this 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 such as may have been
filed in favor of the Security Trustee relating to Collateral.
(b) This Agreement creates a valid and (upon the taking of the
actions required hereby) perfected security interest in the Collateral as
security for the Secured Obligations, subject in priority to no other
Encumbrances (other than Permitted Encumbrances), and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been (or in the case of future Collateral will be) duly taken.
(c) No Grantor has any trade names except as set forth on Schedule
III hereto.
(d) 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, (ii) for
the execution, delivery or performance of this Agreement by such Grantor or
(iii) for the perfection or maintenance of the pledge, assignment and security
interest created hereby, except for the filing of financing and continuation
statements under the Uniform Commercial Code.
(e) The chief place of business and chief executive or registered
office of such Grantor and the office where such Grantor keeps records of the
Collateral are located at the address specified opposite the name of such
Grantor on the attached Schedule IV.
(f) The Pledged Stock constitutes the percentage of the issued and
outstanding shares of capital stock of the issuers thereof indicated on the
attached Schedule I. The Pledged Beneficial Interest constitutes the percentage
of the beneficial interest of the issuer thereof indicated on Schedule I hereto.
(g) The Pledged Stock and the Pledged Beneficial Interest have been
duly authorized and validly issued and are 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.
(h) A true and complete copy of each Assigned Agreement in effect on
the Initial Closing Date has been delivered to the Security Trustee. Each
Assigned Document upon its inclusion in the Collateral will have been duly
authorized, executed and delivered by the relevant Grantors, will be in full
force and effect and will be binding upon and enforceable against all parties
thereto in accordance with their terms.
Section 2.04 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
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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 Grantor under the contracts
and agreements included in the Collateral or to take any action to collect or
enforce any claim for payment assigned under this Agreement.
Section 2.05 Delivery of Collateral. All certificates or instruments
representing or evidencing any Collateral (other than Account Collateral) shall
be delivered to and held by or on behalf of the Security Trustee in New York 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 evidence the security interests granted thereby. The
Security Trustee shall have the right, at any time in its discretion and without
notice to any Grantor, to transfer to or to register in the name of the Security
Trustee or any of its nominees any or all of the Pledged Stock and Pledged
Beneficial Interest, subject only to the revocable rights specified in Section
2.12(a). In addition, the Security Trustee shall have the right at any time to
exchange certificates or instruments representing or evidencing any Collateral
(other than Account Collateral) for certificates or instruments of smaller or
larger denominations. To the extent that any Assigned Lease constitutes chattel
paper (as defined in Section 9-105 of the UCC), the Grantors shall cause the
original of such Assigned Lease to be delivered to the Security Trustee promptly
(and in any case no later than ten days) after the execution and delivery of
such Assigned Lease by all its parties.
Section 2.06 Maintenance of Security Trustee Accounts.
(a) Bankers Trust hereby agrees to act as the Operating Bank under
this Agreement. Upon the execution of this Agreement and from time to time
thereafter as called for by Section 3.01 of the Indenture, the Operating Bank
shall establish and maintain on the books and records of its office specified in
Section 9.02 and maintain in the name of the Security Trustee each respective
Security Trustee Account (as an Eligible Account) to be established on the
Initial Closing Date or on such other time. If, at any time, any Security
Trustee Account ceases to be an Eligible Account, the Operating Bank shall,
within 10 Business Days thereafter, establish a new Security Trustee Account
having the same characteristics or such other Account and transfer all property
related to such old Account to such new Account. The Operating Bank also agrees
to cooperate with any replacement Operating Bank as to the transfer of any
property in, or records relating to, any Security Trust Account maintained by
it. Except as a Secured Party in accordance with the provisions of this
Agreement, Bankers Trust waives any claim or lien against any Account it may
have, by operation of law or otherwise, for any amount owed to it by any
Grantor.
(b) The Operating Bank hereby agrees that (i) each Security Trustee
Account will be and will be maintained as a Securities Account of which it is
the Securities Intermediary and in respect of which the Security Trustee is the
"entitlement holder" (as defined in Section 8-102(a)(7) of the UCC) of the
"securities entitlement" (as defined in Section 8-102(a)(17) of the
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UCC) with respect to each "financial asset" (as defined in Section 8-102(a)(9)
of the UCC) credited to such Account, (ii) all Collections and other cash
required to be deposited in any such Account and Permitted Account Investments
and all other property acquired with cash credited to any such Account will be
credited to such Account, (iii) all items of property (whether cash, investment
property, Permitted Account Investments, other investments, securities,
instruments or other property credited to each Security Trustee Account will be
treated as a "financial asset" (as defined in Section 8-102(a)(9) of the UCC)
under Article 8 of the UCC, (iv) its "securities intermediary's jurisdiction"
(as defined in Section 8-110(e) of the UCC) with respect to each Account is the
State of New York and (v) all securities, instruments and other property in
order or registered from and credited to any Security Trustee Account shall be
payable to or to the order of, or registered in the name of, the Operating Bank
or shall be indorsed to the Operating Bank or in blank, and in no case
whatsoever shall any financial asset credited to any Security Trustee Account be
registered in the name of any Grantor, payable to or to the order of any Grantor
or specially indorsed to any Grantor except to the extent the foregoing have
been specially endorsed by a Grantor to the Operating Bank or in blank. The
Operating Bank acknowledges that the Security Trustee has appointed the
Administrative Agent pursuant to the Administrative Agency Agreement, as its
agent for, among other things, dealings with respect to the Security Trustee
Accounts; the Operating Bank agrees that, until otherwise notified in writing by
the Security Trustee, the Operating Bank will follow the written directions and
instructions of the Administrative Agent, as the agent for the Security Trustee,
to the extent it is required to follow those of the Security Trustee except
that, with respect to withdrawals from any Note Account, the Operating Bank
agrees that it will follow the directions and instructions of the Trustee, as
the agent for the Security Trustee (the Security Trustee hereby appointing the
Trustee as its agent for such purpose).
(c) The Security Trustee agrees that it will hold (and will indicate
clearly in the books and records that it holds) its "security entitlement" to
the "financial asset" credited to each Security Trustee Account in trust (i) to
the extent of any Segregated Funds in the Lessee Funded Account, for the benefit
of the relevant Lessees, (ii) to the extent of any Cash Collateral Account for
any class or subclass of Notes, for the benefit of the Holders of such Notes and
(to the extent so provided, if at all, in the Controlling Trustees' Resolution
establishing such Credit Facility) each provider of a Credit Facility the
proceeds of which funded such Cash Collateral Account, (iii) to the extent of
any Varig Reserve Account, for the Secured Parties and, to the extent set forth
in Section 3.01(m)(iii) of the Indenture, GE Capital and (iv) in the case of any
other Security Trustee Account, for the benefit of the Secured Parties (but
subject to the subordination provisions hereof).
Section 2.07 The Grantor and the Accounts. So long as any Secured
Obligations remain unpaid:
(a) No Grantor shall establish any Account except to the extent that
it is entitled, pursuant to the Indenture and in compliance with this Section
2.07, to establish one or more Non-Trustee Accounts. Except to the extent that
such payment is required by the payee thereof (and is permitted by the
Indenture) to be deposited in a Non-Trustee Account, each Grantor shall
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instruct each Person obligated at any time to make any payment to such Grantor
for any reason (an "Obligor") to make such payment to the appropriate Rental
Account.
(b) With respect to each Non-Trustee Account to be established or
established by any Grantor:
(i) Each Grantor shall maintain each Non-Trustee Account (as an
Eligible Account) in its name only with Eligible Institutions ("Non-Trustee
Account Banks") that have entered into letter agreements in substantially the
form of Exhibit C hereto (or made such other arrangements as are acceptable to
the Security Trustee) with such Grantor and the Security Trustee (the "Account
Letters").
(ii) Each Grantor shall immediately instruct each Obligor to make
any payment not required, as provided in Section 2.07(a), to be made to a
Security Trustee Account to a Non-Trustee Account meeting the requirements of
Section 2.07(b)(i).
(iii) 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 another Non-Trustee Account meeting the requirements of Section
2.07(b)(i). 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, in which case Section 2.07(a)
shall apply.
Section 2.08 As to the Assigned Documents. (a) Upon the inclusion of any
Assigned Document (other than an Assigned Lease) in the Collateral, the relevant
Grantor will deliver to the Security Trustee a consent, in substantially the
form of Exhibit D and executed by each party to such Assigned Document (other
than any Grantor) or (where the terms of such Assigned Document expressly
provide for a consent to its assignment for security purposes to substantially
the same effect as Exhibit D) will give due notice to each such other party to
such Assigned Document of its assignment pursuant to this Agreement. Upon the
inclusion of any Assigned Lease in the Collateral, the relevant Grantor will
deliver to the Security Trustee (i) in the case of any Assigned Lease that is an
Initial Lease such consents, acknowledgments and/or notices as are provided for
in the related Lease Assignment Documents and (ii) in the case of any other
Assigned Lease such consents, acknowledgments and/or notices as are necessary or
customary under the terms of such Assigned Lease and under the Applicable Law of
the jurisdiction governing such Assigned Lease and the jurisdiction in which the
relevant lessee is principally located in order to effect and perfect the
assignment of, and grant of a lien upon, such Assigned Lease pursuant to this
Agreement and/or to assure the payment of all Rental Payments under such
Assigned Lease to the appropriate Account in accordance with the terms of the
Indenture. Upon the request of any Grantor, the Security Trustee (solely in its
capacity as such) will execute such undertakings of quiet enjoyment in favor of
the lessee under any Assigned Lease as are (in the case of any Assigned Lease
that is an Initial Lease) provided for in the Lease Assignment Documents or as
are (in the case of any other Assigned Lease) substantially to the same effect
as such undertakings.
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(b) Upon (i) the inclusion of any Assigned Document in the
Collateral or (ii) the amendment or replacement of any Assigned Document or the
entering into of any new Assigned Document, the relevant Grantor will deliver a
copy thereof to the Security Trustee and will take such other action as may be
necessary or desirable to perfect the lien of this Agreement as to such Assigned
Document.
(c) Each Grantor shall, at its expense but subject to Section
2.08(e), Section 3.01(c), the Indenture and (in the case of any Assigned Lease)
the Servicing Agreement:
(i) perform and observe all the terms and provisions of the Assigned
Documents to be performed or observed by it, enforce the Assigned Documents in
accordance with their terms and take all such action to such end as may be from
time to time requested by the Security Trustee; and
(ii) furnish to the Security Trustee promptly upon receipt copies of
all notices, requests and other documents received by such Grantor under or
pursuant to the Assigned Documents, 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 Document such demands and
requests for information and reports or for action as such Grantor is entitled
to make thereunder.
(d) Each Grantor will, at its expense and upon the request of any
Secured Service Provider, pursue for the benefit of such Secured Service
Provider any claim that such Secured Service Provider has under any Assigned
Document for indemnity or otherwise.
(e) So long as no Default Notice shall have been delivered to the
Issuer and no Acceleration Default shall have occurred and be continuing, and
notwithstanding any provision to the contrary in this Agreement, each Grantor
shall be entitled, to the exclusion of the Security Trustee but subject always
to the terms of the Indenture (x) to exercise and receive, directly or
indirectly through one or more agents, including the Servicer, any of the
claims, rights, powers, privileges, remedies and other benefits under, pursuant
to, with respect to or arising out of the Assigned Documents and (y) to take any
action or to not take any action, directly or indirectly through one or more
agents, including the Servicer, related to the Assigned Documents and the
lessees or counterparties thereunder, including entering into, amending,
supplementing, terminating, performing, enforcing, compelling performance of,
exercising all remedies (whether arising under any Assigned Document or by
statute or at law or in equity or otherwise) under, exercising rights, elections
or options or taking any other action under or in respect of, granting or
withholding notices, waivers, approvals and consents in respect of, receiving
all payments under, dealing with any credit support or collateral security in
respect of, or taking any other action in respect of, the Assigned Documents and
contacting or otherwise having any dealings with any lessee or counterparty
thereunder; provided, however, (i) whether or not a Default Notice has been
delivered or an Acceleration Default has occurred, all amounts payable under
each Assigned Document (including all Rental Payments under each Assigned Lease)
shall be paid directly to the appropriate Account in accordance with the terms
of the Indenture, (ii) so
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long as any Assigned Lease remains in effect (and without limiting the authority
of the Servicer or the Additional Servicer under the express terms of the
Servicing Agreement or the Additional Servicing Agreement, as applicable), no
Grantor will abrogate any right, power or privilege granted expressly in favor
of the Security Trustee or the Trustee under any Lease Assignment Document and
(ii) upon the delivery of a Default Notice to the Issuer or during the
continuance of an Acceleration Default, all such rights of each Grantor shall
cease, and, subject to Section 3.01(c), all such rights shall become vested in
the Security Trustee, which shall thereupon have the sole right, subject to
Section 3.01(c), to exercise or refrain from exercising such rights.
Section 2.09 As to Security Collateral, Beneficial Interest Collateral and
Investment Collateral. (a) All Security Collateral, Beneficial Interest
Collateral and Investment Collateral (the "Relevant Collateral") shall be
delivered to the Security Trustee as follows:
(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 any
Securities Intermediary on the books of the issuer thereof or on the books of
any securities intermediary of any Securities Intermediary, by causing such
Securities Intermediary to continuously credit by book entry such Certificated
Security or Instrument to a Securities Account maintained by such Securities
Intermediary in the name of the Security Trustee and confirming to the Security
Trustee that it has been so 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 a Securities Intermediary on the books of
the issuer thereof or on the books of any securities intermediary of a
Securities Intermediary, by causing such Securities Intermediary to continuously
credit by book entry such Uncertificated Security to a Securities Account
maintained by such Securities Intermediary in the name of the Security Trustee
and confirming to the Security Trustee that it has been so credited; and
(iii) in the case of each Government Security registered in the name
of any 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 causing such Securities Intermediary to continuously credit by
book entry such security to the Securities Account maintained by such Securities
Intermediary in the name of the Security Trustee and confirming to the Security
Trustee that it has been so credited.
(b) Each of the Issuer and the Security Trustee hereby represents,
with respect to the Relevant Collateral, 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 any Securities Intermediary's jurisdiction
in connection with any Securities Account with any Securities Intermediary
referred to in Section 2.09(a) for purposes of 31 C.F.R. Section 357.11(b),
Section 8-110(e) of the UCC or any similar
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state or Federal law, or (ii) with any other person relating to such account
pursuant to which it has agreed that any 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 constituting Relevant Collateral held in and credited to the
Securities Account, including cash, to be treated as a "financial asset" within
the meaning of Section 8-102(a)(9) of the UCC for the purposes of Article 8 of
the UCC.
(c) Without limiting the foregoing, the Issuer and the Security
Trustee agree, and the Security Trustee shall cause each Securities
Intermediary, to take such different or additional action as may be required
based upon any Opinion of Counsel received pursuant to Section 2.18 in order to
maintain the perfection and priority of the security interest of the Security
Trustee in the Relevant Collateral in the event of any change in applicable law
or regulation, including 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 2.10 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
(including under the laws of any foreign jurisdiction), 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
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; (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
request, in order to perfect and preserve the pledge, assignment and security
interest granted or purported to be granted hereby and (iv) execute, file,
record, or register such additional documents and supplements to this Agreement,
including any further assignments, security agreements pledges, grants and
transfers, as may be required by or desirable under the laws of any foreign
jurisdiction, or as the Security Trustee may request, to create, attach,
perfect, validate, render enforceable, protect or establish the priority of the
security interest and lien of this Agreement.
(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 or cause to be furnished 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; provided that, to the extent that (in the case of any Assigned
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Lease) such statements, schedules or reports (or the data needed to prepare
them) can be obtained only from the Servicer or the Additional Servicer (as
applicable), no Grantor shall be required to obtain any such statements,
schedules, reports or data beyond those to which it is entitled under the
Servicing Agreement or the Additional Servicing Agreement, respectively.
(d) Each Grantor shall, immediately upon the organization or
acquisition by such Grantor of any Issuer Subsidiary, cause such Issuer
Subsidiary to enter into a Grantor Supplement.
Section 2.11 Place of Perfection; Records. Each Grantor shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Collateral 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
2.03(e) shall have been taken with respect to the Collateral. Each Grantor shall
hold and preserve such records and shall permit representatives of the Security
Trustee at any time during normal business hours to inspect and make abstracts
from such records, all at the sole cost and expense of such Grantor.
Section 2.12 Voting Rights; Dividends; Etc. (a) So long as no Default
Notice shall have been delivered to the Issuer 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 all or any part of the Security
Collateral and Beneficial Interest Collateral pledged by such Grantor for any
purpose not inconsistent with the terms of this Agreement, the charter documents
of such Grantor or the Indenture; provided, however, that such Grantor shall not
exercise or shall refrain from exercising any such right if in its judgment such
action would have a material adverse effect on the value of all or any part of
the Security Collateral or the Beneficial Interest Collateral; and
(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 in writing and provide for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 2.12(a)(i).
(b) Whether or not any Default or Event of Default shall have
occurred, any and all distributions, dividends and interest paid in respect of
the Security Collateral and Beneficial Interest Collateral pledged by such
Grantor, including any and all (i) distributions, dividends and interest paid or
payable other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
such Security Collateral or Beneficial Interest Collateral; (ii) distributions,
dividends and other distributions paid or payable in cash in respect of such
Security Collateral or Beneficial Interest 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 (iii) cash paid, payable or
otherwise distributed in respect of principal of, or in redemption of, or in
exchange for, such Security Collateral or Beneficial Interest Collateral shall
be paid into the Collections Account or shall be forthwith
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delivered to the Security Trustee, as applicable and, if received by such
Grantor, shall be received in trust for the benefit of the Security Trustee, be
segregated from the other property or funds of such Grantor and be forthwith
paid to the Collections Account or delivered to the Security Trustee in the same
form as so received (with any necessary indorsement).
(c) Upon the delivery of a Default Notice to any Issuer Group Member
or during the continuance of an Acceleration Default, all rights of each Grantor
to exercise or refrain from exercising the voting and other consensual rights
that it would otherwise be entitled to exercise pursuant to Section 2.12(a)(i)
and 2.12(a)(ii) 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.
Section 2.13 Transfers and Other Encumbrances; Additional Shares or
Interests. (a) No Grantor shall (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, any of
the Collateral or (ii) create or suffer to exist any Encumbrance upon or with
respect to any of the Collateral of such Grantor, in the case of clause (i) or
(ii) other than the pledge, assignment and security interest created by this
Agreement and as otherwise provided herein, in the Indenture or in the Servicing
Agreement.
(b) Except as otherwise provided pursuant to Section 5.02(l) of the
Indenture, the Issuer Subsidiaries shall not, and the Issuer shall not permit
the Issuer Subsidiaries to, issue, deliver or sell any shares, interests,
participations or other equivalents. Any beneficial interest or capital stock or
other securities or interests issued in respect of or in substitution for the
Pledged Stock or the Pledged Beneficial Interest shall be issued or delivered
(with any necessary endorsement) to the Security Trustee.
Section 2.14 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:
(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 included in the Collateral;
(c) to file any claims or take any action or institute any
proceedings that the Security Trustee may 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
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perfect (except in the case of the Security Collateral provided pursuant to
Section 2.01(i)) and preserve the pledge, assignment and security interest
granted hereby;
provided that the Security Trustee's exercise of any such power shall be subject
to Section 2.08(e) and Section 3.01(c).
Section 2.15 Security Trustee May Perform. If any Grantor fails to perform
any agreement contained in this Agreement, 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 with doing so
shall be payable by the Grantors.
Section 2.16 Covenant to Pay. Each Grantor covenants with the Security
Trustee (for the benefit of the Security Trustee and the Secured Parties) 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, solely and/or jointly, and/or severally with
another or others, as principal or surety on any account whatsoever pursuant to
the Service Provider Documents, the Indenture, the Notes, the Secured Credit
Facilities and the Secured Swap Agreements in accordance with their terms. If no
Default Notice has been delivered and no Acceleration Default is continuing, all
such payments shall be made in accordance with Section 3.08(a) of the Indenture;
if a Default Notice has been declared or an Acceleration Default is continuing,
all such payments shall be made in accordance with Section 3.08(b) of the
Indenture.
Section 2.17 Delivery of Collateral Supplements. Upon (a) the acquisition
by any Grantor of any Relevant Collateral or (b) the establishment of any
Non-Trustee Account, each relevant Grantor shall concurrently execute and
deliver to the Security Trustee a Collateral Supplement duly completed with
respect to such Collateral and shall take such steps with respect to the
perfection of such Collateral as are called for by this Agreement for Collateral
of the same type; provided that the foregoing shall not be construed to impair
or otherwise derogate from any restriction on any such action in any Related
Document and provided, further that the failure of any Grantor to deliver any
Collateral Supplement as to any such Collateral shall not impair the lien of
this Agreement as to such Collateral.
Section 2.18 Annual Opinion. Upon each anniversary of the Initial Closing
Date, the Issuer shall cause to be delivered to the Security Trustee an Opinion
of Counsel to the effect that there has not been adopted during the preceding
year any change of New York law that would require the taking of any action in
order to maintain the perfection or priority of the lien of this Agreement on
the Collateral or, if there has been such a change, setting forth the actions so
to be taken. The Issuer agrees to take all such actions as may be indicated in
any such opinion, except that, as provided in Section 2.09(c), the Security
Trustee shall take any such actions as may be required with respect to any
Securities Intermediary.
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ARTICLE III
REMEDIES
Section 3.01 Remedies. Upon delivery of a Default Notice pursuant to
Section 4.02 of the Indenture or if any Acceleration Default under the 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 and (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. 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 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
Secured Parties against, all or any part of the Secured Obligations in
accordance with Article VII of this Agreement and Articles III and X of the
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.
(c) Notwithstanding any provision in this Agreement to the contrary,
so long as the Servicer or the Additional Servicer (as applicable) is acting in
such capacity with respect to any Lease pursuant to the provisions of the
Servicing Agreement or the Additional Servicing Agreement (as applicable), the
Security Trustee as assignee of the Issuer agrees not to take any action
constituting Services (as defined in the Servicing Agreement or the Additional
Servicing Agreement, as applicable) and is otherwise subject to the terms of the
Servicing Agreement or the Additional Servicing Agreement when acting thereunder
in place of any Grantor, except (subject to Section 2.08(e)) to the extent the
Issuer would then be entitled to take such action
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under the express terms of the Servicing Agreement or the Additional Servicing
Agreement (as applicable).
ARTICLE IV
SECURITY INTEREST ABSOLUTE
Section 4.01 Security Interest Absolute. A separate action or actions may
be brought and prosecuted against each 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 security interest and lien granted under, and all
obligations of each Grantor under, this Agreement shall be absolute and
unconditional, irrespective of:
(a) any lack of validity or enforceability of any Related Document,
Assigned Document, Credit Facility or Swap Agreement or any other agreement or
instrument relating thereto;
(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
any other amendment or waiver of or any consent to any departure from any
Related Document, Assigned Document, Credit Facility or Swap Agreement 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 or a Person deemed to be a surety.
ARTICLE V
THE SECURITY TRUSTEE
AND THE OPERATING BANK
Section 5.01 Authorization and Action. (a) Each Secured Party by its
acceptance of the benefits of this Agreement hereby appoints and authorizes
Bankers Trust as the initial Security Trustee to take such action as trustee on
behalf of the Secured Parties and to exercise such powers and discretion under
this Agreement and the other Related Documents as are
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specifically delegated to the Security Trustee by the terms of this Agreement
and of the Related Documents, and no implied duties and covenants shall be
deemed to arise 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 of this
Agreement. The Security Trustee in its individual capacity shall not be
answerable or accountable under any circumstances, except 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 in this Agreement)
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 5.02 Absence of Duties. The powers conferred on the Security
Trustee under this Agreement with respect to the Collateral are solely to
protect its interest in this Agreement and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it under this
Agreement, 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 5.03 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 5.04 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 or other governing body 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 or
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other governing body 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 in this Agreement, 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 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 to this Agreement 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 of this
Agreement, 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 under this Agreement either directly or by or through agents,
including 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 under
this Agreement 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 under this Agreement 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 Administrative
Agent under any of the Related Documents.
(f) The Security Trustee shall not be liable for any Costs, 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
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Section 7.03(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.
(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 Administrative Agent.
(i) The Security Trustee shall have no duty to monitor the
performance of the Issuer, the Administrative Agent or any other party to the
Related Documents, nor shall it have any liability in connection with the
appointment of the Administrative Agent, or the malfeasance or nonfeasance by
such parties. The Security Trustee shall have no liability in connection with
compliance by the Issuer, the Administrative Agent 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 5.05 No Individual Liability. The Security Trustee shall have no
individual liability in respect of all or any part of the Secured Obligations,
and all 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 of the Secured Obligations.
Section 5.06 The Operating Bank. The Operating Bank shall be entitled to
the immunities and privileges of the Security Trustee under Sections 5.03 and
5.04(a), (e) and (g). The Operating Bank agrees to perform its duties hereunder
in accordance with the requirements of, and subject to the limitations of the
duties of, a Securities Intermediary under the UCC.
ARTICLE VI
SUCCESSOR TRUSTEES
AND OPERATING BANK
Section 6.01 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 the Issuer 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 6.01 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 6.02 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
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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
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,
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 (if any) of the
liens granted or purported to be granted hereby, 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. The retiring Security Trustee shall take all steps necessary to
transfer all Collateral in its possession and all its control over the
Collateral to the successor Security Trustee. 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
VII 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.
Section 6.03 The Operating Bank. If at any time the Person acting as the
Operating Bank is no longer the Security Trustee, the Security Trustee shall so
notify the Administrative Agent and the Issuer, and the Security Trustee shall
cause the Administrative Agent to establish and maintain the Security Trustee
Accounts with the Person then acting as the Security Trustee as provided in the
Administrative Agency Agreement and the Person then acting as the Security
Trustee shall assume the obligations of the Operating Bank under this Agreement.
ARTICLE VII
AGREEMENT AMONG SECURED PARTIES
Section 7.01 Subordination and Priority. (a) Notwithstanding the date,
manner or order of attachment or perfection (if any) or the description of any
collateral or security interests, liens, claims or encumbrances covered or
granted by Section 2.01, each Subordinated
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Representative agrees that the respective rights and interest of the
Subordinated Creditors in the Collateral are and shall be subordinate, to the
extent and in the manner hereinafter and in Articles III and X of the Indenture
set forth, to all rights and interest of the Senior Creditors in the Collateral,
and that the Senior Creditors shall have at all times interests prior and senior
to that of the Subordinated Creditors in all 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 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 or the Refinancing Account pursuant to Section
3.10(a) or Article XI of the Indenture and payments covered by Section 3.12 and
3.13 of the 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 VII and Article X of the Indenture, 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 Grantors.
Section 7.02 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 shall have occurred
and be continuing and both before and after the commencement of any proceeding
referred to in Section 7.03(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 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 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
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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 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 7.01(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.
Section 7.03 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 7.03(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 Secured Parties 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
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
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
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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. Without
limiting the generality of any of the foregoing, if any proceeding referred to
in Section 7.03(a) is commenced by or against any Grantor, the Subordinated
Creditors shall, upon written demand from the Senior Representative or the
Security Trustee, file such claims in such proceeding as the Senior
Representative or the Security Trustee, as applicable, shall request in such
written demand or any subsequent written demand provided in connection
therewith; provided however, that should one or more Subordinated Creditors fail
to comply fully with any such demand within thirty (30) days of receipt by such
Subordinated Creditor of the relevant demand, such Subordinated Creditor (by
holding its respective Notes) shall be deemed to have irrevocably appointed the
Security Trustee its attorney-in-fact to file and prosecute any such claim and
to dispose of any proceeds of such filing or prosecution in accordance with the
terms hereof and of the other Related Documents.
(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 7.04 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 7.05 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 or to enable the Senior
Representative and the Security Trustee to exercise and enforce their rights and
remedies hereunder.
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Section 7.06 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 7.06 shall limit the right of any
Subordinated Creditor to transfer any Subordinated Obligation including any
Note.
Section 7.07 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 7.08 Enforcement. Each of the Subordinated Representatives agrees
that this Agreement shall be enforceable against it and the Subordinated
Creditors under all circumstances, including in any proceeding referred to in
Section 7.03(a).
Section 7.09 Obligations 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:
(a) any lack of validity or enforceability of this Agreement, any
Assigned Document, Note, Secured Credit Facility or Secured Swap Agreement or
any other agreement or instrument relating thereto;
(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 Senior Obligations, or
any other amendment or waiver of or any consent to any departure from this
Agreement, any Service Provider Document, Note, Secured Credit Facility or
Secured Swap Agreement or any other agreement or instrument relating thereto;
(c) 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
(d) 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 or a Person deemed to be a surety.
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.
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<PAGE> 34
Section 7.10 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 N.Y. Uniform
Commercial Code 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 N.Y. Uniform Commercial Code 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 7.11 Senior Obligations and Subordinated Obligations Unimpaired.
Nothing in this Agreement shall impair (a) as between the Issuer and any Secured
Party, the obligations of the Issuer to such Secured Party, including the Senior
Obligations and the Subordinated Obligations or (b) 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 7.12 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 VIII
INDEMNITY AND EXPENSES
Section 8.01 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 its
duties hereunder (including, when the Security Trustee is performing the same in
place of the Administrative Agent, the performance of the Bank Account
Managerial Services), 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 hereunder 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 or delayed. The Issuer need not reimburse any
expense or indemnity against any loss or liability incurred by the Security
Trustee through negligence or bad faith. For the avoidance of doubt, in the
event the Security Trustee is providing any of the Bank Account Managerial
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<PAGE> 35
Services in place of the Administrative Agent, each of its expenses related
thereto shall be deemed to be an "Expense" for purposes of the Related
Documents.
(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, (iv) the failure by any Grantor to perform or observe any
of the provisions hereof, or (v) without limiting any of the foregoing, the
Security Trustee's performance of the Bank Account Managerial Services in place
of the Administrative Agent.
(c) The Issuer shall indemnify the Operating Bank (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 (determined with reference to reasonable commercial
standards applicable to Securities Intermediaries) or bad faith on its part in
connection with its duties hereunder, 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 hereunder and hold it harmless
against, any loss, liability or reasonable expense incurred without negligence
(determined with reference to reasonable commercial standards applicable to
Securities Intermediaries) or bad faith on its part. The Operating Bank shall
notify the Issuer promptly of any claim asserted against the Operating Bank 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 Operating Bank shall cooperate in the defense. The
Operating Bank 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 or delayed. The Issuer need not reimburse any expense or indemnity
against any loss or liability incurred by the Operating Bank through negligence
(as so determined) or bad faith.
Section 8.02 Holders' Indemnity. The Security Trustee shall be entitled to
be indemnified (subject to the limitations and requirements described in Section
8.01 mutatis mutandis) 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 8.01 and this Section 8.02 shall survive
the termination of this Agreement or the earlier resignation or removal of the
Security Trustee.
Section 8.03 No Compensation from Secured Parties. Each of the Security
Trustee and the Operating Bank agrees that it shall have no right against the
Secured Parties for any fee as compensation for its services in such capacity.
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<PAGE> 36
Section 8.04 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.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments; Waivers; Etc. (a) No amendment or waiver of any
provision of this Agreement, and no consent to any departure by any party from
the provisions of this Agreement, shall in any event be effective unless the
same shall be in writing and signed by each Service Provider, the Senior
Representative and, in the event the Subordinate Creditors are 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 with the terms thereof and hereof 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 Grantor
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)
Annexes I, II, III and IV attached to each Grantor Supplement shall be
incorporated into, become a part of and supplement Schedules I, II, III and IV,
respectively, and the Security Trustee may attach such Annexes as supplements to
such Schedules; and each reference to such Schedules shall be a reference to
such Schedules as so supplemented and (iii) such Additional Grantor shall be a
Grantor for all purposes under this Agreement and shall be bound by the
obligations of the Grantors hereunder.
(c) Upon the execution and delivery by a Grantor of a Collateral
Supplement, Annexes I and II to each Collateral Supplement shall be incorporated
into, become a part of and supplement Schedules I and II, respectively, and the
Security Trustee may attach such Annexes as supplements to such Schedules; and
each reference to such Schedules shall be a reference to such Schedules as so
supplemented.
Section 9.02 Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier) and mailed,
telecopied or delivered to the intended recipient at its address specified, as
follows:
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<PAGE> 37
For each Grantor:
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
For the Security Trustee:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Services,
Structured Finance Team
Facsimile: (212) 250-6439
Telephone: (212) 250-6323
For the Operating Bank:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Services,
Structured Finance Team
Facsimile: (212) 250-6439
Telephone: (212) 250-6323
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 9.02. Each such notice 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.
Section 9.03 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.
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<PAGE> 38
Section 9.04 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 9.05 Continuing Security Interest; Assignments. Subject to the
Section 9.06(c), this Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the earlier
of the payment in full in cash of the Secured Obligations and the circumstances
specified in Section 9.06(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 9.06 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 9.06(c), upon the
payment in full in cash of the Secured Obligations, the pledge, assignment and
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Grantors. Upon any such termination, the Security
Trustee will, at the Issuer's expense, execute and deliver to each relevant
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 shall be released and the certificates or other instruments representing
or evidencing any of the Collateral held by the Security Trustee shall be
returned to the Issuer 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.
Section 9.07 Currency Conversion. If any amount is received or recovered
by the Security Trustee 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
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<PAGE> 39
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 9.08 Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 9.09 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 New York, New York to the
Person named as the process agent of such party in Exhibit F 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 9.10 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.
Section 9.11 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.
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<PAGE> 40
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.
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as the
Owner Trustee
By /s/ Patricia A. Evans
------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
AFT TRUST - SUB I
By Wilmington Trust Company, not in its
individual capacity but solely as the
owner trustee
By /s/ Patricia A. Evans
------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
Given under the Common Seal
of AIRCRAFT FINANCE TRUST
IRELAND LIMITED in the
presence of:
BANKERS TRUST COMPANY,
as the Operating Bank and the Security
Trustee
By /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
<PAGE> 41
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date first written above.
AIRCRAFT FINANCE TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as the
Owner Trustee
By:
--------------------------------------
Name:
Title:
AFT TRUST - SUB I
By Wilmington Trust Company, not in its
individual capacity but solely as the
owner trustee
By:
--------------------------------------
Name:
Title:
Given under the Common Seal
of AIRCRAFT FINANCE TRUST
IRELAND LIMITED in the
presence of:
/s/ [ILLEGIBLE]
p.p. Goodbody Secretarial Ltd.
Secretary
/s/ [ILLEGIBLE]
DIRECTOR
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as the Security Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 42
EXHIBIT A
SECURITY TRUST AGREEMENT
FORM OF SECURED PARTY SUPPLEMENT
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: Corporate Trust and Agency
Services-Structured Finance Team
Re: Security Trust Agreement, dated as of May 5, 1999
Reference is made to the Security Trust Agreement, dated as of May 5, 1999 (the
"Security Trust Agreement"), between AIRCRAFT FINANCE TRUST, a Delaware
statutory business trust organized (the "Issuer"), the ISSUER SUBSIDIARIES
listed on the signature pages of, or who otherwise become grantors under, the
Security Trust Agreement (together with the Issuer, the "Grantors") and BANKERS
TRUST COMPANY, a New York banking corporation ("Bankers Trust"). 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] [Tertiary] [Subordinated] Credit Facility under the
Indenture] [a "Service Provider Document"][a "Swap Agreement"] [FOR SWAPS
ENTITLED TO SENIOR SWAP PAYMENTS ADD: payments under which constitute Senior
Swap Payments under and as defined in the Indenture, entitled to the priority of
payments specified in Section 3.08(a)(ii) and 3.08(b)(iii) 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 Secured Party Supplement;
3. confirms that, upon delivery of this Secured Party Supplement,
each reference in the Security Trust Agreement to a "Secured Party" shall also
mean and be a reference to the undersigned and the undersigned accepts the
benefits of the Security Trust Agreement subject to the terms and provisions
thereof (including Article VII thereof);
<PAGE> 43
4. in its capacity as a Secured Party, appoints and authorizes the
Security Trustee to take any and all actions in respect of the Collateral as
are delegated to the Security Trustee by the terms of the Security Trust
Agreement, together with any such powers and discretion as are reasonably
incidental thereto;
5. in its capacity as a Secured Party, confirms its agreement to
the limitations and qualifications of the Security Trustee's obligations set
forth in Article V of the Security Trust Agreement; and
6. confirms that this Secured Party Supplement 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.
Very truly yours,
[SECURED 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> 44
4. in its capacity as a Secured Party, appoints and authorizes the
Security Trustee to take any and all actions in respect of the Collateral as are
delegated to the Security Trustee by the terms of the Security Trust Agreement,
together with any such powers and discretion as are reasonably incidental
thereto;
5. in its capacity as a Secured Party, confirms its agreement to the
limitations and qualifications of the Security Trustee's obligations set forth
in Article V of the Security Trust Agreement; and
6. confirms that this Secured Party Supplement 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.
Very truly yours,
[SECURED 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:
2
<PAGE> 45
EXHIBIT B-1
SECURITY AGREEMENT SUPPLEMENT
[FORM OF COLLATERAL SUPPLEMENT]
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: Corporate Trust and Agency
Services-Structured Finance Team
Re: Security Trust Agreement, dated as of May 5, 1999
Ladies and Gentlemen:
Reference is made to the Security Trust Agreement, dated as of May 5, 1999 (the
"Security Trust Agreement"), between AIRCRAFT FINANCE TRUST, a Delaware
statutory business trust organized under the laws of the State of Delaware (the
"Issuer"), the ISSUER SUBSIDIARIES listed on the signature pages of, or who
otherwise become grantors under, the Security Trust Agreement (together with the
Issuer, the "Grantors") and BANKERS TRUST COMPANY, a New York banking
corporation ("Bankers Trust"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Security Trust
Agreement.
The undersigned hereby delivers, as of the date first above written,
the attached Annexes I and II pursuant to Section 2.17 of the Security Trust
Agreement.
The undersigned Guarantor hereby confirms that the property included
in the attached Annexes constitutes part of the Collateral and hereby makes each
representation and warranty set forth in Section 2.03 of the Security Trust
Agreement (as supplemented by the attached Annexes).
Attached are (i) an Account Letter in substantially the form of
Exhibit C to the Security Trust Agreement from each Non-Trustee Account Bank at
which each Non-Trustee Account included in the foregoing Collateral is
maintained, (ii) where required with respect to any Assigned Document (other
than an Assigned Lease) included in the foregoing Collateral, a Consent and
Agreement in substantially the form of Exhibit D to the Security Trust Agreement
from the counterparty thereto or, with respect to any Assigned Lease included in
the foregoing Collateral, such consents, acknowledgements and/or notices as are
called for under Section 2.08(a) of the Security Trust Agreement and (iii) duly
completed copies of Annexes I and II hereto.
<PAGE> 46
This Collateral Supplement 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.
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 Security Trustee
By:_____________________________
Name:
Title:
2
<PAGE> 47
ANNEX I
SECURITY AGREEMENT SUPPLEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
Percentage of
Stock Issuer Par Value Certificate No(s). Number of Shares Outstanding Shares
------------ --------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
PLEDGED BENEFICIAL INTERESTS
<TABLE>
<CAPTION>
Percentage of
Issuer Certificate No. Beneficial Interest
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
PLEDGED DEBT
<TABLE>
<CAPTION>
Debt Issuer Description of Debt Date
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
<PAGE> 48
ANNEX II
SECURITY AGREEMENT SUPPLEMENT
NON-TRUSTEE ACCOUNT INFORMATION
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
NAME AND ADDRESS NON-TRUSTEE
OF BANK ACCOUNT HOLDER ACCOUNT NUMBER
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
<PAGE> 49
EXHIBIT B-2
SECURITY TRUST AGREEMENT
[FORM OF GRANTOR SUPPLEMENT]
Bankers Trust Company, as Security Trustee
Four Albany Street
New York, New York 10006 [Date]
Attention: Corporate Trust and Agency
Services-Structured Finance Team
Re: Security Trust Agreement, dated as of May 5, 1999
Ladies and Gentlemen:
Reference is made to the Security Trust Agreement, dated as of May 5, 1999 (the
"Security Trust Agreement"), between AIRCRAFT FINANCE TRUST, a Delaware
statutory business trust organized under the laws of the State of Delaware (the
"Issuer"), the ISSUER SUBSIDIARIES listed on the signature pages of, or who
otherwise become grantors under, the Security Trust Agreement (together with the
Issuer, the "Grantors") and BANKERS TRUST COMPANY, a New York banking
corporation ("Bankers Trust"). 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.
To secure the Secured Obligations, the undersigned Grantor hereby
assigns and pledges to the Security Trustee for its benefit and the benefit of
the Secured Parties (except, with respect to any Secured Collateral Provider
Documents under clause (h) or clause (i) below the related Secured Collateral
Provider), and hereby grants to the Security Trustee for its benefit and the
benefit of the Secured Parties (except, with respect to any Secured Collateral
Provider Documents under clause (h) or clause (i) below the related Secured
Collateral Provider) a security interest in, all of its right, title and
interest in and to:
(a) all of the following (the "Security Collateral"):
(i) the Pledged Stock identified on the attached Annex 1 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;
<PAGE> 50
(ii) the Pledged Debt identified on the attached Annex 1 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 capital stock of any Issuer Group
Member from time to time acquired by such Grantor in any manner, including the
capital stock of any Issuer Group Member that may be formed from time to time,
and the certificates representing such additional shares of the capital 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 such additional shares; and
(iv) all additional indebtedness from time to time owed to such
Grantor by any Issuer 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) all of the following (the "Beneficial Interest Collateral"):
(i) the Pledged Beneficial Interests identified on the attached
Annex 1, all certificates, if any, from time to time representing all of such
Grantor's right, title and interest in such Pledged Beneficial Interest, any
contracts and instruments pursuant to which any such Pledged Beneficial
Interests are created or issued and all distributions, 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 Beneficial Interest;
and
(ii) all of such Grantor's right, title and interest in all
additional beneficial interests from time to time acquired by such Grantor in
any manner, all certificates, if any, from time to time representing such
additional beneficial interests and all distributions, 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 beneficial
interests;
(c) 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 to be
held in, 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; 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;
2
<PAGE> 51
(d) all right of such Grantor in and to each Security Trustee
Account at any time or from time to time established and all cash, investment
property, Permitted Account Investment, other Investments, securities,
instruments or other property (including all "financial assets" within the
meaning of Section 8.102(a)(9) of the UCC) at any time or from time credited to
any such Security Trustee Account (collectively, the "Account Collateral"):
(e) all other "investment property" (as defined in Section
9-115(1)(f) of the UCC) of such Grantor including written notification 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 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; and
(ii) 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;
(f) all of the following (the "Assigned Agreement Collateral"):
(i) all of such Grantor's right, title and interest in and to all
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 property in such deposit account, 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;
(g) 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 any
leasing arrangements among Issuer Group Members with respect to such Leases (all
such Leases, the "Assigned Leases"), including without limitation (i) all rights
of such Grantor to receive moneys due and to become due under or pursuant to
such Assigned Leases, (ii) all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to such Assigned Leases,
(iii) claims of such Grantor for damages arising out of or for breach or default
under such Assigned Leases, (iv) all rights under any such Assigned Lease with
respect to any subleases of the Aircraft subject to such Assigned Lease and (v)
the right of such Grantor to terminate such Assigned Leases and to compel
performance of, and otherwise to exercise all remedies under, any Assigned
Lease, whether arising under such Assigned Leases or by statute or at law or in
equity (the "Lease Collateral");
(h) all of such Grantor's right, title and interest in and to all
Service Provider Documents (the "Servicing Collateral");
3
<PAGE> 52
(i) all of such Grantor's rights, title and interest in and to all
Credit Facilities not consisting of a Cash Collateral Account and Swap
Agreements all rights to administer, draw upon and otherwise deal with each
Credit Facility and to administer and otherwise deal with each such Swap
Agreement; and
(j) all of such Grantor's right, title and interest in and to the
personal property identified in a Grantor Supplement or a Collateral Supplement
executed and delivered by such Grantor to the Security Trustee; and
(k) all proceeds of any and all of the foregoing Collateral
(including proceeds that constitute property of the types described in
subsections (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j) above);
provided that the Collateral shall not include Excluded Payments.
The undersigned Guarantor hereby makes each representation and
warranty set forth in Section 2.03 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 Pledged Beneficial Interests, the Security Collateral, the Beneficial
Interest Collateral, the Non-Trustee Account Collateral, the Account Collateral,
the Investment Collateral, the Assigned Agreement, the Assigned Agreement
Collateral, the Assigned Leases, the Service Provider Documents, the Servicing
Collateral, the Lease Collateral, the Assigned Documents and the Agreement
Collateral 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 are (i) an Account Letter in substantially the form of
Exhibit C to the Security Trust Agreement from each Non-Trustee Account Bank at
which each Non-Trustee Account included in the foregoing Collateral is
maintained, (ii) where required with respect to any Assigned Document (other
than an Assigned Lease) included in the foregoing Collateral, a Consent and
Agreement in substantially the form of Exhibit D to the Security Trust Agreement
from the counterparty thereto or, with respect to any Assigned Lease included in
the foregoing Collateral, such consents, acknowledgements and/or notices as are
called for under Section 2.08(a) of the Security Trust Agreement and (iii) duly
completed copies of Annexes I, II, III and IV hereto.
4
<PAGE> 53
This Grantor Supplement 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.
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 Security Trustee
By:_____________________________
Name:
Title:
5
<PAGE> 54
ANNEX I
SECURITY AGREEMENT SUPPLEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
Percentage of
Stock Issuer Par Value Certificate No(s). Number of Shares Outstanding Shares
------------ --------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
PLEDGED BENEFICIAL INTERESTS
<TABLE>
<CAPTION>
Percentage of
Issuer Certificate No. Beneficial Interest
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
PLEDGED DEBT
<TABLE>
<CAPTION>
Debt Issuer Description of Debt Date
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
<PAGE> 55
ANNEX II
SECURITY AGREEMENT SUPPLEMENT
NON-TRUSTEE ACCOUNT INFORMATION
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
NAME AND ADDRESS NON-TRUSTEE
OF BANK ACCOUNT HOLDER ACCOUNT NUMBER
--------------------- --------------------------------- --------------------------
<S> <C> <C>
</TABLE>
<PAGE> 56
ANNEX III
SECURITY AGREEMENT SUPPLEMENT
TRADE NAMES
<PAGE> 57
ANNEX IV
SECURITY AGREEMENT SUPPLEMENT
<TABLE>
<CAPTION>
CHIEF PLACE OF
NAME OF GRANTOR CHIEF EXECUTIVE OFFICE BUSINESS REGISTERED OFFICE
-------------------- ---------------------------- -------------- ---------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 58
EXHIBIT C
SECURITY TRUST AGREEMENT
FORM OF NON-TRUSTEE ACCOUNT LETTER
_______________, 1999
[Name and address
of Account Bank]
[Name of the Grantor]
Ladies and Gentlemen:
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 May 5, 1999 (the "Security
Trust Agreement"), between the Grantor, various other Grantors and Bankers Trust
Company, as the Operating Bank and the Security Trustee (the "Security
Trustee"). Capitalized terms used herein, unless otherwise defined herein, have
the meanings assigned to them in the Security Trust Agreement.
Pursuant to the Security Trust Agreement, 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 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.
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
Trustees 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 henceforth be
subject to written instructions only from an officer of the Security Trustee or
(unless you are otherwise notified by the Security Trustee)
<PAGE> 59
from an officer of the Administrative Agent as the agent of the Security
Trustee. In the event of any conflicting instructions, those of the Security
Trustee shall prevail.
(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 "Collections
Account"):
[Insert address of Operating Bank and
account number of the Collections 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 Administrative Agent as the agent
of the Security Trustee 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 Collections Account. After any
such termination, you shall nonetheless remain obligated promptly to transfer to
the Collections Account all funds and other property received in respect of the
Pledged Account.
2
<PAGE> 60
This letter 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.
Very truly yours,
[NAME OF GRANTOR]
By:_______________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity,
but solely as the Security Trustee
By:_______________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF PLEDGED ACCOUNT BANK]
By:____________________________
Name:
Title:
3
<PAGE> 61
EXHIBIT D
SECURITY TRUST AGREEMENT
FORM OF CONSENT AND AGREEMENT
_______________, 1999
[Name of the Grantor]
Ladies and Gentlemen:
Reference is made to the agreement between you and the Grantor dated
(the "Assigned Document").
Pursuant to the Security Trust Agreement, dated May 5, 1999 (the
"Security Trust Agreement"), between the Grantor, certain other Grantors and
Bankers Trust Company, as the Operating Bank and the 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"): all of such Grantor's right, title and interest in
and to the Assigned Document, including without limitation all rights of such
Grantor to receive moneys due and to become due under or pursuant to the
Assigned Document, all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Assigned
Document, claims of such Grantor for damages arising out of or for breach or
default under the Assigned Document and the right of such Grantor to terminate
the Assigned Document, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder, whether arising under the Assigned
Document 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 Document. 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 Document directly to the Collections 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 Document in accordance
with the terms of the Security Trust Agreement, and you will comply in all
respects with such exercise.
<PAGE> 62
(c) You will not, without the prior written consent of the Security
Trustee, (i) cancel or terminate the Assigned Document or consent to or accept
any cancellation or termination thereof or (ii) amend or otherwise modify the
Assigned Document.
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 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.
Very truly yours,
[NAME OF GRANTOR]
By:_______________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity,
but solely as the Security Trustee
By:_______________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF OBLIGOR]
By:______________________________
Name:
Title:
2
<PAGE> 1
Exhibit 10.3
================================================================================
SERVICING AGREEMENT
between
GE CAPITAL AVIATION SERVICES, LIMITED,
and
AIRCRAFT FINANCE TRUST
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not part of Agreement)
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Construction and Usage.........................................1
ARTICLE II
APPOINTMENT; SERVICES
SECTION 2.01. Appointment....................................................1
SECTION 2.02. Aircraft Asset Services........................................4
SECTION 2.03. Notes Offerings................................................6
SECTION 2.04. Compliance with Applicable Laws and GE Policies................14
SECTION 2.05. Limitations....................................................16
ARTICLE III
STANDARD OF CARE; CONFLICTS OF INTEREST; STANDARD OF LIABILITY
SECTION 3.01. Standard of Care...............................................18
SECTION 3.02. Conflicts of Interest..........................................18
SECTION 3.03. Standard of Liability..........................................20
SECTION 3.04. Waiver of Implied Standard.....................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Aircraft Assets................................................22
SECTION 4.02. Aircraft Assets Related Documents..............................22
SECTION 4.03. Accounts and Cash Flow.........................................23
SECTION 4.04. Organization and Standing......................................23
SECTION 4.05. Authority......................................................23
SECTION 4.06. No Conflicts...................................................24
SECTION 4.07. Compliance with Applicable Laws................................25
SECTION 4.08. Litigation; Decrees............................................25
SECTION 4.09. Appointments...................................................25
SECTION 4.11. No Conflicts...................................................26
SECTION 4.12. Compliance with Applicable Laws of Ireland.....................27
ARTICLE V
SERVICER UNDERTAKINGS
SECTION 5.01. Access.........................................................27
SECTION 5.02. Compliance with Law............................................27
i
<PAGE> 3
SECTION 5.03. Commingling....................................................27
SECTION 5.04. Restrictions on Exercise of Certain Rights.....................27
SECTION 5.05. Coordination with AFT..........................................28
ARTICLE VI
UNDERTAKINGS OF AFT
SECTION 6.01. Cooperation....................................................28
SECTION 6.02. No Representation with Respect to Third Parties................28
SECTION 6.03. Related Document Amendments....................................28
SECTION 6.04. Other Aircraft.................................................29
SECTION 6.05. Communications.................................................29
SECTION 6.06. Ratification...................................................29
SECTION 6.07. Additional Aircraft Assets.....................................29
SECTION 6.08. Execution, Amendment, Modification or Termination of
Aircraft Assets Related Documents........................30
SECTION 6.09. Access to AFT Group Information................................31
SECTION 6.10. AFT Group Accounts and Cash Arrangements.......................31
SECTION 6.11. Notification of Bankruptcy.....................................32
SECTION 6.12. Further Assurances.............................................32
SECTION 6.13. Guarantees.....................................................32
SECTION 6.14. Transfers of Funds.............................................33
ARTICLE VII
AFT GROUP RESPONSIBILITY
SECTION 7.01. AFT Group Responsibility.......................................33
SECTION 7.02. Performance with Respect to Aircraft Assets....................33
SECTION 7.03. Lease Operating Budget; Aircraft Asset Expenses Budget.........34
SECTION 7.04. Transaction Approval Requirements..............................36
SECTION 7.05. Approved Budgets and Transaction Approval Requirements.........39
ARTICLE VIII
EFFECTIVENESS
SECTION 8.01. Effectiveness..................................................39
ARTICLE IX
SERVICING FEES; EXPENSES; TAXES; PRIORITY OF SERVICING FEES
SECTION 9.01. Servicing Fees; UniCapital Serviced Aircraft...................39
SECTION 9.02. Monthly Base Fee...............................................41
SECTION 9.03. Rent Fees......................................................41
SECTION 9.04. Sales Fee......................................................43
SECTION 9.05. Additional Servicing Fees......................................43
SECTION 9.06. Expenses.......................................................45
ii
<PAGE> 4
SECTION 9.07. Taxes .........................................................46
SECTION 9.08. Priority of Payments to Servicer...............................50
ARTICLE X
TERM; RIGHT TO TERMINATE; RESIGNATION; CONSEQUENCES OF EXPIRATION,
TERMINATION, RESIGNATION OR REMOVAL; CERTAIN TAX MATTERS; SURVIVAL
SECTION 10.01. Term .........................................................51
SECTION 10.02. Right to Terminate............................................51
SECTION 10.03. Resignation or Removal........................................56
SECTION 10.04. Consequences of Expiration, Termination, Resignation or
Removal..................................................58
SECTION 10.05. Survival......................................................60
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. Indemnity.....................................................61
SECTION 11.02. Procedures for Defense of Claims..............................62
SECTION 11.03. Reimbursement of Costs........................................63
SECTION 11.04. Waiver of Certain Claims; Special Indemnity...................63
SECTION 11.05. Waiver of Certain Accounting Claims; Special Indemnity........64
SECTION 11.06. Waiver of Year 2000 Claims; Special Indemnity.................64
SECTION 11.07. Continuing Liability under Other Agreements...................65
ARTICLE XII
ASSIGNMENT AND DELEGATION
SECTION 12.01. Assignment and Delegation.....................................66
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Documentary Conventions.......................................66
SECTION 13.02. Power of Attorney.............................................67
SECTION 13.03. Reliance......................................................67
SECTION 13.04. Year 2000 Readiness Disclosure................................67
SECTION 13.05. Certain Information...........................................67
SECTION 13.06. Original Aircraft.............................................68
SECTION 13.07. UniCapital Aircraft...........................................69
iii
<PAGE> 5
Schedules
Schedule 2.02(a) Aircraft Assets Services
Schedule 2.02(a)(i) Applicable Indenture Covenants
Schedule 2.02(a)(ii) Form of Officer's Certificate
Schedule 4.01 Aircraft Assets
Schedule 4.02 Aircraft Assets Related Documents
Schedule 4.03 Bank Accounts
Schedule 4.04(a) List of Persons within the AFT Group and
Jurisdictions
Schedule 7.01 Responsibilities of AFT Group
Schedule 7.04 Liabilities Incurred in Ordinary
Course of Business
Schedule 8.01 Conditions to Execution
Schedule 9.06(a) Overhead Expenses
Schedule 9.06(b) Aircraft Asset Expenses
Schedule 13.02 Power of Attorney
Annexes
Annex 1 Insurance Guidelines
Annex 2 Concentration Limits
Appendices
Appendix A Construction and Usage; Definitions
Appendix B Form of Guarantee
Appendix C Notices
iv
<PAGE> 6
SERVICING AGREEMENT dated as of May 5, 1999, between GE CAPITAL
AVIATION SERVICES, LIMITED, a company incorporated under the laws of Ireland
(the "Servicer") and AIRCRAFT FINANCE TRUST, a Delaware business trust ("AFT").
For the consideration set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Servicer and AFT
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Unless otherwise defined herein, all
capitalized terms used but not defined herein have the meanings assigned to such
terms in Appendix A.
SECTION 1.02. Construction and Usage. The conventions of
construction and usage set forth in Appendix A are incorporated by reference
herein.
ARTICLE II
APPOINTMENT; SERVICES
SECTION 2.01. Appointment. (a) AFT appoints the Servicer as the
exclusive provider of the Services (as defined in Section 2.02(a)) to AFT and
its Subsidiaries and Affiliates (collectively, the "AFT Group") in respect of
the Aircraft Assets on the terms and subject to the conditions set forth in this
Agreement. In furtherance of the foregoing, the parties hereto acknowledge and
agree that notwithstanding any other provision of this Agreement, without the
consent of the Servicer, AFT shall not, and shall not permit any Person within
the AFT Group and any agent of any thereof, including the Administrative Agent,
to, contact directly or otherwise have any direct dealings with any Lessee or
any relevant third party with respect to any Aircraft Asset (which, as provided
in the definition of "Aircraft Assets", the parties understand shall not include
any Aircraft Asset (x) that shall have ceased to be an Aircraft Asset in
accordance with the provisions of Sections 2.04(b) or 3.02(d), but shall include
any Former Aircraft Asset that shall have become an Aircraft Asset pursuant
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to Section 6.07 of the Servicing Agreement or (y) in respect of which the
obligation of the Servicer to provide Services shall have been terminated in
accordance with Article X) (such contact or other direct dealing, a "Lessee
Contact") to the extent that such Lessee Contact constitutes, or involves taking
any action that constitutes, the provision or performance of any Service (to
such extent, a "Restricted Lessee Contact"). Notwithstanding the foregoing, in
the event that AFT or, in the case of clauses (iv) or (v) below only, any holder
of any Beneficial Interest Certificates reasonably believes that it shall be
necessary for there to be a Restricted Lessee Contact under circumstances in
which one of the following clauses is applicable:
(i) during the period (x) commencing upon the occurrence of an Event
of Default under Section 4.01 of the Indenture in respect of the payment
of interest on any Class A Note (as defined in the Indenture) due to an
insufficiency of funds in the Collection Account on the relevant date,
which Event of Default (1) shall have occurred on a date on which no
amount is available for drawing under any Credit Facility (as defined in
the Indenture) in respect thereof and (2) shall have continued unremedied
for 60 days and (y) ending upon the remedying of such Event of Default;
(ii) following the occurrence of an Event of Default (other than one
referred to in clause (i) of this Section 2.01(a)) under the Indenture
and, other than in respect of an Event of Default under Sections 4.01(e)
or 4.01(f) of the Indenture, the issuance of a Default Notice (pursuant to
which the Outstanding Principal Balance of the Notes and all accrued and
unpaid interest thereon shall become due and payable) in accordance with
the terms of the Indenture, and provided that at the time of such Event of
Default at least 10 Aircraft Assets shall not be subject to Leases and
each such Aircraft Asset shall have been off-lease and reasonably
available for re-lease (including in the possession of the Servicer,
together with the related Aircraft Documents) during the three-month
period ending on the date of such Event of Default;
(iii) in respect of any claim for indemnification made by the
Servicer under this Agreement in respect of a Loss incurred by the
Servicer related to a Lessee;
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(iv) to discharge AFT's or such holder's, as the case may be,
obligations under Applicable Law including any requirement to file any
report with any governmental authority or to respond to any court order or
to prosecute or defend any suit;
(v) to respond to requests from AFT's or such holder's, as the case
may be, auditors;
(vi) to enable AFT to discharge its obligations under Article VII;
(vii) to enable the Administrative Agent to monitor the Servicer's
performance under this Agreement in accordance with the express terms of
the Administrative Agency Agreement;
(viii) to enable AFT to perform its express obligations under the
Indenture and Security Trust Agreement including, without limitation,
AFT's obligations under Sections 5.02 and 5.03 of the Indenture and
Sections 2.06 and 3.01 of the Security Trust Agreement; or
(ix) the Servicer's material failure to perform a Service which
involves a Lessee and necessitates a Lessee Contact, which material
failure continues unremedied for 30 days after the Servicer's receipt of
written notice of such material failure from AFT and which if left
unremedied would have a Material Adverse Effect on the AFT Group taken as
a whole;
then AFT shall deliver a written notice to the Servicer setting forth in
reasonable detail the reasons for such Restricted Lessee Contact (including
which of the foregoing clauses (i) through (ix) is applicable thereto) and the
specifics of such Restricted Lessee Contact. In the case of clauses (i) and (ii)
and (iv) through (viii) above, after receipt of such notice, the Servicer shall
promptly notify AFT whether the Servicer will itself make such Restricted Lessee
Contact, or whether a Person within the AFT Group or agent of any thereof,
including the Administrative Agent, should make such Restricted Lessee Contact.
In the case of clauses (iii) and (ix) above, after delivering such notice to the
Servicer, any Person within the AFT Group shall be permitted to make such
Restricted Lessee Contact directly itself or through any agent, including the
Administrative Agent. In making any Restricted Lessee Contact AFT shall not, and
shall not permit any Person within the AFT
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Group or any agent of any thereof, including the Administrative Agent, to
interfere with the Servicer's performance of any Service.
(b) The Servicer hereby accepts its appointment pursuant to the
first sentence of Section 2.01(a) and agrees to perform the Services on the
terms and subject to the conditions set forth in this Agreement.
SECTION 2.02. Aircraft Asset Services. (a) The Services to be
provided by the Servicer in respect of the Aircraft Assets are as set forth in
Schedule 2.02(a) (the "Services"), the provisions of which Schedule 2.02(a) are
hereby incorporated herein by reference.
(b) AFT has advised the Servicer that each Person within the AFT
Group has appointed AFT to act as its representative with respect to any matter
in respect of which AFT has or any other Person within the AFT 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, the Servicer
shall in all cases be entitled to rely on the instructions (or other actions) of
AFT as representative of each Person within the AFT Group. The Servicer shall
not be liable to any Person within the AFT Group or any other Person for any act
taken or omission to act in accordance with such instructions (or other
actions), except to the extent otherwise provided in Section 3.03 and Article
XI. The Servicer shall in all cases be entitled to rely upon the instructions
(or other actions) of AFT and upon notices, reports or other communications
(whether written or oral) made by any Lessee or any other Person (other than any
Affiliate of the Servicer) in or concerning any Aircraft Assets, Aircraft Assets
Related Document or any document in connection therewith and shall not be
responsible for the accuracy or completeness of any such notices, reports or
other communications.
(c) AFT has advised the Servicer that it has appointed the
Administrative Agent, on a revocable basis, to, among other things, act on its
behalf in connection with any actions required or permitted to be taken by AFT
on its own behalf or on behalf of any other Person within the AFT Group
(including as provided in Section 2.02(b)) pursuant to the terms of this
Agreement. Accordingly, in connection with the performance of the Services,
unless earlier notified in writing by AFT that the Administrative Agent's
appointment to act on behalf of AFT has been revoked or terminated, the Servicer
shall
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in all cases be entitled to rely on the instructions (or other actions) of the
Administrative Agent; provided, however, that the Servicer shall not be obliged
to act upon the instructions of, or with respect to, the Administrative Agent
unless the Servicer consented to the appointment of such Administrative Agent in
writing, which consent shall not be unreasonably withheld (it being understood
that the Servicer may consider, among other factors, whether the proposed
Administrative Agent is a Competitor). The Servicer hereby consents to the
appointment of ReSource/Phoenix, Inc. as the initial Administrative Agent. The
appointment of the Administrative Agent to act on behalf of AFT shall in no way
limit or otherwise derogate from the Servicer's right to rely on the
instructions (or other actions) of AFT as set forth in Section 2.02(b). Without
limiting the foregoing, until such time as the Servicer has been notified in
writing that the Administrative Agent's appointment has been revoked or
terminated, in all circumstances requiring the direction, consent or approval
of, or the delivery of any notices or other communications to, AFT hereunder,
the Servicer shall only be required to seek the direction, consent or approval
of, or deliver any such notices or other communications to, the Administrative
Agent. The Servicer shall not be liable to any Person within the AFT Group or
any other Person for any act taken or omission to act in accordance with the
instructions (or other actions) of the Administrative Agent, except to the
extent otherwise provided in Section 3.03 and Article XI. AFT agrees with the
Servicer that the Administrative Agency Agreement shall not be amended by the
parties thereto in any manner that may, directly or indirectly, affect the
Servicer's rights, obligations or liabilities (or potential liabilities) under
this Agreement or with respect to the Administrative Agency Agreement or
otherwise without the Servicer's prior written consent.
(d) Except as otherwise provided in Sections 2.04(b), 3.02(c),
3.02(d) and 10.04, AFT agrees not to (and not to permit any other Person within
the AFT Group to) appoint any third party service provider with respect to any
Aircraft Asset without the prior written consent of the Servicer; provided,
however, that the Servicer's prior written consent is not required with respect
to the appointment by any Person within the AFT Group of any legal, accounting,
insurance, valuation or other similar service providers to perform services not
included within the Services.
(e) The Servicer shall in all cases be entitled to rely on the
instructions (or other actions) of any Person that
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the Servicer reasonably believes to be authorized to act on behalf of AFT or the
Administrative Agent and shall not be liable to any Person within the AFT Group
for any act taken or omission to act in accordance with such instructions (or
other actions), except to the extent otherwise provided in Section 3.03 and
Article XI.
(f) Notwithstanding anything contained in this Agreement to the
contrary, the Servicer shall not be required to perform any Service (or any
other service) with respect to any Original Aircraft unless and until a true and
complete copy of all Aircraft Assets Related Documents has been delivered to the
Servicer or other written notice thereof has been provided to the Servicer.
Without limiting the foregoing, the Servicer acknowledges that, in connection
with its provision of services with respect to the Original Aircraft, it is in
possession of various Aircraft Assets Related Documents that were received by
the Servicer prior to the date hereof.
(g) AFT agrees not to (and not to permit any other Person within the
AFT Group to) enter into any agency agreements relating to the procurement of
lessees for the Aircraft Assets (or agreements similar thereto) without the
prior written consent of the Servicer.
SECTION 2.03. Notes Offerings. (a)(i) In connection with the public
or private offering and sale (whether within the United States, outside of the
United States or both within and outside of the United States) after the Closing
Date of any newly issued or outstanding Notes, as the case may be, by (x) AFT or
(y) any other Person, pursuant to which any Person within the AFT Group is
required to file, or assist in the filing of, any registration statement with
the United States Securities and Exchange Commission or prepare and distribute,
or assist in the preparation and distribution of, a private placement memorandum
or other securities offering document (any such offering and sale, including,
without limitation, the Initial Exchange Offer and any other Exchange Offer,
being hereinafter referred to herein as a "Notes Offering"), AFT will provide
(or cause its advisors to provide, as the case may be) the Servicer and its
advisors drafts of, and a reasonable time to review, each registration statement
(including the form of prospectus therein) or private placement memorandum or
other securities offering document, as the case may be, and each amendment or
supplement to any thereof relating to any such Notes Offering (the "Prospectus")
and will use its best efforts to incorporate the comments, if any, provided by
the Servicer
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with respect to the Servicer or any of its Affiliates or their respective roles
in connection with any such Notes Offering (it being understood that the
Servicer and its Affiliates have the right, but not the obligation, to comment
thereon). AFT will not, and will not permit any Person within the AFT Group to,
file, or assist in the filing of, any such Prospectus with any governmental
agency or otherwise publicly disclose (it being understood that disclosures to
Persons having registration rights that were granted by AFT with respect to any
Notes shall not be considered public disclosures) the contents of such
Prospectus without the Servicer's prior consent (which consent must be written
only with respect to, in the case of any Prospectus that is filed with the
United States Securities and Exchange Commission, the last Prospectus filed
prior to or concurrently with the filing of a request for acceleration of
effectiveness of the related registration statement or post-effective amendment
thereto or, in the case of any Prospectus that is not filed with the United
States Securities and Exchange Commission, the version of the Prospectus to be
delivered in connection with the sale, or confirmation of sale, of any Notes, as
the case may be) as to those portions of any such Prospectus relating to the
Servicer or any of its Affiliates (the "Servicer Disclosure", which term shall
include, without limitation, the Servicer Information), which consent shall not
be unreasonably withheld or delayed.
(ii) AFT understands and agrees that the Servicer has the right to
approve any information in any Prospectus relating to the Servicer or any
Affiliate thereof and that AFT will not permit the inclusion in any such
Prospectus of (x) any financial statements or financial data relating to the
Servicer or any Affiliate thereof, (y) performance or related data with respect
to the Servicer's management of aircraft directly or indirectly owned by any
Person within the AFT Group or any other Person's aircraft or other assets or
(z) information relating to aircraft that do not comprise Aircraft Assets 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 a form and substance substantially similar to that set
forth under the captions "The Parties--GECAS" and "Risk Factors-Risks Relating
to AFT and Certain Third Parties--Conflicts of Interest of GECAS" (second and
fourth paragraphs thereof only) in the final offering memorandum dated April 21,
1999, relating to AFT and the Notes (the "Final Prospectus"). Notwithstanding
the foregoing, the Servicer agrees (A) that, subject to its prior review and
updating, any Prospectus may include Servicer Disclosure
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substantially identical to that contained in the Final Prospectus and (B) to
respond with any comments it may have on any Servicer Disclosure reasonably
promptly following AFT's delivery of drafts of the entire Prospectus, including
any Servicer Disclosure, to the Servicer. AFT will also provide (or cause its
Affiliates or advisors to provide, as the case may be) the Servicer with copies
of, and an opportunity to review, any marketing and marketing related materials
produced in connection with any Notes Offering. AFT will not distribute any such
marketing materials (or disseminate, or permit the dissemination of, the
information contained therein) including information relating to the Servicer or
any of its Affiliates without the Servicer's prior written consent, which
consent shall not be unreasonably withheld, as to those portions of any such
marketing materials relating to the Servicer or any of its Affiliates. The
Servicer agrees to respond with any comments it may have on any such marketing
materials reasonably promptly following AFT's delivery of copies thereof to the
Servicer.
(iii) AFT agrees that it will use its commercially reasonable
efforts to cause its legal, accounting and other technical advisors to include
the Servicer and such Affiliates of the Servicer as the Servicer designates as
addressees of any opinions and/or comfort letters being provided to any Person
within the AFT Group and/or any underwriters in connection with any Notes
Offering.
(iv) AFT agrees that each Prospectus will include disclosure, in
form and substance satisfactory to the Servicer, of all disclaimers, waivers of
liability and indemnification pertaining to the Servicer or any of its
Affiliates in connection with this Agreement and any related Notes Offering.
(b) AFT agrees that, in connection with customary marketing
activities related to any Notes Offering, the Servicer and its Affiliates shall
be present at such marketing activities solely in the Servicer's capacity as
Servicer with respect to the Aircraft Assets pursuant to this Agreement. AFT
agrees that on any so-called roadshow the Servicer's only obligation shall be,
to the extent necessary, to discuss the factual matters relating to its role as
servicer hereunder and the Aircraft Assets which are the subject hereof,
including discussing information contained in the Prospectus with respect to
such assets relating to types of aircraft, aircraft maintenance and aircraft
leases. Notwithstanding the foregoing, the Servicer shall not be required to
make any presentations with respect to, or to comment upon, its views of future
trends in the aviation
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industry, including future trends relating to types of aircraft, particular
lessees or expected aircraft lease rates or values, or to provide opinions,
forecasts, predictions or prospects relating thereto (or to the Aircraft
Assets). AFT agrees that no more than two (2) members of the Servicer's
management, the identity of which members and the schedule of any activities in
which such members are to participate are to be mutually agreed upon by AFT and
the Servicer from time to time, shall be required to be present at any customary
road show activities related to any Notes Offering (it being understood that if
reasonably requested by AFT, the Servicer will provide, subject to availability,
up to an aggregate of four (4) members of its management). In no event shall a
representative of the Servicer be required to attend any roadshow without
representatives of AFT, the Administrative Agent and the underwriters.
(c) AFT will invite the Servicer to attend, on reasonable prior
notice, all meetings (or portions thereof) with rating agencies relating to any
Notes Offering, will provide the Servicer a reasonable period of time to review
and comment upon any written materials relating to the Servicer or any of its
Affiliates prior to submission thereof to any rating agency and will provide the
Servicer with copies of all documents received from any such rating agencies
relating to the Servicer or any of its Affiliates. AFT agrees that, in
furtherance of the foregoing, it will not submit any materials to any rating
agency relating to the Servicer or any of its Affiliates without the Servicer's
prior consent, which consent shall be in writing and not unreasonably withheld
or delayed.
(d) AFT understands, acknowledges and agrees that the Servicer will
not be a party to any underwriting agreement or any letter to, representation to
or indemnity or other agreement with, any underwriter, in connection with any
Notes Offering, and, except as set forth in Section 2.03(m), shall not assume
responsibility for any information set forth in any Prospectus related thereto.
(e) (i) Subject to executing confidentiality agreements satisfactory
in form and substance to AFT, AFT agrees to use its commercially reasonable
efforts to provide the Servicer or any of its Affiliates and/or advisors with an
opportunity, at the Servicer's election, to conduct customary due diligence with
respect to any Notes Offering, including with respect to any matters disclosed
in any Prospectus.
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(ii) Subject to executing confidentiality agreements satisfactory in
form and substance to the Servicer, the Servicer agrees to provide AFT,
underwriters, rating agencies and/or advisors with reasonable opportunities to
conduct due diligence with respect to information pertaining to the Servicer and
the provision of Services pursuant to this Agreement with respect to the
Aircraft Assets; provided, however, that, if it is established to the Servicer's
reasonable satisfaction that any rating agency does not execute confidentiality
agreements as a matter of policy, the Servicer will waive such requirement with
respect to such rating agency so long as such rating agency establishes to the
Servicer's reasonable satisfaction that any information made available to it
will be held confidential.
(f) Except to the extent required by law, AFT agrees not to (and not
to permit any other Person within the AFT Group to) make any, direct or
indirect, press release or other public announcement by any means (including by
making disclosures to financial analysts or other members of the financial
community) relating to the Servicer (or any of its Affiliates) and their
respective involvement in any Notes Offering without the Servicer's prior
written consent. In the event a press release or other public announcement is
recommended by securities counsel or required by law, AFT shall consult with the
Servicer prior to making (or permitting to be made) any such press release or
public announcement to the extent that such press release or public announcement
relates to the Servicer (or any of its Affiliates) and their respective
involvement in any Notes Offering.
(g) Upon the closing of any Notes Offering (other than the Initial
Exchange Offer), AFT shall pay, or cause another Person to pay, the Servicer
financing fees, pro rata in accordance with the Net Proceeds of any such Notes
Offering, equal to the greater of (x) 0.0005 multiplied by the Net Proceeds of
any such Notes Offering and (y) $250,000. "Net Proceeds" means the cash proceeds
received by any Person selling Notes (other than underwriters) within the AFT
Group or any other Person in connection with any Notes Offering, less
Transaction Costs incurred by any Person within the AFT Group or any such other
Person in connection with any such Notes Offering (other than the fees payable
pursuant to this Section 2.03); provided, however, that, in calculating Net
Proceeds for purposes of this Section 2.03(g), with respect to any offering of
Additional Notes the cash proceeds of which are used in part to acquire Aircraft
Assets from GE Capital and its Affiliates, the Net Proceeds resulting from the
sale of such Additional
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Notes only (without giving effect to this proviso) shall be reduced by the
product of (a) such Net Proceeds and (b) the quotient obtained by dividing (i)
the Appraised Value of the Aircraft Assets being acquired by Persons within the
AFT Group from GE Capital and its Affiliates by (ii) the Appraised Value of all
Aircraft Assets being acquired by Persons within the AFT Group, in the case of
(i) and (ii) in connection with such offering. Without agreement between AFT and
the Servicer, which agreement shall include an increase in the fees to be paid
to the Servicer in connection with the Servicer's involvement with respect to
any Notes Offering, the Servicer shall not be required to assist in the
solicitation of, or otherwise take any action to obtain, any lessee consents
and/or novations in connection with any Notes Offering. Such increase in the
fees to be paid to the Servicer in connection with the Servicer's involvement
with respect to any such Notes Offering will be negotiated in good faith by AFT
and the Servicer and will reflect the increased services to be provided by the
Servicer (it being understood that an agreement as to such increased fees must
be reached prior to the Servicer's involvement with respect to any Notes
Offering pursuant to this Section 2.03 in which the Servicer assists in the
solicitation of, or otherwise takes any action to obtain, any lessee consents
and/or novations).
(h) Notwithstanding the foregoing, (i) neither the Servicer nor any
of its Affiliates shall be obligated to underwrite or purchase any securities to
be issued by AFT or any other Person within the AFT Group or any other Person in
any Notes Offering; (ii) neither the Servicer nor any of its Affiliates shall be
obligated to issue any Guarantees or otherwise to provide any credit enhancement
or support or incur any obligations or liabilities to provide any credit
enhancement or support or incur any other obligations or liabilities in
connection with any Notes Offering; (iii) 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 (as "registrant", "issuer" or in
any other capacity) or take any other action that could, in the Servicer's sole
determination, 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; and (iv) the obligations of the Servicer
under this Section 2.03 shall be subject to the reasonable satisfaction of the
Servicer with all the terms and conditions of the applicable Notes Offering that
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relate to the Servicer or any of its Affiliates (including the indemnities in
favor of the Servicer and its Affiliates).
(i) In the case of any Notes Offering, the Indemnified Parties shall
have no liability for, and AFT shall hold, and shall cause each other Person, if
any, for whom a Notes Offering was conducted to hold, each Indemnified Party
harmless from, and indemnify on an After Tax Basis each Indemnified Party
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 applicable underwriters and
purchasers of any securities issued in connection with any such Notes Offering)
such Indemnified Party, directly or indirectly, arising out of, in connection
with or related to the Servicer's performance of the obligations set forth in
this Section 2.03 with respect to any Notes Offering; provided, however, that
such indemnity shall not apply to the extent that, if AFT had suffered such
Losses, the Servicer would have been required to indemnify AFT pursuant to the
terms of Section 2.03(m). The obligation of AFT under this Section 2.03(i) shall
be in addition to any liability that AFT may otherwise have to the Indemnified
Parties and shall not be limited or reduced with respect to the Indemnified
Parties by any other rights to indemnification that may be available to such
Indemnified Parties.
(j) AFT agrees to reimburse the Servicer, on a monthly basis, for
all out-of-pocket expenses incurred directly or indirectly by the Servicer or
any of its Affiliates in connection with any Notes Offering with respect to
which the Servicer shall provide services pursuant to this Section 2.03,
including any outside advisor fees and expenses (including travel and lodgings),
including legal, accounting, investment banking, consulting and other similar
advisors retained by the Servicer or any of its Affiliates in connection with
any Notes Offering.
(k) For the avoidance of doubt, but without derogating from any of
the Servicer's rights hereunder, the Servicer shall continue to act as the
primary servicer for each Aircraft Asset, following the financing or refinancing
thereof pursuant to a public or private aircraft financing transaction, so long
as any Person within the AFT Group owns or leases-in such Aircraft Asset (or so
long as such Aircraft Asset constitutes an Original Aircraft), on the terms
provided in this Agreement. In addition, the Servicer shall continue to act as
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the primary servicer for any Aircraft Assets that are financed or refinanced
pursuant to a public or private aircraft financing transaction (including a
public or private securitization financing transaction) under circumstances in
which, following such financing or refinancing, (i) AFT, any holder of any
Beneficial Interest Certificates (including, without limitation, UniCapital)
and/or any of their respective Affiliates have (individually or in the
aggregate) a direct or indirect interest in such Aircraft Assets or in any
securities representing the residual or equity interest in such Aircraft Assets,
and (ii) such Aircraft Assets are to be managed pursuant to a servicing
agreement or other arrangement other than this Agreement, (x) on a basis
substantially the same as the basis upon which the Servicer provides the
Services pursuant to this Agreement (including for the fees provided for herein
to be paid to the Servicer and in accordance with the Standard of Care and the
Conflicts Standard and subject to the Standard of Liability and Article XI) and
(y) otherwise on such commercially reasonable terms as shall be agreed.
(l) Notwithstanding any provision to the contrary in this Agreement,
GE Capital or any Affiliate of GE Capital may, in its sole discretion, at any
time and from time to time enter into and effectuate public or private financing
transactions with respect to Aircraft other than the Aircraft Assets.
(m) The Servicer shall indemnify and hold harmless AFT, UniCapital,
any holder of a Beneficial Interest Certificate and their respective trustees,
officers and employees from and against any and all Losses that may be imposed
on, incurred by or asserted against AFT or such other Persons insofar as any
such Loss arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Servicer Information (as
defined below) contained in any final or preliminary Prospectus or (ii) the
omission or alleged omission to state in the Servicer Information included in
any final or preliminary Prospectus a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Servicer shall not be liable to AFT under the indemnity set
forth in this Section 2.03(m) (x) unless the Servicer shall have consented in
writing the text of the Servicer Information in the relevant final or
preliminary Prospectus and (y) if the relevant Loss results from an untrue
statement or omission contained in a preliminary Prospectus that was delivered
to a person that was sold a security described in such preliminary Prospectus
and if the Servicer shall have provided to AFT prior to the
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distribution of the related final Prospectus information correcting such untrue
statement or omission and AFT shall have failed to deliver or cause to be
delivered such final Prospectus to such person containing such corrected
information. "Servicer Information" shall mean the information set forth in the
sections of the Final Prospectus captioned "Risk Factors--Risks Relating to AFT
and Certain Third Parties--Conflicts of Interest of GECAS" (excluding any
description therein of the Servicing Agreement or any other document or the
terms of any thereof), "The Parties--GECAS" and "The Original Aircraft and
Initial Leases--The Lessees--Payment History" (second paragraph thereof only and
with respect to the Aircraft Assets only during the period that the Servicer was
the "Servicer" thereof) and the comparable sections (or comparable disclosure in
comparable portions thereof) contained in any other preliminary or final
Prospectus. In connection with any Notes Offering (other than an Exchange
Offer), upon the request and at the expense of AFT, the Servicer shall make a
good faith effort to obtain from one of its regular outside legal counsel,
selected by the Servicer, a customary securities law disclosure letter related
solely to the Servicer Information included in the relevant Prospectus and
addressed to the underwriters or initial purchasers in respect of the Notes
being offered under such Prospectus (such underwriters and initial purchasers
not, however, constituting third party beneficiaries of this Agreement).
SECTION 2.04. Compliance with Applicable Laws and GE Policies. (a)
Notwithstanding anything to the contrary in this Agreement, the Servicer shall
not be obligated to take or refrain from taking any action at any time that the
Servicer believes, in its sole discretion, is reasonably likely to (i) violate
any Applicable Law with respect to the Servicer or its Affiliates or any GE
Policy or (ii) lead to an investigation by any Governmental Authority, directly
or indirectly, of or relating to the Servicer, any of its Affiliates or the
Services. "GE Policy" means each of the established written policies of GE
applicable to GE and its controlled affiliates related to business practices
with respect to legal, ethical and social matters, which policies are currently
embodied in the pamphlet Integrity: The Spirit & Letter of Our Commitment, a
copy of which has been provided to AFT, as the same may be amended and in effect
from time to time. The Servicer shall provide AFT with a copy of all amendments
and updates to Integrity: The Spirit & Letter of Our Commitment.
(b) If pursuant to paragraph (a) above, the Servicer shall have
determined not to take any action with respect to any
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transaction or potential transaction (whether or not any such transaction or a
similar transaction has previously been entered into) relating to any Aircraft
Asset and as a consequence thereof any Person within the AFT Group shall be
denied the opportunity to participate in any transaction or potential
transaction in which it would otherwise be able to participate in accordance
with Applicable Law, then, notwithstanding the provisions of Section 2.01, any
such Person within the AFT Group may enter into, or engage another Person to
arrange on its behalf, such transaction or potential transaction with respect to
such Aircraft Asset; provided, however, that such Person within the AFT Group
may not enter into any such transaction or potential transaction if at or about
the same time a substantially similar transaction (with at least as favorable or
the same economic terms) could be arranged by the Servicer with respect to such
Aircraft Asset in a manner that is not reasonably likely to violate GE Policy or
lead to an investigation by any Governmental Authority, directly or indirectly,
of or relating to the Servicer, any of its Affiliates or the Services; provided
further, however, that (i) the Aircraft Asset that is the subject of such
transaction or potential transaction (a "Former Aircraft Asset") shall cease to
be an Aircraft Asset (including for the purposes of calculating the Servicing
Fees) on the date that such transaction or potential transaction is entered
into, (ii) from and after such date (unless and until such Former Aircraft Asset
becomes an Aircraft Asset pursuant to Section 6.07) no further Services shall be
provided with respect to such Former Aircraft Asset and (iii) the Servicer shall
not have any obligation or liability with respect to such Former Aircraft Asset
or such transaction or potential transaction.
(c) Notwithstanding anything to the contrary set forth in paragraph
(b) above, no Person within the AFT Group shall be entitled to enter into, or
engage any other Person to arrange on its behalf, any transaction or potential
transaction with respect to any Aircraft Asset if the Servicer shall have made a
determination regarding that transaction or potential transaction pursuant to
paragraph (a) above because it reasonably believed that such transaction or
potential transaction was reasonably likely to violate the United States Foreign
Corrupt Practices Act (or any similar or successor statute) applicable to
corporations organized under the laws of the United States (or any state or
political subdivision thereof) or applicable to any Person within the AFT Group
or otherwise applicable to such transaction or potential transaction.
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SECTION 2.05. Limitations. (a) Neither the Servicer nor any of its
Affiliates shall assume any Indebtedness of any Person within the AFT Group nor
shall any provision of this Agreement or any other Operative Agreement be
construed so as to imply that the parties intended any such assumption.
(b) In addition to Section 2.04, the Servicer shall not, and shall
not be obligated to, act in a manner inconsistent with the rights, obligations
or undertakings of the "Lessor" under any Lease or otherwise in any manner that
is illegal or prohibited by Applicable Law or any applicable contract.
(c) 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 AFT Group or any of its Representatives any
confidential or proprietary information regarding the Servicer's or any of its
Affiliate's business or the business or finances of any Person, other than any
Person within the AFT Group, whose assets it manages from time to time.
(d) The Servicer shall not be liable or accountable for (i) the
failure by a Lessee to perform any of its obligations under any Lease including
the payment of amounts payable under any Lease or (ii) the accuracy or
completeness of any notices, reports or other communications (whether written or
oral) made by any Lessee or any Person other than the Servicer in or concerning
any Lease or any document in connection therewith and shall be entitled to rely
upon all such notices, reports and communications except to the extent that the
Servicer has actual notice of any matter to the contrary.
(e) The Servicer may rely on any Adviser, Broker, law firm or other
professional adviser appointed by the Servicer or AFT and shall not be liable
for any claim by any Person within the AFT Group to the extent that it was
acting in good faith upon the advice of such Adviser, Broker, law firm or other
professional adviser.
(f) The relationship between the Servicer and AFT is an agency
relationship and, except in relation to any money erroneously received by the
Servicer or any of its Affiliates into any of the Servicer's or any of its
Affiliate's bank accounts on behalf of any Person within the AFT Group, which
the Servicer will hold in trust for such Person and deposit into the Collection
Account as soon as reasonably practicable, neither
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the Servicer nor any of its Representatives shall be under any fiduciary duty or
other implied obligation or duty to any Person within the AFT Group or any
holder of any equity or debt security issued by any Person within the AFT Group,
any Lessee or any other Person arising out of this Agreement.
(g) Without prejudice to the Standard of Care, the Servicer shall
not be imputed with the knowledge of any of its employees other than its
directors, officers and those employees involved in the performance of the
Services relevant to such knowledge responsible for the day to day
administration of this Agreement. The Servicer shall be deemed to have actual
notice of any matter only upon the receipt of written notice describing any such
matter in reasonable detail or to the extent that one of the foregoing Persons
has actual knowledge of any such matter or which one of such Persons ought to
have known if the Servicer had acted in accordance with the Standard of Care.
(h) The Servicer shall not be obligated to assume, or engage in
activities which could reasonably be expected to subject the Servicer to, any
liability as a related company, shadow director or similar legal concept of any
Person within the AFT Group. AFT understands, acknowledges and agrees that the
intent of the parties hereunder is that the Servicer will not be subject to any
obligations or liabilities whatsoever other than as and to the extent that any
obligations or liabilities arise pursuant to the express terms of this
Agreement.
(i) Notwithstanding anything to the contrary set forth herein or
otherwise, neither the Servicer nor any of its Affiliates shall be liable or
accountable hereunder for, and shall have no obligations with respect to, any
adverse consequences (including any Losses) in connection with any Year 2000
Compatibility problems, or any Year 2000 Problem relating to the Services, or
the operation or functionality of the Aircraft Assets or of the AFT Group as
either may relate to the processing of any dates.
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ARTICLE III
STANDARD OF CARE; CONFLICTS OF INTEREST;
STANDARD OF LIABILITY
SECTION 3.01. Standard of Care. The Servicer shall use reasonable
care and diligence at all times in the performance of the Services (the
"Standard of Care").
SECTION 3.02. Conflicts of Interest. (a) AFT acknowledges and agrees
that (i) in addition to managing the Aircraft Assets under this Agreement, the
Servicer may manage, and shall be entitled to manage, from time to time the
separate assets and businesses of (w) GE Capital and its Affiliates, (x) AerFi
and its Affiliates (including pursuant to the Amended and Restated Servicing
Agreement), (y) Airplanes U.S. Trust and Airplanes Limited and their respective
Affiliates and (z) other third parties (the assets of the parties described in
clauses (w), (x), (y) and (z) are collectively hereinafter referred to as the
"Other Assets"); (ii) 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 the various entities to whom it provides management services and with
respect to the various assets in respect of which it provides management
services; and (iii) the Controlling Trustees of AFT have approved the
transactions contemplated by this Agreement and the other Operative Agreements
and desire that such transactions be consummated and in giving such approval the
Controlling Trustees of AFT have expressly recognized that such conflicts of
interest may arise and that when such conflicts of interest arise the Servicer
shall perform the Services hereunder in accordance with the Standard of Care
and, to the extent applicable, the Conflicts Standard.
(b) If conflicts of interest arise regarding the management of (i) a
particular Aircraft Asset, on the one hand, and another Aircraft Asset, on the
other hand, or (ii) any Aircraft Asset, on the one hand, and any Other Asset, on
the other hand, the Servicer shall perform the Services in good faith and,
without prejudice to the generality of the foregoing, 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 Asset
and such Other Asset, respectively, on an unreasonable basis and, in the case of
the VARIG Aircraft (as
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defined in the Final Prospectus), on the basis of GE Capital's interests in the
VARIG Deposit Amounts (as defined in the Final Prospectus) (the standard set
forth in this Section 3.02(b) shall be referred to collectively as the
"Conflicts Standard").
(c) Notwithstanding any provision herein to the contrary, if, in
connection with the provision of Services with respect to an Aircraft Asset or
Lease, a conflict of interest shall exist that, in the good faith opinion of the
Servicer, requires an arm's-length negotiation between the Servicer or an
Affiliate of the Servicer, on the one hand, and any Person within the AFT Group,
on the other hand, and the Servicer believes it would not be appropriate for the
Servicer to act on behalf of such Person within the AFT Group in connection with
such negotiation (whether or not the Servicer shall propose to act on behalf of
itself or one of its Affiliates in connection with such negotiation), then the
Servicer shall withdraw from acting as Servicer with respect to such Aircraft
Asset or Lease in connection with the negotiation of the issue giving rise to
such conflict of interest. The Servicer shall provide written notice to AFT not
more than ten Business Days after it has made a determination that an
arm's-length negotiation is necessary with respect to such conflict of interest
and it would not be appropriate for the Servicer to act on behalf of such Person
within the AFT Group in connection with such negotiation. Not more than seven
Business Days after receipt of such notice from the Servicer, AFT shall appoint
an independent representative (which may be any Person within the AFT Group or
the Administrative Agent, but otherwise not a Competitor of the Servicer or any
of its Affiliates) (the "Independent Representative") to act on behalf of such
Person within the AFT Group to which such Aircraft Asset or Lease and conflict
of interest relates. Any such Independent Representative so appointed shall act
on behalf of the relevant Person within the AFT Group for purposes of such
negotiation relating to such Aircraft Asset or Lease and the Servicer shall have
no responsibility or liability to any Person within the AFT Group with respect
to such negotiation relating to such Aircraft Asset or Lease. In any event, the
Servicer shall be entitled to act on behalf of itself or its Affiliate with
respect to such negotiation. During the period of such Independent
Representative's appointment, the Servicer shall continue to perform its
ordinary functions as Servicer with respect to such Aircraft Asset or Lease to
the extent that the performance of the Servicer does not directly or indirectly
affect the negotiation of the issue giving rise to such conflict of interest. To
the extent, if any, the Servicer cannot continue
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to perform any Services with respect to such Aircraft Asset or Lease during such
negotiation, such Services shall be performed by the Independent Representative
or any other designee of such Person within the AFT Group. Any such Aircraft
Asset or any Aircraft Assets subject to any such Lease shall continue to be
included as an Aircraft Asset for purposes of calculating the Servicing Fees
pursuant to Article IX during the appointment of an Independent Representative
and the fees, if any, of any such Independent Representative shall be paid by
AFT.
(d) If the Servicer reasonably determines that directions given by
any Person to the Servicer in accordance with this Agreement or Services
required to be performed under this Agreement (other than any Service involving
an arm's-length negotiation between the Servicer or an Affiliate of the
Servicer, on the one hand, and any Person within the AFT Group, on the other
hand) would, in either case, if carried out, place the Servicer in a conflict of
interest with respect to which, in the Servicer's good faith opinion, the
Servicer cannot continue to perform its obligations hereunder within the
requirements set forth in Section 3.02 with respect to all Aircraft Assets or
any affected Aircraft Assets, as the case may be, the Servicer shall give AFT
prompt written notice thereof and thereafter the Servicer may resign as Servicer
with respect to the affected Aircraft Assets or AFT may elect to remove the
Servicer with regard to the affected Aircraft Assets as provided in Article X.
SECTION 3.03. Standard of Liability. The Servicer shall not be
liable or accountable to any Person including, without limitation, any
Subsidiary or Affiliate of AFT (other than AFT to the extent set forth in the
next following sentence) under any circumstances for any Losses directly or
indirectly arising out of, in connection with or related to, the management by
the Servicer of Aircraft Assets or Other Assets. The Servicer shall not be
liable or accountable to AFT under any circumstances for, and AFT shall
indemnify the Servicer on an After-Tax Basis in accordance with the provisions
of Article XI for, any Losses, directly or indirectly, arising out of, in
connection with or related to, the management by the Servicer of Aircraft Assets
or Other Assets, unless such Losses are finally adjudicated to have resulted
directly from (x) the Servicer's gross negligence or willful misconduct in
respect of its obligation to apply the Standard of Care or the Conflicts
Standard in respect of its performance of the Services or (y) any representation
or warranty by the Servicer set forth in Sections 4.10 or 4.11 having proven to
be false on the date hereof (the liability standards set forth in this Section
3.03,
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the "Standard of Liability"). For the avoidance of doubt, but without limiting
the provisions of Section 9.07, the provisions of this Section 3.03 shall not
give rise to any obligation on the part of the Servicer to indemnify AFT for any
Taxes. Without limiting the foregoing, the Servicer shall not be directly or
indirectly liable or accountable to AFT under any circumstances for any Losses
directly or indirectly arising out of, in connection with or related to, (i) the
direct or indirect transfer of any Aircraft Assets or Leases related thereto or
any other assets to any Person within the AFT Group, (ii) the adequacy of the
terms of any Lease relating to any Aircraft Assets to the extent any such Lease
was newly executed, amended or modified in connection with the solicitation of
Lessee consents, novations and related documentation pursuant to the direct or
indirect transfer of the Aircraft Assets to the AFT Group, (iii) the reliability
or creditworthiness of any Lessee with respect to its obligations under any
Lease, (iv) the adequacy of the lease payments derived from the Leases related
to any Aircraft Assets to support various obligations of the Persons within the
AFT Group, (v) the adequacy of the maintenance reserves or security deposits
relating to the Aircraft Assets, (vi) the terms and conditions of the Notes or
Beneficial Interest Certificates being offered and sold by AFT as of the Closing
Date or pursuant to any Notes Offering, (vii) the ability of AFT to comply with
the terms and conditions of such Notes or Beneficial Interest Certificates and
(viii) the structuring and implementation of any aspect of the various
transactions contemplated by the Final Prospectus.
SECTION 3.04. Waiver of Implied Standard. Except as expressly stated
above in this Article III, all other warranties, conditions and representations,
express or implied, statutory or otherwise, arising under U.S. Federal,
Delaware, Irish or other law in relation to 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
waived by AFT, and the Servicer shall not be liable to AFT or any other Person
within the AFT Group or any other Person in contract, tort or otherwise under
U.S. Federal, Delaware, Irish or other law for any loss, damage, expense or
injury of any kind whatsoever, consequential or otherwise, arising out of or in
connection with either the services to be supplied pursuant to this Agreement or
any goods to be provided or sold in conjunction with such services or any defect
in either such goods or services or from any other cause, whether or not any
such matter amounts to a fundamental breach of a fundamental term of this
Agreement. Nothing in this
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Article III should be taken as in any way limiting or excluding any liability
which the Servicer may have to AFT under Section 2 of the Irish Liability for
Defective Products Act, 1991.
THE CONTRACTUAL RIGHTS, IF ANY, WHICH THE AFT GROUP ENJOYS BY VIRTUE
OF SECTIONS 12, 13, 14 AND 15 OF THE SALE OF GOODS ACT, 1893 (AS AMENDED) AND
SECTION 39 OF THE SALE OF GOODS AND SUPPLY OF SERVICES ACT, 1980 ARE IN NO WAY
PREJUDICED BY ANYTHING CONTAINED IN THIS AGREEMENT SAVE TO THE EXTENT PERMITTED
BY LAW.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AFT represents and warrants to, and agrees with, the Servicer as
follows:
SECTION 4.01. Aircraft Assets. Schedule 4.01 contains a true and
complete list of all Aircraft Assets constituting Aircraft Assets as of the
Closing Date and each Person within the AFT Group, if any, that owns such
Aircraft Assets as of the Closing Date. Except as otherwise set forth therein,
on the Delivery of each Aircraft Asset listed in Schedule 4.01, each Person
within the AFT Group listed as an owner of an Aircraft Asset on such Schedule
will have such title to such Aircraft Asset as was conveyed to such Person on
its Delivery, free and clear of all Liens created by or through such Person.
SECTION 4.02. Aircraft Assets Related Documents. (a) The Servicer
shall not be required to perform any service provided for in or in connection
with any Aircraft Assets Related Documents not in its possession (all such
Aircraft Assets Related Documents listed in Schedule 4.02 being in its
possession) or delivered to it, and, to the extent that the failure to provide
such service results in any Losses to the Servicer, AFT shall indemnify the
Servicer for such Losses on an After-Tax Basis, in accordance with the
provisions of Article XI.
(b) Each Aircraft Assets Related Document is a legal, valid and
binding agreement of the Person within the AFT Group that is a party thereto
(including by way of assignment or novation) and is enforceable against such
Person within the AFT
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Group that is a party thereto in accordance with its terms. No Person within the
AFT Group has modified, amended or waived any provision of or terminated any
Aircraft Assets Related Document referred to in Schedule 4.02 except as
disclosed therein.
SECTION 4.03. Accounts and Cash Flow. Schedule 4.03 sets forth a
true and complete list of all bank or other similar accounts and any other
accounts relating to the Aircraft Assets, with respect to which any Person
within the AFT Group, the Security Trustee, the Administrative Agent or any
other agent of any of the foregoing has authority and sets forth in reasonable
detail a written description of all material arrangements and procedures
relating to the flow of cash related to the Aircraft Assets, including wire
transfer instructions.
SECTION 4.04. Organization and Standing. (a) Each of AFT and each
other Person within the AFT Group is a corporation or business trust duly
organized and validly existing and, if relevant, 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 trust 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 franchises, licenses, permits,
authorizations and approvals the failure of which to obtain could not,
individually or in the aggregate, have a Material Adverse Effect on the Persons
within the AFT Group, taken as a whole. Each of AFT and each other Person within
the AFT Group are in compliance in all material respects with all terms and
conditions of such franchises, licenses, permits, authorizations and approvals.
Schedule 4.04(a) sets forth a true and complete list of each Person within the
AFT Group and the jurisdiction in which each such Person within the AFT Group is
legally organized.
(b) Each of AFT and each other Person within the AFT Group is duly
qualified to do business as a foreign corporation 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 Persons within the AFT Group, taken as a whole.
SECTION 4.05. Authority. Each of AFT and each other Person within
the AFT Group which is a party to an Operative
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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 the AFT 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 contemplated thereby have been or on or before
the date of entering into the relevant Operative Agreements will have been duly
and properly taken.
(b) Each of the Operative Agreements to which any Person within the
AFT Group is or will be a party has been or will be duly and 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, enforceable against it in accordance
with its terms.
SECTION 4.06. No Conflicts. Neither the execution and delivery of
any Operative Agreement to which any Person within the AFT Group is a party nor
the consummation of the transactions contemplated thereby nor performance by any
Person within the AFT Group of any of its obligations thereunder will (i)
violate any provision of the constituent documents of any such Person within the
AFT Group, (ii) violate any order, writ, injunction, judgment or decree
applicable to any Person within the AFT 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, cancelation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, warrant or
other similar instrument or any license, permit, material agreement or other
material obligation to which any Person within the AFT Group is a party or by
which any Person within the AFT Group or any of their respective properties or
assets may be bound. Other than with respect to any filings made pursuant to the
HSR Act, no action, consent or approval by, or filing with, any Governmental
Authority or any other regulatory or self-regulatory body, or any other Person,
is required in connection with the execution, delivery or performance by any
Person within the AFT Group of the Operative Agreements to which it is a party
or the consummation by any Person within the AFT Group of the transactions
contemplated thereby.
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SECTION 4.07. Compliance with Applicable Laws. Each of AFT and each
other Person within the AFT Group is in compliance in all material respects with
all Applicable Laws and any filing requirements relating thereto.
SECTION 4.08. Litigation; Decrees. (a) Other than as may exist with
respect to the Aircraft Assets, there are no claims, actions, suits,
arbitrations or other proceedings or investigations (i) pending or, to the best
knowledge of each of AFT and each other Person within the AFT Group, threatened,
by or against or affecting AFT or any other Person within the AFT Group, which
in any case involves a potential loss exceeding $1,000,000 and (ii) pending, or
to the best knowledge of each of AFT and each other Person within the AFT Group,
threatened, by or against or affecting AFT or any other Person within the AFT
Group, related to the transactions contemplated by the Operative Agreements.
(b) Each of AFT and each other Person within the AFT Group is in
compliance in all material respects with each outstanding judgment, order or
decree (other than as may exist with respect to the Aircraft Assets) of any
Governmental Authority or arbitrator applicable to AFT or any other Person
within the AFT Group, as the case may be, and no such judgment, order or decree
has or could have a Material Adverse Effect on AFT or any other Person within
the AFT Group.
SECTION 4.09. Appointments. (a) Each Person within the AFT Group has
appointed AFT, and AFT has accepted such appointment, to act as representative
of each such Person with respect to any matter in respect of which AFT or any
other Person within the AFT Group is required or permitted to take any action
pursuant to the terms of this Agreement.
(b) AFT has appointed the Administrative Agent to act on its behalf
and on behalf of each of its Subsidiaries pursuant to the terms of the
Administrative Agency Agreement and AFT has appointed the Administrative Agent,
on a revocable basis, to act on its behalf in connection with any action
required or permitted to be taken by AFT on its own behalf or on behalf of any
other Person within the AFT Group pursuant to the terms of this Agreement.
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The Servicer represents and warrants to AFT as follows:
SECTION 4.10. Authority. (a) The Servicer 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 the Servicer 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 contemplated thereby
have been or on or before the date of entering into the relevant Operative
Agreements will have been duly and properly taken.
(b) Each of the Operative Agreements to which the Servicer is or
will be a party has been or will be duly and validly executed and delivered by
the Servicer, as applicable, and each such Operative Agreement is or upon such
execution and delivery will be a legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with its terms.
SECTION 4.11. No Conflicts. (a) Neither the execution and delivery
of any Operative Agreement to which the Servicer is a party nor the consummation
of the transactions contemplated thereby nor performance by the Servicer of any
of its obligations thereunder will (i) violate any provision of the constituent
documents of the Servicer, (ii) violate any order, writ, injunction, judgment or
decree applicable to the Servicer or any of its 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 of the terms, conditions or provisions
of any note, bond, mortgage, indenture, warrant or other similar instrument or
any licence, permit, material agreement or other material obligation to which
the Servicer is a party or by which the Servicer or any of its properties or
assets may be bound. Other than with respect to any filings made pursuant to the
HSR Act, no action, consent or approval by, or filing with, any Governmental
Authority or any other regulatory or self-regulatory body, or any other Person,
is required in connection with the execution, delivery or performance by the
Servicer of the Operative Agreements to which it is a party or the consummation
by the Servicer of the transactions contemplated thereby.
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SECTION 4.12. Compliance with Applicable Laws of Ireland. The
Servicer is in compliance in all material respects with all Applicable Laws of
Ireland and any filing requirements in Ireland relating thereto necessary to
perform its obligations under this Agreement.
ARTICLE V
SERVICER UNDERTAKINGS
SECTION 5.01. Access. The Servicer at such times as AFT may
reasonably request shall grant, and shall cause any Servicer Delegate to grant,
to the Persons within the AFT Group and their agents (including, without
limitation, the Administrative Agent and auditors) access to the documents and
other records related to the Aircraft Assets (copies of which AFT shall (at its
expense) be entitled to take), to enable the Persons within the AFT Group to
monitor the performance by the Servicer under this Agreement or to otherwise
discharge their respective obligations under Applicable Law. Upon reasonable
prior written notice and at reasonable times (in any event not more than an
aggregate, with respect to the AFT Group taken as a whole, of four (4) times per
Year), the Servicer shall make one or more (such number to be determined by the
Servicer in its sole discretion) members of its management available to attend
meetings of the Controlling Trustees of AFT. In addition, the Servicer will make
one or more members of its management available to participate in additional
meetings of such Controlling Trustees either, in the Servicer's sole discretion,
by participating in person or by teleconference. Any out-of-pocket expenses
incurred by the Servicer in connection with any such attendance shall be
reimbursed by AFT.
SECTION 5.02. Compliance with Law. The Servicer shall, in connection
with the performance of the Services, comply in all material respects with all
laws, rules and regulations applicable to the Servicer.
SECTION 5.03. Commingling. The Servicer shall not commingle with its
own funds, any funds of any Person within the AFT Group from time to time in its
possession.
SECTION 5.04. Restrictions on Exercise of Certain Rights. Subject to
the enforcement of its rights under the Security Trust Agreement, the Servicer
shall not take any steps
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for the purpose of procuring the appointment of an administrative receiver or
the making of any administrative order or for instituting any bankruptcy,
reorganization, arrangement, insolvency, winding up, liquidation, composition or
any similar proceeding under the laws of any jurisdiction with respect to any
Person within the AFT Group.
SECTION 5.05. Coordination with AFT. The Servicer shall designate an
individual who shall be an employee of the Servicer and who shall be primarily
responsible for coordinating with AFT and any other Person within the AFT Group
regarding the Services, and the Servicer may from time to time change such
designation by providing notice to AFT of such change.
ARTICLE VI
UNDERTAKINGS OF AFT
SECTION 6.01. Cooperation. AFT shall, and shall cause each other
Person within the AFT Group and their respective agents (including the
Administrative Agent) to, at all times cooperate with the Servicer to enable the
Servicer to provide the Services, including providing the Servicer with all
powers of attorney as may be reasonably necessary or appropriate for the
Servicer to perform the Services.
SECTION 6.02. No Representation with Respect to Third Parties. AFT
agrees that as between the Servicer, on the one hand, and each of AFT and the
other Persons within the AFT 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. AFT shall not take, and
shall not permit any other Person within the AFT Group to take, any action that
would increase in any respect the scope, nature or level of the Services to be
provided under this Agreement without the Servicer's express prior written
consent, including by entering into, amending, modifying or supplementing any
Aircraft Assets Related Document (it being understood that (i) the Servicer
shall have no liability to any Person within the AFT Group directly or
indirectly arising out of, in connection with or related to, the Servicer's
failure to perform such increased Service prior to any such amendment,
modification
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or supplement being consented to in writing by the Servicer and (ii) no Person
within the AFT Group shall be permitted to engage another Person to perform the
affected Service without the prior written consent of the Servicer).
SECTION 6.04. Other Aircraft. Except as otherwise expressly provided
in Section 2.04(b), 3.02(c) and Section 10.04 of this Agreement, AFT shall not,
and shall not permit any other Person within the AFT Group or any agent of any
Person thereof (including the Administrative Agent) to, enter into, or cause or
permit any Person (other than the Servicer or any Person acting for or on its
behalf) to enter into on its behalf, (a) any transaction for the lease or sale
of any Aircraft Asset in respect of which the Servicer is at such time
performing Services or (b) any agreement for the performance by any Person other
than the Servicer of some or all of the Services, in the case of (a) and (b)
without the prior written consent of the Servicer.
SECTION 6.05. Communications. AFT shall, and shall cause each other
Person within the AFT Group and the Administrative Agent to, forward promptly to
the Servicer a copy (or, if such communication is oral, notify the Servicer by
prompt oral or written notice and, if oral notice, confirmed in writing upon
request) of any communication received from any Person (including any Person
under any Aircraft Assets Related Document) in relation to any Aircraft Asset.
SECTION 6.06. Ratification. AFT hereby ratifies and confirms and
agrees to ratify and confirm (and shall cause each other Person within the AFT
Group to do the same) (and shall furnish written evidence thereof upon request
of the Servicer) 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 6.07. Additional Aircraft Assets. If any Aircraft Asset
shall become a Former Aircraft Asset pursuant to the provisions of Section 2.04
and thereafter the condition which caused such Former Aircraft Asset to cease to
be an Aircraft Asset shall no longer exist or the transaction entered into as
contemplated by Section 2.04(b) shall terminate, then AFT shall, and shall
require each other Person within the AFT Group, as appropriate, to, cause such
Former Aircraft Asset to become an Aircraft Asset and the Servicer shall accept
such Aircraft Asset as an Aircraft Asset, such action to be confirmed by an
exchange of correspondence to such effect.
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SECTION 6.08. Execution, Amendment, Modification or Termination of
Aircraft Assets Related Documents. (a) In connection with the acquisition of any
Aircraft (other than any Former Aircraft Asset) which becomes an Aircraft Asset
after the Closing Date other than pursuant to the Asset Purchase Agreement, no
later than ten Business Days prior to such Aircraft becoming an Aircraft Asset,
AFT shall deliver a written notice thereof to the Servicer setting forth the
model type and manufacturer's serial number of such Aircraft and the Person
within the AFT Group which will become the owner of such Aircraft upon its
acquisition, together with (x) a true and complete list all documents related to
such Aircraft which will become Aircraft Assets Related Documents upon the
acquisition of such Aircraft and (y) a true and complete copy of each document
which will become an Aircraft Assets Related Document upon the acquisition of
such Aircraft or, to the extent it has yet to be executed, the most current
draft of such document (with a final executed copy to be delivered as promptly
as practicable thereafter). AFT will be deemed to represent and warrant to, and
agree with, the Servicer on the date such Aircraft becomes an Aircraft Asset
that (i) the Person within the AFT Group listed as the owner of such Aircraft in
the written notice provided by AFT will have such title to such Aircraft as was
conveyed to such Person on its acquisition free and clear of all Liens created
by or through such Person, (ii) each Aircraft Assets Related Document related to
such Aircraft is a legal, valid and binding agreement of the Person within the
AFT Group that is a party thereto (including by way of assignment or novation)
and is enforceable against such Person within the AFT Group that is a party
thereto in accordance with its terms and (iii) no Person within the AFT Group
has modified, amended or waived any provision of or terminated any Aircraft
Assets Related Document referred to in such written notice provided by AFT
except as disclosed therein. The Servicer shall not be required to perform any
services provided for in or in connection with any Aircraft Assets Related
Documents not delivered to it, and, to the extent that the failure to provide
such service results in any Losses to the Servicer, AFT shall indemnify the
Servicer for such Losses on an After-Tax Basis, in accordance with the
provisions of Article XI.
(b) No later than five Business Days after the date that (i) any
agreement, instrument or other document becomes an Aircraft Assets Related
Document (other than as contemplated in Section 6.08(a)) or (ii) any Aircraft
Assets Related Document shall have been amended, modified or terminated, AFT
shall
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deliver written notice thereof to the Servicer together with (x) 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 (y) in the case of any
amendment, modification or termination, a true and complete copy of any related
agreement, instrument or other document; provided, however, that such notice or
such document shall not be required to be delivered, but shall be delivered if
the Servicer does not have possession of such notice or document, delivery is so
requested by the Servicer and AFT has possession of such notice or document, if
the Servicer was substantially involved in the preparation and execution of such
new, amended, modified or terminated agreement, instrument or other document.
SECTION 6.09. Access to AFT Group Information. At all such times as
the Servicer may reasonably request, AFT shall grant, and shall cause each other
Person within the AFT Group and the Administrative Agent to grant, access to the
Servicer and its agents to the books of account, documents and other records of
such Person (including "read only" and reporting access to the management
information systems used by such Persons), and to officers, directors (or
trustees, as applicable) and employees of each Person within the AFT Group or
any such agent for the purposes of the Servicer's performance of its obligations
in respect of Aircraft Assets under this Agreement. AFT will provide the
Servicer with copies of the minutes of the board of Controlling Trustees of AFT
and any written materials presented to the board by any Person, including,
without limitation, the Administrative Agent.
SECTION 6.10. AFT Group Accounts and Cash Arrangements. (a) AFT
shall not, and shall not permit any other Person within the AFT Group or any
agent thereof to, establish any new bank or similar account relating to the
Aircraft Assets or close any bank or similar account relating to the Aircraft
Assets other than in accordance with the terms of the Indenture, the Security
Trust Agreement or the Administrative Agency Agreement.
(b) No Person within the AFT 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 terms of the Indenture,
the Security Trust Agreement or the Administrative Agency Agreement.
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SECTION 6.11. Notification of Bankruptcy. If AFT, or any other
Person within the AFT Group, shall consider taking any action to:
(a) file any petition or application, commence any proceeding, pass
any resolution or convene a meeting with respect to (i) itself, any of its
Affiliates or any of its assets under any United States Federal, state or
local, foreign or other law relating to the appointment of an examiner,
liquidator, receiver or similar Person with respect to AFT or any other
Person within the AFT Group or over the whole or any part of any
properties or assets of any of AFT or any other Person within the AFT
Group or (ii) any bankruptcy, reorganization, compromise arrangements or
insolvency of any of AFT or any other Person within the AFT Group; or
(b) make an assignment for the benefit of its creditors generally;
then AFT shall notify the Servicer of such consideration a reasonable period of
time prior to taking any such action to the extent practicable, 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 AFT or any other Person
within the AFT Group becomes aware of the intention of, or any action by, any
Person (whether a creditor or member of any of AFT or any other Person within
the AFT Group) to appoint an examiner, liquidator, receiver or similar Person,
it shall promptly notify the Servicer accordingly.
SECTION 6.12. Further Assurances. AFT agrees, and shall cause each
other Person within the AFT Group and their respective agents (including the
Administrative Agent) to agree, that, at any time and from time to time, upon
the written request of the Servicer, 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 6.13. Guarantees. AFT agrees, and shall cause each other
Person within the AFT Group, to execute and deliver an AFT Group Guarantee in
favor of the Servicer in the form attached hereto as Appendix B.
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SECTION 6.14. Transfers of Funds. AFT agrees, and shall cause each
other Person within the AFT Group and their respective agents (including the
Administrative Agent), to cooperate with the Servicer to the extent necessary to
cause funds to be transferred into or out of the various Bank Accounts in order
for the various payments from Lessees to be applied on a basis consistent with
the instructions of such Lessees, subject in each case to the terms of the
Leases and the rights and obligations of the lessors thereunder.
ARTICLE VII
AFT GROUP RESPONSIBILITY
SECTION 7.01. AFT 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 AFT and each other Person within the AFT Group shall continue to have and
exercise through its Controlling Trustees or board of directors, as applicable,
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 Servicer in accordance with the terms of
this Agreement, and each of AFT and each other Person within the AFT Group shall
at all times conduct its separate ongoing business in such a manner that the
same shall at all times be readily identifiable from the separate business of
the Servicer. Matters with respect to which responsibility is not being
delegated to the Servicer shall include but are not limited to the matters set
forth in Schedule 7.01.
SECTION 7.02. Performance with Respect to Aircraft Assets. AFT has
directed the Servicer to, and the Servicer will, perform the Services in a
manner that is intended to be consistent with maximizing the cash flows derived
from the leases relating to the Aircraft Assets 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 term lengths), 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.
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AFT understands and acknowledges the inherent uncertainty in determining market
conditions at any point in time as well as the inherent limitations in
anticipating market conditions from time to time. It is expressly understood
that this Section 7.02 does not impose any higher or different standard of care
or liability than is set forth in Article III.
SECTION 7.03. Lease Operating Budget; Aircraft Asset Expenses
Budget. (a) AFT shall adopt with respect to each year during the term of this
Agreement, in accordance with Sections 7.03(b), (c) and (d), (i) a single lease
operating budget with respect to all Aircraft Assets (the "Lease Operating
Budget") and (ii) a single budget with respect to the Aircraft Asset expenses
related to all Aircraft Assets (the "Aircraft Asset Expenses Budget"); provided,
however, that, with respect to the Year commencing January 1, 1999, AFT shall
have adopted the Lease Operating Budget and the Aircraft Asset Expenses Budget
for such Year that are attached to a certificate delivered by AFT to the
Servicer on the Closing Date.
(b) In respect of each Year during the term of this Agreement, it is
understood that the Administrative Agent shall prepare on behalf of the AFT
Group, and not later than the October 31 immediately preceding the commencement
of such Year deliver to the Servicer (other than with respect to the fiscal year
commencing January 1, 1999), a proposed Lease Operating Budget and a proposed
Aircraft Asset Expenses Budget for such Year together with reasonably detailed
information regarding the assumptions underlying such proposed budgets.
(c) In connection with the preparation of such proposed Lease
Operating Budget and Aircraft Asset Expenses Budget, the Servicer shall provide
the Administrative Agent, not later than the September 30 immediately preceding
the commencement of such Year (other than with respect to the fiscal year
commencing January 1, 1999), information in a form to be agreed from time to
time relating to (i) Aircraft Assets lease rates, (ii) Aircraft Assets 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 as may be reasonably required to prepare such
budgets, in each case including the assumptions relating thereto. The Servicer
shall only be obligated to provide expense-related information to the
Administrative Agent pursuant to this Section 7.03(c) to the extent that such
information relates to the Services performed
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by the Servicer hereunder. AFT shall ensure that the Administrative Agent is
instructed to prepare each such proposed Lease Operating Budget and proposed
Aircraft Assets Expenses Budget on a timely basis.
(d) After the delivery of such proposed Lease Operating Budget and
Aircraft Asset Expenses Budget as described in Sections 7.03(b) and (c), the
Servicer and the Administrative Agent shall review and discuss such proposed
Lease Operating Budget and Aircraft Asset Expenses Budget and shall make such
adjustments thereto as they shall deem appropriate, and the revised proposed
Lease Operating Budget and proposed Aircraft Asset Expenses Budget in respect of
any Year shall then be submitted no later than the December 1 preceding such
Year to AFT for its consideration and approval (other than with respect to the
fiscal year commencing January 1, 1999). The approved Lease Operating Budget and
Aircraft Asset Expenses Budget for any Year, as each may be amended or modified
from time to time, shall hereinafter be referred to as the "Approved Budget".
Each Approved Budget shall be consistent with, and not in any manner reduce,
limit or circumscribe, the delegation to the Servicer pursuant to this Agreement
(including pursuant to Section 7.04) of a practical and workable level of
autonomy, authority and responsibility with respect to the performance of the
Services.
(e) If AFT does not adopt any Approved Budget for any Year as
contemplated by Section 7.03(d) or if, after an Approved Budget is adopted, AFT
shall determine that any Changed Circumstances have occurred and are continuing,
then AFT shall instruct the Servicer and the Administrative Agent, on behalf of
the AFT Group, to review and, to the extent possible, revise the Lease Operating
Budget and Aircraft Asset Expenses Budget in such a manner as to adequately
address the concerns of AFT and/or such Changed Circumstances (it being
understood that, subject to the last sentence of Section 7.03(d), AFT may
instruct the Servicer to proceed with a Lease Operating Budget and an Aircraft
Asset Expenses Budget approved by AFT if AFT determines that any proposed
revisions do not adequately address the concerns of AFT and/or such Changed
Circumstances).
(f) Notwithstanding any other provision hereof, the Servicer shall
have no liability for the failure of the Approved Budget for any Year to be
achieved.
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SECTION 7.04. Transaction Approval Requirements. (a) The Servicer
shall not do any of the following without the express prior written approval of
AFT:
(i) Except as otherwise required in accordance with the terms of any
Lease or the Asset Purchase Agreement, sell (or enter into any agreement
to sell) or otherwise dispose of any Aircraft (excluding any sale or
exchange of any Engine, parts or components thereof or aircraft or engine
spare parts or ancillary equipment or devices furnished therewith) forming
part of the Aircraft Assets.
(ii) Enter into any new Lease (or any renewal or extension of an
existing Lease, unless any such Lease being renewed or extended had
previously been approved pursuant to this Section 7.04(a) or if any such
Lease contains an extension option and such option is being exercised in
accordance with the terms of such Lease) of Aircraft Assets if the Lease
shall not comply with all the applicable provisions of Sections 5.02 and
5.03 of the Indenture with respect to the leasing of such Aircraft Assets
or if the Lease grants a purchase option in favor of the lessee.
(iii) Terminate any Lease or Leases (without substitution of, or
replacement by, another substantially similar Lease or Leases with respect
to such Aircraft Assets) to any single Lessee with respect to any Aircraft
Assets then having an aggregate depreciated net book value on the books of
the applicable Person(s) within the AFT Group in excess of $75,000,000.
(iv) Unless provided for in the then current Approved Budget
(including the provisions of Section 7.03(e)), enter into any contract for
the modification and/or maintenance of Aircraft Assets if the costs to be
incurred thereunder by the applicable Person within the AFT Group (A)
exceed the greater of (1) the estimated aggregate cost of a heavy
maintenance "D" check for the airframe and a total refurbishment of the
engines for Aircraft Assets of the type in question and (2) the amount of
the available maintenance reserves or other collateral under the
applicable Lease or (B) are outside the ordinary course of the AFT Group's
business.
(v) Issue any Guarantee on behalf of, or otherwise pledge the credit
of (other than with respect to trade
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payables in the ordinary course of the AFT Group's business), any Person
within the AFT Group.
(vi) Except as specifically contemplated by Schedule 2.02(a), on
behalf of any Person within the AFT Group, enter into, amend or grant a
waiver with respect to, any transaction with GE Capital or any of its
Affiliates (including GE and its Affiliates), including for the
acquisition, sale or lease of any Aircraft Assets from or to, or the
obtaining or provision of services by, any such Person.
(vii) Incur on behalf of any Person within the AFT Group any
liability (actual or contingent) or cause any such liability to be
incurred, except for a liability (A) contemplated in the then current
Approved Budget, (B) arising out of, in connection with or related to a
transaction of a type which is otherwise subject to approval under this
Section 7.04 and is in fact so approved or, due to the existence of an
exception, limitation or other carve out contained therein or in any
definition therein, is not subject to approval under the relevant
provision of this Section 7.04, (C) incurred in the ordinary course of the
AFT Group's business, including, but not limited to, liabilities related
to such matters specified in Schedule 7.04, or (D) incurred pursuant to a
Lease in entering into the Lease or performing any obligations of the
lessor thereunder; provided, however, that the exception contained in
clause (C) above is not intended to override any other restriction
contained in this Agreement (other than this clause (vii)) relating to the
incurrence of any liability referred to in such clause (C).
(viii) Enter into on behalf of AFT or any Person within the AFT
Group, any order or commitment to acquire, or acquire on behalf of the AFT
Group, aircraft or, except as otherwise provided in Section 4(e) of
Schedule 2.02(a), aircraft engines, except (A) in accordance with any
Lease or (B) to acquire a replacement engine for an Aircraft so long as
the same is provided for in the then current Approved Budget;
provided, however, that, before the Servicer shall effect (or cause to be
effected) any optional improvement or modification of any Aircraft Asset or
effect any optional conversion of any Aircraft Asset from a passenger aircraft
to a freighter or
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mixed-use aircraft or purchase or otherwise acquire any Engines or Parts outside
of the ordinary course of business (other than in the ordinary course of
business in connection with a new lease of such Aircraft Asset), the Servicer
shall request that AFT deliver to the Servicer a certificate certifying that
such action will not violate Section 5.02(i) of the Indenture, such certificate
to be delivered to the Servicer within seven Business Days after such request
therefor, and the Servicer shall not undertake such action pending receipt of
such certificate.
(b) Any transaction entered into by the Servicer on behalf of any
Person within the AFT Group (other than with other Persons within the AFT Group)
shall be on an arm's-length basis and on fair market value terms, unless
otherwise agreed by AFT on behalf of any such Person within the AFT Group.
(c) The transaction approval requirements (the "Transaction Approval
Requirements") set forth in this Section 7.04 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. Any rejection by AFT of any proposed
transaction submitted to it by the Servicer pursuant to the Transaction Approval
Requirements shall only be applicable to such portions of any such proposed
transaction as are specifically required to be approved as set forth in Section
7.04(a).
(d) AFT shall provide the Servicer with a response confirming its
approval or rejection of any proposed transaction submitted to it by the
Servicer as promptly as practicable following its receipt of a proposal from the
Servicer and in any event not more than three Business Days after receipt of
such a proposal. In the event that the Controlling Trustees of AFT, a duly
authorized committee thereof or the Administrative Agent fails to approve of any
transaction with respect to which an approval is required pursuant to the
Transaction Approval Requirements and in respect of which the Servicer has
submitted a reasonably detailed written proposal, AFT shall provide a reasonably
detailed written explanation for any such rejection to the Servicer
simultaneously with notifying the Servicer of such rejection. The Servicer is
not required to take any action with respect to any transaction for which
approval was sought pending receipt of such explanation.
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SECTION 7.05. Approved Budgets and Transaction Approval
Requirements. Except as set forth in Section 7.04(a), no transaction entered
into by the Servicer on behalf of any Person within the AFT Group in connection
with the performance by the Servicer of the Services shall require the approval
of any Person within the AFT Group or its Controlling Trustees or board of
directors, as applicable, or any committees thereof; provided, however, that
nothing set forth in this Article VII shall prohibit the Servicer from seeking
any approval or direction from AFT with respect to any matter related to the
Services or the Aircraft Assets to the extent that the Servicer believes to be
appropriate and pending the Servicer's receipt of any such approval or
direction, the Servicer may refrain from taking any action with respect to the
matter for which the Servicer has sought approval or direction.
ARTICLE VIII
EFFECTIVENESS
SECTION 8.01. Effectiveness. The effectiveness of this Agreement and
all obligations of the parties hereunder shall be conditioned upon satisfaction
(or waiver by the appropriate party) of the conditions set forth in Schedule
8.01.
ARTICLE IX
SERVICING FEES; EXPENSES; TAXES;
PRIORITY OF SERVICING FEES
SECTION 9.01. Servicing Fees; UniCapital Serviced Aircraft. (a) In
consideration of the Servicer's performance of the Services, AFT agrees to pay
to the Servicer servicing fees consisting of (i) the monthly base fee set forth
in Section 9.02 ("Monthly Base Fee"), (ii) the rent fees set forth in Section
9.03 ("Rent Fees"), (iii) the sales fee set forth in Section 9.04 ("Sales Fee")
and (iv) the additional servicing fees set forth in Section 9.05 ("Additional
Servicing Fees").
(b) For purposes of Sections 9.03, 9.04 and 9.05, the term "Aircraft
Assets" shall be deemed to include all UniCapital Serviced Aircraft and the
UniCapital Serviced Aircraft shall be
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included in the calculation of the Servicing Fees set forth in such Sections on
the terms and to the extent provided for in the following two sentences. With
respect to any UniCapital Serviced Aircraft which is also an Initial UniCapital
Aircraft, 50% of the gross proceeds received by any Person within the AFT Group
in respect of a Disposition of such UniCapital Serviced Aircraft shall be
included as Gross Proceeds for purposes of calculating the Sales Fee, the
Additional Sales Fee and the Additional Disposition Fee. In respect of any
UniCapital Serviced Aircraft with respect to which the Servicer arranged or
negotiated the related Lease or the extension or renewal of such Lease (it being
understood that in the event that the Lease to TransMeridian Airlines
contemplated by the Letter of Intent referred to in clause (y) of the proviso to
this sentence is implemented, the Servicer shall not be deemed to have arranged
or negotiated such Lease), (i) 50% (in the case of any Initial UniCapital
Aircraft) and 75% (in the case of any Additional UniCapital Aircraft) of the
Rents due or actually paid, as applicable, in respect of such UniCapital
Serviced Aircraft shall be included in the calculation of the Rent Payable Fee,
the Rent Collected Fee and the Additional Rent Collected Fee, and (ii) 50% (in
the case of any Initial UniCapital Aircraft, without duplication of amounts
included pursuant to the prior sentence) and 75% (in the case of any Additional
UniCapital Aircraft) of the gross proceeds received by any Person within the AFT
Group in respect of a Disposition of such UniCapital Serviced Aircraft shall be
included as Gross Proceeds for purposes of calculating the Sales Fee, the
Additional Sales Fee and the Additional Disposition Fee; provided, however, that
if the Lease is with a Lessee that was both (x) the Lessee of such UniCapital
Aircraft immediately prior to the effectiveness of such Lease or the extension
or renewal of such Lease and (y) the initial Lessee of such UniCapital Aircraft
at the time that such UniCapital Aircraft had first become an Aircraft Asset
under this Agreement (for purposes of this clause (y) if the Airbus A320-200
Aircraft (with manufacturer's serial number 373) shall be both an Initial
UniCapital Aircraft and leased to TransMeridian Airlines as contemplated by the
Letter of Intent dated October 28, 1998, TransMeridian Airlines shall be deemed
to be the relevant initial Lessee), then (A) 0% (in the case of any Initial
UniCapital Aircraft) and 50% (in the case of any Additional UniCapital Aircraft)
of the Rents due or actually paid, as applicable, in respect of such UniCapital
Serviced Aircraft shall be included in the calculation of the Rent Payable Fee,
the Rent Collected Fee and the Additional Rent Collected Fee, and (B) 50% (in
the case of any Initial UniCapital Aircraft, without duplication of amounts
included
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pursuant to the prior sentence) and 50% (in the case of any Additional
UniCapital Aircraft) of the gross proceeds received by any Person within the AFT
Group in respect of a Disposition of such UniCapital Serviced Aircraft shall be
included as Gross Proceeds for purposes of calculating the Sales Fee, the
Additional Sales Fee and the Additional Disposition Fee; provided further,
however, that the gross proceeds received by any Person within the AFT Group in
respect of a Disposition of a UniCapital Serviced Aircraft which is also an
Additional UniCapital Aircraft shall be included as Gross Proceeds as provided
for in this sentence only if the Disposition occurs while such UniCapital
Serviced Aircraft is subject to the Lease or the Lease extension or renewal
which was arranged or negotiated by the Servicer.
(c) AFT agrees to provide the Servicer (with a copy to the
Administrative Agent) with any information in a timely manner that the Servicer
may reasonably request to enable the Servicer to determine the timing and amount
of any payment that the Servicer is entitled to receive pursuant to this
Agreement.
SECTION 9.02. Monthly Base Fee. A Monthly Base Fee equal to $150,000
shall be payable by AFT to the Servicer in arrears on each Payment Date during
the Term of this Agreement; provided, however, that in the event that any
Aircraft (other than any Former Aircraft Asset) shall become an Aircraft Asset
after the Closing Date other than pursuant to the Asset Purchase Agreement, then
the Monthly Base Fee will be increased to reflect the addition of such Aircraft,
and the amount of such increase will be negotiated in good faith by AFT and the
Servicer.
SECTION 9.03. Rent Fees. (a) Rent Fees shall consist of the Rent
Payable Fee and the Rent Collected Fee. The Rent Fees shall be calculated by the
Servicer, with the assistance of AFT to the extent such Rent Fees relate to any
UniCapital Serviced Aircraft, and payable by AFT as follows:
(i) A Rent Payable Fee shall be payable by AFT to the Servicer in
arrears for each period commencing on the Closing Date (or, thereafter, the
fourth Business Day prior to the most recent Calculation Date) and ending on the
fourth Business Day prior to 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.
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The "Rent Payable Fee" in respect of any Fee Period shall equal one
percent of the aggregate amount of the Rents due from each Lessee attributable
to such Fee Period, or portion of such Fee Period in which the relevant Aircraft
constitutes an Aircraft Asset or a UniCapital Serviced Aircraft; provided,
however, that, in the event of an early termination of a Lease relating to any
Aircraft Asset for any reason (other than by reason of the occurrence of an
event of loss or exercise of a purchase option), the Rents which would have been
payable pursuant to such Lease but for such early termination will be included
in this calculation of the Rent Payable Fee until the earlier of (a) the date on
which Rents shall become payable in respect of such Aircraft Asset pursuant to
another Lease the Rents of which shall be included in this calculation of the
Rent Payable Fee and (b) the day that numerically corresponds to the first date
by which such Aircraft Asset and related Aircraft Documents shall have been
physically repossessed by the Servicer (or, in the case of any UniCapital
Serviced Aircraft, the servicer under the UniCapital Servicing Agreement)
following such early termination in (or, if no such day exists, the last day of)
the calendar month that is the third month after the month in which such date
occurs; provided further, however, that Rents due in respect of any UniCapital
Serviced Aircraft shall be included in this calculation of the Rent Payable Fee
on the terms and to the extent provided for in Section 9.01(b).
(ii) A Rent Collected Fee shall be payable by AFT to the Servicer in
arrears for each Fee Period, such payment to be made no later than the Payment
Date immediately following the end of each such Fee Period.
The "Rent Collected Fee" in respect of any Fee Period shall equal
one percent of the aggregate amount of the Rents actually paid by each Lessee
and, if any Lessee fails to pay any Rent when due, amounts applied towards such
payment during such Fee Period or portion of such Fee Period in which the
relevant Aircraft constitutes an Aircraft Asset or a UniCapital Serviced
Aircraft; provided, however, that if any collateral security, including any
security deposit, is applied to the payment of Rent, then, for purposes of
calculating the Rent Collected Fee, the amounts so applied shall not be included
as Rent at the time of such application but shall be so included at such time as
any Person within the AFT Group shall receive substitute collateral security or
a payment (whether in the form of Rent or otherwise) which restores, in whole or
in part, such collateral security; provided further, however, that Rents
actually paid in respect of any UniCapital Serviced Aircraft shall be included
in this
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calculation of the Rent Collected Fee on the terms and to the extent provided
for in Section 9.01(b).
(b) Not less than four Business Days prior to each Payment Date
immediately following the end of each Fee Period, the Servicer shall deliver a
written notice to AFT specifying the amount of the Rent Payable Fee and the
amount of the Rent Collected Fee payable in respect of such Fee Period.
SECTION 9.04. Sales Fee. (a) A Sales Fee shall be payable with
respect to each Fee Period by AFT to the Servicer, such payment to be made not
later than the Payment Date immediately following the end of each such Fee
Period.
(b) The "Sales Fee" in respect of any Fee Period shall equal one
percent multiplied by the Aggregate Gross Proceeds in respect of Dispositions of
Aircraft Assets during such Fee Period. "Aggregate Gross Proceeds" for any Fee
Period means the sum of the Gross Proceeds for each Disposition of an Aircraft
Asset that is an Aircraft Asset during such Fee Period. "Disposition" means,
with respect to any Aircraft Asset, the sale (including pursuant to the exercise
of a purchase option), total loss or other event or circumstances under which
such Aircraft Asset ceases to be an Aircraft Asset or, in the case of any
Aircraft Asset which is a UniCapital Serviced Aircraft, ceases to be a
UniCapital Serviced Aircraft. "Gross Proceeds" shall be an amount equal to the
gross proceeds (including the fair market value of any non-cash consideration)
received by any Person within the AFT Group in respect of any Disposition of an
Aircraft Asset; provided however, that the gross proceeds in respect of a
Disposition of a UniCapital Serviced Aircraft shall be included as Gross
Proceeds on the terms and to the extent provided for in Section 9.01(b).
(c) Not less than four Business Days prior to each Payment Date
immediately following the end of each Fee Period, the Servicer shall deliver a
written notice to AFT specifying the amount of the Sales Fee payable in respect
of such Fee Period.
SECTION 9.05. Additional Servicing Fees. (a) Additional Servicing
Fees shall consist of Additional Sales Fees, Additional Disposition Fees and
Additional Rent Collected Fees. The Additional Servicing Fees shall be
calculated by the Servicer, with the assistance of AFT to the extent such
Additional Servicing Fees relate to any UniCapital Serviced Aircraft, and
payable by AFT as follows:
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(i) An Additional Sales Fee shall be payable by AFT to the Servicer
with respect to each Fee Period, such payment to be made on the Payment Date
that amounts are distributed to the Servicer pursuant to Section 3.08(a)(xxxiv)
of the Indenture; provided, however, that such payment shall be made not later
than the Payment Date immediately following the date on which all amounts
outstanding to be paid under the Notes issued on the Closing Date shall have
been paid in full. The "Additional Sales Fee" in respect of any Fee Period shall
equal one percent multiplied by the Aggregate Gross Proceeds in respect of
Dispositions of Aircraft Assets during such Fee Period.
(ii) An Additional Disposition Fee shall be payable by AFT to the
Servicer in respect of any Disposition of an Aircraft Asset, such payment to be
made on the Payment Date that amounts are distributed to the Servicer pursuant
to Section 3.08(a)(xxxiv) of the Indenture.
The "Additional Disposition Fee" in respect of any Disposition of an
Aircraft Asset shall equal five percent multiplied by the Adjusted Gross
Proceeds in respect of such Disposition. "Adjusted Gross Proceeds" means, in
respect of the Disposition of an Aircraft Asset, an amount equal to (i) the
Gross Proceeds received by any Person within the AFT Group in respect of such
Aircraft minus (ii) the sum of the Sales Fee and the Additional Sales Fee
payable in respect of such Disposition and the Outstanding Principal Balance of
Notes allocable to such Aircraft. On any date, the Outstanding Principal Balance
of 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 Notes, in each case on
the most recent Payment Date.
(iii) An Additional Rent Collected Fee shall be payable by AFT to
the Servicer for each Fee Period commencing on or after the fourth Business Day
prior to the Calculation Date immediately preceding the Payment Date on which
all amounts outstanding to be paid under the Notes shall have been paid in full
(each such Fee Period, an "Additional Fee Period"), such payment to be made no
later than the Payment Date immediately following the end of each such
Additional Fee Period.
The "Additional Rent Collected Fee" in respect of any Additional Fee
Period shall equal three percent of the aggregate amount of the Rents actually
paid by each Lessee and, if any
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Lessees fails to pay any Rents when due, amounts applied towards such payment
during such Additional Fee Period or portion of such Additional Fee Period in
which the relevant Aircraft constitutes an Aircraft Asset or a UniCapital
Serviced Aircraft; provided, however, that Rents actually paid in respect of any
UniCapital Serviced Aircraft shall be included in this calculation of the
Additional Rent Collected Fee on the terms and to the extent provided for in
Section 9.01(b).
(b) Not less than four Business Days prior to each Payment Date
immediately following the end of each Fee Period, the Servicer shall deliver a
written notice to AFT specifying the amount of any Additional Disposition Fees
and the Additional Rent Collected Fee, payable in respect of such Fee Period.
SECTION 9.06. Expenses. (a) The Servicer shall be responsible for,
and shall not be entitled to reimbursement for, the Servicer's overhead expenses
set forth in Schedule 9.06(a) ("Overhead Expenses").
(b) (i) AFT shall be responsible for all costs and expenses relating
to or associated with the Aircraft Assets other than Overhead Expenses,
including those costs and expenses set forth in Schedule 9.06(b) ("Aircraft
Asset Expenses"). Nothing contained in this Section 9.06 shall be deemed to
impose on the Servicer any obligation to advance any of its own funds for any
Aircraft Asset Expenses.
(ii) If, in connection with the performance of Services, the
Servicer, on behalf of any Person within the AFT Group, proposes to provide
goods and services, or arrange for the provision of goods or services, from any
vendor, supplier, service provider or other Person (A) for a purchase price in
excess of U.S. $1,000,000 (or the equivalent thereof in the currency in which
such obligation is payable) or (B) at any time when a default in respect of the
payment of any amount due under this Agreement shall have occurred and be
continuing, the Servicer may require AFT to pay for such goods or services in
advance or otherwise make the funds for payment of such goods or services
available to the satisfaction of the Servicer. If such advance payment is not
made or such funds are not otherwise made available, notwithstanding any other
provision in this Agreement, the Servicer shall be relieved of its obligation to
provide or arrange for the provision of such goods or services in respect of the
Aircraft Assets for which such goods or services were to be provided but shall
otherwise continue to manage such Aircraft Assets as provided in this Agreement
and
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shall continue to be entitled to receive Asset Based Servicing Fees in respect
of such Aircraft Assets. In such case, AFT may provide or arrange for the
provision of such goods or services in respect of such Aircraft Assets.
SECTION 9.07. Taxes. (a) AFT agrees to pay on an After-Tax Basis and
to indemnify and hold harmless the Indemnified Parties on an After-Tax Basis
from and against (i) all liability for Taxes of or imposed on the Taxpayers that
are imposed on, or asserted to be payable by, any Indemnified Party as a result
of the structuring and implementation of any aspect of the various transactions
contemplated by the Final Prospectus or otherwise (other than any such Taxes
described in Section 9.07(f)), regardless of whether such Taxes are attributable
to a taxable period ending before, on or after the Closing Date, other than any
such Taxes imposed on or payable by a Taxpayer in its capacity as a withholding
agent in respect of amounts payable pursuant to this Agreement to an Indemnified
Party and (ii) any liability for out-of-pocket fees, costs and expenses
(including reasonable attorneys' fees) arising out of or incident to any Tax
indemnified hereunder. If any Taxes for which AFT is to indemnify any
Indemnified Party pursuant to the immediately preceding sentence are payable
after the Closing Date, AFT shall pay or cause to be paid to such Indemnified
Party an amount calculated on an After-Tax Basis equal to the amount of such
Taxes no later than the later of (x) five Business Days after such Indemnified
Party gives notice to AFT that such amount is due and specifying the date such
Taxes are due and payable (the "Due Date") and (y) one Business Day before the
Due Date. Amounts described in clause (ii) shall be reimbursed on an After-Tax
Basis not less frequently than quarterly. Any payment required to be made
hereunder and not made at the time specified in the preceding two sentences
shall bear interest at the Stipulated Interest Rate or such higher rate actually
payable by such Indemnified Party on the delayed payment of the Taxes being
indemnified, calculated from the date such payment was required to be made
hereunder to the date such payment is actually received by the Indemnified
Party.
(b) All amounts payable by or on behalf of AFT pursuant to this
Agreement shall be payable exclusive of any applicable value added tax, which
value added tax, if payable, shall also be payable by AFT, upon production of a
valid value added tax invoice by the Servicer. All amounts payable to AFT by an
Indemnified Party pursuant to this Agreement shall be inclusive of value added
tax save to the extent such Indemnified Party is entitled to recover (by way of
repayment, credit or set
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off) the whole or any part of such value added tax. Where it is so entitled, at
the request of AFT, value added tax shall be payable in addition thereto on
production of a valid value added tax invoice but payment of the value added tax
element shall not fall due until the latest possible date before the date on
which such Indemnified Party shall receive such repayment, credit or set off
(and such Indemnified Party shall be obligated to use reasonable endeavors
(taking into account its overall tax position) to obtain such repayment, credit
or set off as soon as possible); provided, however, that, to the extent such
payment of the value added tax element shall fall due prior to such date of
receipt pursuant to Applicable Law, AFT shall make such Indemnified Party whole
on an After-Tax Basis for any resulting loss of the time value of funds. The
Servicer shall act on AFT's behalf in processing any refund of value added tax
and the Servicer and AFT 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.
(c) Except as provided in Section 9.07(f), AFT shall, on an
After-Tax Basis, pay and indemnify and hold the Indemnified Parties harmless
from all Taxes imposed, levied or assessed against or upon the Person in the AFT
Group or any Indemnified Parties by any Governmental Authority upon or with
respect to any of the Operative Agreements or any payment pursuant thereto or
resulting from the matters or activities described therein, other than (except
to the extent required to make any payment on an After-Tax Basis) (i) payroll,
social security and employment Taxes of such Indemnified Party and any Taxes
that are based on or measured by the net income, net receipts, net profits, net
worth, franchise or conduct of business of such Indemnified Party, (ii) any
Taxes payable by such Indemnified Party pursuant to the controlled foreign
corporation provisions or the passive foreign investment company provisions of
the U.S. Internal Revenue Code of 1986, as amended (the "Code"), or any
successor provision, (iii) any Taxes payable by an Indemnified Party (other than
stamp, documentary or other similar taxes), which Taxes are imposed by Ireland
or the United States of America or any political subdivision of either, or any
other jurisdiction, to the extent such Taxes would not have been imposed but for
any connection of the Indemnified Party or any Affiliate thereof with the
jurisdiction imposing such Taxes (other than any such connection that results
from activities of such Indemnified Party or any Affiliate which activities are
located in such jurisdiction by reason of the location of (x) a specific lessee
or sublessee of any Person within the AFT Group (or, with respect to any
Original Aircraft,
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the owner), (y) an Aircraft or any part thereof or (z) any other Person (other
than any Indemnified Party) with whom any Person within the AFT Group (or, with
respect to any Original Aircraft, the owner) may be engaging, or contemplating
engaging, in a commercial relationship), (iv) Taxes attributable to events or
conditions arising after the termination or expiration of this Agreement and (v)
Taxes imposed as a result of the gross negligence or wilful misconduct of any
Indemnified Party. All Taxes with respect to which AFT has an indemnification
responsibility under this Section 9.07 shall be paid not later than the date
such Taxes shall be due unless and to the extent, in the case of Taxes that do
not burden any of the assets or property of any Indemnified Party and are
assessed solely upon a Person or Persons within the AFT Group, such Person or
Persons within the AFT Group shall be contesting such Taxes in good faith by
appropriate proceedings, in which case such Taxes, or so much thereof as are
being contested and are unpaid, shall be paid promptly upon a final
determination that such Taxes, are due and payable. In the event any Taxes with
respect to which AFT has an indemnification responsibility under this Section
9.07 are levied on any Indemnified Party, or any Indemnified Party is required
by law or otherwise to pay any such Taxes in the first instance or as a result
of a Person or Persons within the AFT Group's failure to comply with, or
nonperformance in relation to, any Applicable Law or regulations governing the
payment thereof by such Person or Persons within the AFT Group, AFT shall pay to
such Indemnified Party the full amount thereof on an After-Tax Basis within five
Business Days after receipt from such Indemnified Party of any written request
for such payment but not later than the due date for such Taxes. Any payment
required to be made hereunder and not made at the time specified under this
Section 9.07 shall bear interest at the Stipulated Interest Rate or such higher
rate actually paid by such Indemnified Party on the delayed payment of the Taxes
being indemnified, calculated from the date such payment was required to be made
hereunder to the date such payment is actually received by such Indemnified
Party.
(d) If any claim or demand is asserted in writing with respect to a
Tax indemnified hereunder, such Indemnified Party shall in good faith notify AFT
of such claim or demand within 10 days of receipt thereof; provided, however,
that failure to give such notification shall not affect such Indemnified Party's
entitlement to indemnification hereunder unless such failure shall materially
and adversely prejudice the ability of AFT to defend itself or any Indemnified
Party against any such action, claim, demand, proceeding or suit. If AFT
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shall so request within 30 days after receipt of such notice, such Indemnified
Party shall in good faith at AFT's expense contest the imposition of such Tax;
provided, however, that such Indemnified Party may in its sole discretion select
any applicable forum for such contest and determine whether any such contest
shall be by (i) resisting payment of such Tax, (ii) paying such Tax under
protest or (iii) paying such Tax and seeking a refund thereof; provided further,
however, that at such Indemnified Party's option such contest shall be conducted
by AFT in the name of such Indemnified Party (subject to the preceding proviso)
(it being understood that AFT shall not be permitted to contest the imposition
of such Tax in the name of such Indemnified Party without the prior written
consent of such Indemnified Party). In no event shall such Indemnified Party be
required or AFT be permitted by such Indemnified Party to contest the imposition
of any Tax for which AFT is obligated to indemnify pursuant to this Section 9.07
unless (i) such Indemnified Party shall have received from AFT (A) an indemnity
reasonably satisfactory to such Indemnified Party for any liability, expense or
loss arising out of or relating to such contest and (B) an opinion of tax
counsel to AFT, furnished at the expense of AFT, to the effect that a reasonable
basis exists for contesting such claim; (ii) AFT shall have agreed to pay such
Indemnified Party on demand all reasonable costs and expenses that such
Indemnified Party may incur in connection with contesting such claim (including
all costs, expenses, losses, reasonable legal and accounting fees,
disbursements, penalties, interest and additions to tax); (iii) AFT shall be in
compliance with all of their obligations under this Agreement; (iv) such
Indemnified Party shall have determined that the action to be taken will not
result in a material risk of sale, forfeiture or loss of, or the creation of any
Lien (except if AFT shall have adequately bonded such Lien or otherwise made
provision to protect the interests of such Indemnified Party in a manner
reasonably satisfactory to such Indemnified Party) on any property or rights of
such Indemnified Party, or any portion thereof or any interest therein; and (v)
if such contest shall be conducted in a manner requiring the payment of the
claim, shall have paid the amount required. Notwithstanding anything contained
in this Section 9.07, an Indemnified Party shall not be required nor shall AFT
be permitted by such Indemnified Party to contest or continue to contest in the
name of an Indemnified Party the imposition of any Tax for which AFT is
obligated to indemnify pursuant to this Section 9.07 if such an Indemnified
Party shall waive in writing its rights to indemnification under this Section
9.07 with respect to such Tax.
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(e) If any Indemnified Party shall obtain a refund of all or any
part of any Tax paid by AFT, such Indemnified Party shall, provided no Event of
Default, or default by AFT in the payment of any amount due hereunder, has
occurred and is continuing, pay AFT an amount equal to the amount of such
refund, including interest received or credited and attributable thereto, plus
any net Tax benefit (or minus any net Tax detriment) realized by such
Indemnified Party as a result of a payment made pursuant to this sentence or as
a result of the receipt or accrual of such refund, including interest received
or credited and attributable thereto. If any Indemnified Party shall have paid
AFT any refund of all or part of any Tax paid by AFT and it is subsequently
determined that such Indemnified Party was not entitled to the refund, such
determination shall be treated as the imposition of a Tax for which AFT is
obligated to indemnify such Indemnified Party pursuant to the provisions of
Section 9.07 hereof.
(f) Notwithstanding the other provisions of this Section 9.07, AFT
will have no liability under this Section 9.07 and the Servicer will indemnify
and hold harmless AFT and the other members of the AFT Group in respect of any
Taxes (including any associated interest, penalties and additions to tax)
imposed by the United States of America as a result of AFT being obligated to
make, or failing to make, a payment of such Taxes pursuant to section 1446 of
the Code, or any successor provision thereto, by reason of the Servicer being
treated as a partner of or in a member of the AFT Group as a result of any
Indemnified Party holding any direct or indirect interest in a D Note (as
defined in the Indenture) or as a result of the Additional Servicing Fees
payable to the Servicer.
SECTION 9.08. Priority of Payments to Servicer. Any and all amounts
due and owing to the Servicer or any of its Affiliates (including any amounts
due and owing to the Servicer or any of its Affiliates with respect to
indemnification) pursuant to this Agreement (other than the Additional Servicing
Fees) shall be entitled to the priority established therefor in the Indenture,
which priority AFT agrees not to amend without the consent of the Servicer.
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ARTICLE X
TERM; RIGHT TO TERMINATE; RESIGNATION;
CONSEQUENCES OF EXPIRATION, TERMINATION,
RESIGNATION OR REMOVAL; CERTAIN TAX MATTERS; SURVIVAL
SECTION 10.01. Term. This Agreement shall have a non-cancelable term
commencing on the Closing Date and expiring on the later of (a) the first date
on which all amounts outstanding to be paid under the Notes (and any similar
obligations of AFT issued pursuant to any other indenture or similar agreement
(i.e., there shall be no Notes or similar obligations outstanding)) shall have
been paid in full and no Beneficial Interest Certificates (or any similar equity
interests in AFT) remain outstanding and (b) the date on which there shall cease
to be any Aircraft Assets; provided, however, that AFT shall be entitled to
terminate this Agreement following the payment in full of all amounts
outstanding to be paid under the Notes and any similar obligations of AFT issued
pursuant to any other indenture or similar agreement (i.e., there shall be no
Notes or similar obligations outstanding). During the term, this Agreement shall
not be terminable by either party except as expressly provided in this Article
X.
SECTION 10.02. Right to Terminate. (a)(i) At any time during the
term of this Agreement, the Servicer shall in accordance with Section 10.02(c)
be entitled to terminate this Agreement if:
(A) AFT shall fail to pay in full when due (1) any Servicing Fees
within five days after the effectiveness of written notice from the
Servicer of such failure or (2) any other amount payable by AFT hereunder
or any other Operative Agreement within ten days after the effectiveness
of written notice from the Servicer of such failure; or
(B) any Person within the AFT 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 Agreement (other than with respect
to payment obligations of AFT referred to in clause (a)(i)(A) of this
Section 10.02); or
(C) any material representation or warranty by any Person within the
AFT Group made in this Agreement or any
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other Operative Agreement or in any report, certificate, financial
statement or other agreement, instrument or document at any time furnished
by or on behalf of any Person within the AFT Group in connection therewith
shall prove to have been false or misleading in any material respect when
made or furnished and such representation or warranty shall remain false
and misleading in any material respect and such misrepresentation or
breach of warranty is reasonably likely to have a Material Adverse Effect
on the Servicer or a material adverse effect on the rights and obligations
of the Servicer under this Agreement (including the Servicer's
compensation hereunder); or
(D) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
relief in respect of AFT or any Significant Subsidiary of AFT or of a
substantial part of the property or assets of any of such Persons, 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 any such Persons within
the AFT 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 75 days; or
(E) AFT or any Significant Subsidiary of AFT shall (i) 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, (ii) consent to the institution of, or fail
to contest the filing of, any petition described in clause (D) above,
(iii) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, or (iv) make a general assignment
for the benefit of its creditors; or
(F) there shall cease to be any Aircraft Assets; or
(G) the Indenture shall cease to be in full force and effect; or
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(H) any Guarantee issued in favor of the Servicer shall cease to be
a legal, valid and binding agreement of the relevant Person within the AFT
Group, enforceable in accordance with its terms.
(ii) Upon the occurrence of an event set forth in clause (i) of this
Section 10.02(a), in addition to the right of the Servicer to terminate this
Agreement in whole pursuant to Section 10.02(a)(i), the Servicer shall be
entitled to terminate its obligations to provide the Services with respect to
one or more specific Aircraft Assets (but less than all the Aircraft Assets)
(any termination with respect to less than all the Aircraft Assets being a
"Partial Termination"). If, upon any such Partial Termination, the Servicer
shall elect to continue to provide Services with respect to any Aircraft Asset,
the Servicer shall specify the Aircraft Assets in respect of which it intends to
continue to provide Services in the Termination Notice with respect to the
Partial Termination. All references to the expiration or termination of this
Agreement shall mean the expiration or termination of this Agreement in whole
and not to a Partial Termination unless expressly otherwise stated.
(b) At any time during the term of this Agreement, AFT shall be
entitled to terminate this Agreement if:
(i) neither GE nor GE Capital shall own directly or indirectly at
least 75% of the voting equity of, and economic interest in, the Servicer
or any Servicer Delegate; or
(ii) the Servicer shall fail in any material respect to perform any
material Services in accordance with the Standard of Care or the Conflicts
Standard and such failure shall have a Material Adverse Effect on the AFT
Group taken as a whole; 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 GE, GE Capital or the Servicer or any Servicer
Delegate, or 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 75 days or an order or decree
approving or
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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 75 days; or
(iv) GE, GE Capital 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 (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; or
(v) there shall have occurred and be continuing an Event of Default
under Section 4.01(a) of the Indenture in respect of the payment of
interest on any Class A Note (as defined in the Indenture) due to an
insufficiency of funds in the Collection Account on the relevant date,
which Event of Default (x) shall have occurred on a date on which no
amount is available for drawing under any Credit Facility (as defined in
the Indenture) in respect thereof and (y) shall have continued unremedied
for 60 days; or
(vi) an Event of Default (other than one referred to in clause (v)
of this Section 10.02(b)) under the Indenture shall have occurred and,
other than in respect of an Event of Default under Sections 4.01(e) or
4.01(f) of the Indenture, a Default Notice (pursuant to which the
Outstanding Principal Balance of the Notes and all accrued and unpaid
interest thereon shall become due and payable) shall have been issued in
accordance with the terms of the Indenture, and at the time of such Event
of Default at least 10 Aircraft Assets shall not be subject to Leases and
each such Aircraft Asset shall have been off-lease and reasonably
available for re-lease (including in the possession of the Servicer,
together with the related Aircraft Documents) during the three-month
period ending on the date of such Event of Default.
(c)(i) Either party to this Agreement (the "Terminating Party") may,
at any time during the term of this
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Agreement, by written notice (the "Termination Notice") to the other (the
"Nonterminating Party"), set forth its determination to terminate this Agreement
pursuant to clause (a) of this Section 10.02 (in the case of the Servicer) or
Section 10.01 or clause (b) of this Section 10.02 (in the case of AFT) or to
provide for a Partial Termination of this Agreement pursuant to clause (a)(ii)
of this Section 10.02 (in the case of the Servicer); provided, however, that
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 10.04(c); provided further that failure by the Terminating Party to
provide such Termination Notice shall not affect such party's rights under
Section 10.02(a) or Section 10.01 or Section 10.02(b), as the case may be. Any
Termination Notice shall set forth in reasonable detail the basis for such
termination.
(ii) Unless the Termination Notice is provided by AFT pursuant to
the proviso to Section 10.01, no later than the fifth day following the
effectiveness of the Termination Notice (the "Effectiveness Date"), the
Nonterminating Party shall advise the Terminating Party in writing whether the
Nonterminating 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; provided, however, that the failure of
the Nonterminating 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 Termination Notice is provided by AFT pursuant to the proviso
to Section 10.01 or the Nonterminating Party notifies (or is deemed to have
notified) the Terminating Party that the Nonterminating Party does not intend to
cure the basis for such termination, then this Agreement shall terminate or the
Partial Termination shall take effect, as the case may be, immediately or on
such later date as the Terminating Party shall have indicated in the Termination
Notice to the Nonterminating Party. In the event that the Nonterminating Party
notifies the Terminating Party by such fifth day that it intends to cure the
basis for such termination, then the Nonterminating Party shall (A) have 15 days
from the Effectiveness Date to effectuate such cure to the reasonable
satisfaction of the Terminating Party or (B) if such cure cannot reasonably be
expected to be effectuated within such 15-day period, (1) demonstrate to the
reasonable 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
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Terminating Party no later than the thirtieth day following the Effectiveness
Date. Upon the failure of the Nonterminating Party to effectuate a cure in
accordance with the immediately preceding sentence, this Agreement shall
terminate or the Partial Termination shall take effect, as the case may be, on
the latest of (A) the day immediately following the expiration of such 15- or
30-day period, (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 Assets and has accepted such
appointment in accordance with the provision of Section 10.04(c).
SECTION 10.03. Resignation or Removal. (a) If the Servicer
reasonably determines that (x) directions given by any Person to the Servicer in
accordance with this Agreement are or would be if carried out or (y) Services
required to be performed under this Agreement are or would be if carried out (i)
unlawful under Applicable Law, (ii) in violation of any GE Policy, (iii) likely
to lead to an investigation by any Governmental Authority, directly or
indirectly, of or relating to the Servicer, any of its Affiliates or the
Services, (iv) directions or Services that would expose the Servicer to any
liabilities for which adequate bond or indemnity has not, in the Servicer's good
faith opinion, been provided or (v) directions or Services that would place the
Servicer in a conflict of interest with respect to which, in the Servicer's good
faith opinion, the Servicer cannot continue to perform its obligations hereunder
within the requirements set forth in Article III with respect to all Aircraft
Assets or any affected Aircraft Assets, as the case may be, it may resign as the
Servicer for all purposes under this Agreement in relation to all the Aircraft
Assets or, at its election, any affected Aircraft Assets (but with respect to
clause (v) above the Servicer may resign only with respect to the affected
Aircraft) for the duration of this Agreement, such resignation to become
effective upon the selection by AFT of a Replacement Servicer that has been
engaged to perform the Services with respect to all the Aircraft Assets or any
affected Aircraft Assets, as the case may be, and that has accepted such
appointment in accordance with the provisions of Section 10.04(c) (it being
understood that, notwithstanding any other provision herein to the contrary, the
Servicer shall be under no obligation to follow such directions or perform such
Services pending the selection of and acceptance by a Replacement Servicer).
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(b) If AFT shall have received a notice from the Servicer pursuant
to Section 3.02(d) hereof to the effect that the Servicer cannot continue to
perform its obligations hereunder within the requirements set forth in Section
3.02 with respect to all Aircraft Assets or any affected Aircraft Assets, AFT
may remove the Servicer for all purposes under this Agreement in relation to the
affected Aircraft Assets or, in the event that the Servicer has notified AFT
that the Servicer cannot continue to perform its obligations with respect to all
Aircraft Assets, all the Aircraft Assets for the duration of this Agreement,
such removal to become effective upon the selection by AFT of a Replacement
Servicer that has been engaged to perform the Services with respect to any
affected Aircraft Assets or all the Aircraft Assets, as the case may be, and
that has accepted such appointment in accordance with the provisions of Section
10.04(c) (it being understood that, notwithstanding any other provision herein
to the contrary, the Servicer shall be under no obligation to perform Services
with respect to the affected Aircraft Assets pending the selection of and
acceptance by a Replacement Servicer).
(c) If any Taxes that are based on or measured by all or a portion
of the revenues, rental income or assets of any Person within the AFT Group
(other than (i) any Taxes payable by any such Person pursuant to the controlled
foreign corporation provisions or the passive foreign investment company
provisions of the Code or (ii) Taxes imposed as a result of the gross negligence
or wilful misconduct of any such Person) shall be imposed on or with respect to
the Servicer or any Affiliate thereof, and if such Taxes are not indemnified by
AFT then, provided that the Servicer shall have undertaken reasonable efforts
(that do not involve any material cost to the Servicer or any Affiliate thereof)
to otherwise avoid the imposition of such Taxes, the Servicer may resign as the
Servicer for all purposes under this Agreement in relation to all the Aircraft
Assets or, at its election, any Aircraft Assets the resignation with respect to
which would reduce or eliminate such Taxes for the duration of this Agreement,
such resignation to become effective upon the selection by AFT of a Replacement
Servicer to perform the Services with respect to all the Aircraft Assets or such
Aircraft Assets as the case may be, that has accepted such appointment in
accordance with the provisions of Section 10.04(c); provided, however, that
pending the effectiveness of such resignation, AFT shall be required to post a
bond, irrevocable letter of credit or other form of security reasonably
acceptable to the Servicer to be drawn upon by the Servicer in the event that
any such additional Taxes continue to
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be imposed on or with respect to the Servicer or any Affiliate thereof during
such pendency.
SECTION 10.04. Consequences of Expiration, Termination, Resignation
or Removal. (a) Notices. (i) Upon the expiration or termination of this
Agreement in accordance with this Article X, or upon the resignation by or
removal of the Servicer with respect to the performance of the Services for any
or all of the Aircraft Assets, the Servicer will promptly forward to AFT any
notices, reports and communications received by it from any relevant Lessee
during the one year immediately after expiration, termination, resignation or
removal.
(ii) AFT will notify promptly each relevant Lessee and any relevant
third party (with a copy to each Rating Agency) of the termination, resignation
or removal of the Servicer under this Agreement in relation to any of the
Aircraft Assets and will request that all such notices, reports and
communications thereafter be made or given directly to the Replacement Servicer
and AFT.
(b) Accrued Rights. A termination, resignation or removal in
relation to any or all the Aircraft Assets 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.
(c) Replacement Servicer. (i) Upon the expiration or termination of
this Agreement in accordance with this Article X, or upon the resignation by or
removal of the Servicer with respect to the performance of the Services for any
or all of the Aircraft Assets, the Servicer will cooperate with any Replacement
Servicer, including providing such Replacement Servicer with all information and
documents reasonably requested.
(ii) Other than at the expiration of the term as set forth in
Section 10.01 or pursuant to a termination of the Agreement by the Servicer in
accordance with Section 10.02(a)(i)(A), the Servicer may not resign or be
removed from its obligations and duties as Servicer hereunder, nor may this
Agreement 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 and AFT has received written confirmation from each of the Rating
Agencies that no lowering or withdrawal of the then current Ratings of any class
or subclass of Notes will
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result from such appointment; provided, however, that, in the event that a
Replacement Servicer shall not have been appointed within 90 days after any
termination of this Agreement with respect to the Servicer or any resignation by
or removal of the Servicer, the Servicer may petition any court of competent
jurisdiction for the appointment of a Replacement Servicer.
(iii) In the event of the resignation or removal of the Servicer
with respect to the performance of the Services for any or all of the Aircraft
Assets, AFT has informed the Servicer that UniCapital or one of its Affiliates
may be appointed as the Replacement Servicer in respect thereof, and, to the
extent that the consent or approval of the Servicer to any such appointment is
required, the Servicer hereby consents in advance to such appointment.
(d) Payment of Fees and Expenses. (i) Upon the expiration or
termination of this Agreement in accordance with this Article X, or upon the
resignation or removal of the Servicer with respect to the performance of the
Services for any Aircraft Asset, so long as the Servicer is continuing to
perform any of the Services, AFT shall continue to pay 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 10.04(c).
(ii) If a Replacement Servicer is appointed with respect to any
Aircraft Asset in accordance with Section 10.04(c) and such Aircraft Asset is
sold by any Person within the AFT Group to a customer to whom the Servicer had
been actively engaged in marketing such Aircraft Asset 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 Asset as if the Servicer had arranged for the sale of such Aircraft
Asset. Following any such appointment of a Replacement Servicer, the Servicer
will, upon the request of AFT, provide AFT with a list of customers with respect
to which the Servicer had been actively engaged in marketing such Aircraft Asset
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 AFT and shall not be disclosed to any Person other than members of the
Controlling Trustees of AFT and the Administrative Agent or used for any purpose
other than as a basis for determining any Sales
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Incentive Fees payable to the Servicer pursuant to the first sentence of this
Section 10.04(d)(ii).
(e) Transition. Upon the expiration or termination of this Agreement
in accordance with this Article X, or upon the resignation or removal of the
Servicer with respect to the performance of the Services for any Aircraft Asset,
the Servicer shall promptly return the originals (and all copies) within its
possession of all Aircraft Assets Related Documents to AFT and shall provide AFT
with such access to other nonconfidential, nonproprietary documentation and
information relating to the business of any Person within the AFT Group (and,
upon the request by AFT and to the extent practicable, copies thereof) within
its possession as is reasonably necessary to the conduct of the business of any
Person within the AFT Group.
SECTION 10.05. Survival. Notwithstanding any termination or the
expiration of this Agreement, (a) the obligations of AFT under Sections 2.03(g),
2.03(i), 2.03(j), 2.04, 2.05(a), 2.05(c), 2.05(d), 2.05(f), 2.05(g), 2.05(h),
2.05(i), 3.03, 3.04, 6.06, 7.03(f), Article IX, 10.04, 10.05, Article XI, 13.01
and 13.03 of this Agreement and Section 2.2(b) of Schedule 2.02(a) to this
Agreement and the Servicer's obligations under Section 10.04 and Article XI
shall survive such termination or expiration, as the case may be, and (b) the
representations and warranties contained in Article IV and in Section 2.02(g)
shall survive and remain in full force and effect until the third anniversary of
the date on which this Agreement shall have expired or terminated.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.01. Indemnity. (a) Notwithstanding anything to the
contrary set forth herein (other than Section 2.03(m)) or in any other Operative
Agreement, AFT does hereby assume liability for, and does hereby agree to
indemnify and hold harmless on an After-Tax Basis each of the Indemnified
Parties from any and all Losses that may be imposed on, incurred by or asserted
against any Indemnified Party, directly or indirectly, arising out of, in
connection with or related to (i) the Servicer's performance under this
Agreement or from errors in judgment or omissions by the Servicer under this
Agreement; provided, however, that such indemnity shall not apply to the extent
that such Losses are finally adjudicated to have been directly caused by (x) the
willful misconduct or gross negligence of the Servicer in respect of its
obligation to apply the Standard of Care or the Conflicts Standard in respect of
its performance of the Services or (y) any representation or warranty by the
Servicer set forth in Sections 4.10 or 4.11 having proven to be false on the
date hereof, (ii) any Indemnified Parties' involvement (or alleged involvement)
in connection with the structuring or implementation of any aspect of the
transactions contemplated by the Final Prospectus and (iii) the offering or sale
of the Notes or Beneficial Interest Certificates by AFT or any of its
Affiliates, including any Losses to which any Indemnified Party may become
subject, under the Securities Act of 1933, the Securities Exchange Act of 1934
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as any such Loss arises out of, or is based upon (y) any
untrue statement or alleged untrue statement of a material fact contained in the
Final Prospectus or in any amendment thereof or supplement thereto or in any
preliminary offering memorandum or other preliminary prospectus related thereto
or (z) the 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, in the case of the Final Prospectus, in light of the
circumstances under which they were made, not misleading.
(b) Each Indemnified Party agrees to give AFT prompt notice of any
action, claim, demand, discovery of fact, proceeding or suit for which the
applicable Indemnified Party intends to assert a right to indemnification under
this Agreement; provided, however, that failure to give such notification shall
not affect such Indemnified Party's
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entitlement to indemnification under this Section 11.01 unless and only to the
extent such failure results in actual irreparable prejudice to AFT or any other
Person within the AFT Group.
SECTION 11.02. Procedures for Defense of Claims. (a) If a Third
Party Claim is made against any Indemnified Party, the applicable Indemnified
Party shall promptly notify AFT in writing of such claim (which notice shall
include all relevant information reasonably necessary for AFT to understand such
claim which is in the possession or under the control of, or which can with
reasonable commercial efforts be obtained by, such Indemnified Party at the time
of such notice, subject to Applicable Laws and confidentiality obligations), and
the Servicer or AFT (if so directed by the applicable Indemnified Party and if
so accepted by AFT) will undertake the defense thereof. The failure to notify
AFT promptly shall not relieve AFT of its obligations under this Article XI
unless and only to the extent that such failure results in actual irreparable
prejudice to AFT or any other Person within the AFT Group.
(b) If so directed by the applicable Indemnified Party and if
accepted by AFT, AFT shall within 30 days, undertake the conduct and control,
through counsel of its own choosing (subject to the consent of the applicable
Indemnified Party, such consent not to be unreasonably withheld or delayed) and
at AFT's risk and expense, the good faith settlement or defense of such claim,
and the applicable Indemnified Party shall cooperate fully with AFT in
connection therewith; provided, however, that (i) at all times the applicable
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 applicable Indemnified Party, and (ii) AFT shall not be entitled to
settle such claims unless it shall have confirmed in writing its obligation to
indemnify the applicable Indemnified Party for the liability asserted in such
claim. AFT shall obtain the written consent of the applicable Indemnified Party
prior to ceasing to defend, settling or otherwise disposing of such claim if as
a result thereof such Indemnified Party would become subject to injunctive,
declaratory or other equitable relief or the business of such Indemnified Party
would be materially adversely affected in any manner.
(c) So long as AFT is reasonably contesting any such claim in good
faith, the applicable Indemnified Party shall fully cooperate with AFT in the
defense of such claim as is
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reasonably required by AFT. Such cooperation shall include the retention and the
provision of records and information which are reasonably relevant to such Third
Party Claim and making directors, officers and employees available on a mutually
convenient basis to provide additional information. Neither the Servicer nor any
Indemnified Party shall settle or compromise any claim without the written
consent of AFT unless the Servicer or the applicable Indemnified Party agrees in
writing to forego any and all claims for indemnification from AFT with respect
to such claims.
(d) If AFT, within 5 days after notice of any such claim, does not
agree to defend such Third Party Claim as directed by the applicable Indemnified
Party, such Indemnified Party will have the right to undertake the defense,
compromise or settlement of such Third Party Claim.
SECTION 11.03. Reimbursement of Costs. The costs and expenses,
including fees and disbursements of counsel (except as provided in clause (i) of
the proviso to the first sentence of Section 11.02(b)) and expenses of
investigation, incurred by any Indemnified Party in connection with any Third
Party Claim, shall be reimbursed on a quarterly basis by AFT upon the submission
of evidence reasonably satisfactory to AFT that such expenses have been
incurred, without prejudice to AFT's right to contest the Indemnified Party's
right to indemnification and subject to refund in the event that AFT is
ultimately held not to be obligated to indemnify the Indemnified Party.
SECTION 11.04. Waiver of Certain Claims; Special Indemnity. AFT does
hereby (a) assume liability for and agree to indemnify and hold harmless on an
After-Tax-Basis, in accordance with the provisions of this Article XI, each of
the Indemnified Parties from any and all Losses that may be imposed on, incurred
by or asserted against any Indemnified Party directly or indirectly arising out
of, in connection with or related to any claims of shareholders or creditors of
any Person within the AFT Group and any claims ("Shadow Director/Related Company
Claims") that may be made by or on behalf of any Person against any Indemnified
Party which are based on any Indemnified Party being a shadow director of, or a
related company to, any Person within the AFT Group under applicable Irish law
or any similar concept under any other Applicable Law; (b) waive, and shall
cause each other Person within the AFT Group to waive, any and all Shadow
Director/Related Company Claims that may be made by or on behalf of any Person
within the AFT Group against any Indemnified Party, (c) agree not to sue, and to
cause each other
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Person within the AFT Group not to sue, upon any such Shadow Director/Related
Company Claims, and (d) agree that any amounts awarded to or received by any
Person within the AFT Group arising out of or related to any such Shadow
Director/Related Company Claims (whether such claims were made by or on behalf
of any Person within the AFT Group or by a third party (including any
liquidator)) shall be paid over to the applicable Indemnified Party.
SECTION 11.05. Waiver of Certain Accounting Claims; Special
Indemnity. AFT does hereby (a) assume liability for and agree to indemnify and
hold harmless on an After-Tax-Basis, in accordance with this Article XI, each of
the Indemnified Parties from any and all Losses that may be imposed on, incurred
by or asserted against any Indemnified Party directly or indirectly arising out
of, in connection with or related to any claims of shareholders or creditors of
any Person within the AFT Group or of any other Person arising out of, in
connection with or related to, the compliance by AFT or any other Person within
the AFT Group of their respective obligations, including any of their respective
reporting obligations ("Compliance Obligations") to any holders of outstanding
Notes or Beneficial Interest Certificates, any holders of any other securities
issued by any Person within the AFT Group or any Governmental Authorities and
for all instructions, discretion, judgments and assumptions related to such
Compliance Obligations (collectively "Accounting Claims"); provided, however,
that such indemnity shall not apply to the extent that such Losses are finally
adjudicated to have been directly caused by the willful misconduct or gross
negligence of the Servicer in respect of its obligation to apply the Standard of
Care in respect of its performance of such Services, (b) waive, and shall cause
each other Person within the AFT Group to waive, any and all Accounting Claims
that may be made by or on behalf of AFT or any other Person within the AFT Group
against any Indemnified Party and (c) agree not to sue, and to cause each other
Person within the AFT Group not to sue, upon any such Accounting Claim.
SECTION 11.06. Waiver of Year 2000 Claims; Special Indemnity. AFT
does hereby (a) assume liability for and agree to indemnify and hold harmless on
an After-Tax-Basis, in accordance with the provisions of this Article XI
(excluding, for purposes of this Section 11.06, the proviso set forth in Section
11.01(a)(i)), each of the Indemnified Parties from any and all Losses that may
be imposed on, incurred by or asserted against any Indemnified Party directly or
indirectly arising out of, in connection with or related to any claims of
shareholders
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or creditors of any Person within the AFT Group and any claims that may be made
by or on behalf of any other Person against any Indemnified Party arising out
of, in connection with or related to (i) any Year 2000 Compatibility matters in
connection with this Agreement, (ii) a failure by any Person within the AFT
Group to achieve full Year 2000 Compatibility, (iii) any Person within the AFT
Group experiencing any Year 2000 Compatibility problems in its business or with
respect to the Aircraft Assets, (iv) the Servicer experiencing any Year 2000
Compatibility problems in connection with the provision of the Services with
respect to the Aircraft Assets or (v) any third party provider of goods or
services related to the Aircraft Assets experiencing any Year 2000 Compatibility
problems (claims as described in (i)-(v) are collectively referred to as "Year
2000 Claims"); (b) waive, and shall cause each other Person within the AFT Group
to waive, any and all Year 2000 Claims that may be made by or on behalf of any
Person within the AFT Group against any Indemnified Party, (c) agree not to sue,
and to cause each other Person within the AFT Group not to sue, upon any such
Year 2000 Claims, and (d) agree that any amounts awarded to or received by any
Person within the AFT Group arising out of or related to any such Year 2000
Claims (whether such claims were made by or on behalf of any Person within the
AFT Group or by a third party (including any liquidator)) shall be paid over to
the applicable Indemnified Party.
SECTION 11.07. Continuing Liability under Other Agreements. The
Servicer understands, acknowledges and agrees that the intent of the parties
hereunder is that any limitation on the liability of the Servicer under this
Agreement, whether under this Article XI, Article III or otherwise, is not
intended to and shall not be construed to limit the liability of any Person
selling any Aircraft Assets under the Asset Purchase Agreement or the liability
of GE Capital to the initial purchasers under the Purchase Agreement and that
any such liability under either such agreement shall not give rise to any claim
for indemnification in favor of the Servicer or any of its Affiliates under this
Agreement.
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ARTICLE XII
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 all other parties; provided, however, that (i) the Servicer may delegate any
portion of but not all its obligations to GE or GE Capital or to any GE or GE
Capital 75% or more owned Subsidiary (a "Servicer Delegate");(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; and (iii) AFT may assign its rights
hereunder to the Security Trustee under the Security Trust Agreement and,
without in any way releasing AFT from any of its duties or obligations
hereunder, the Servicer consents to such assignment, it being understood that
neither AFT's assignment nor the Servicer's consent to such assignment will
affect the Servicer's rights and obligations hereunder, subject the Servicer to
any liability to which it would not otherwise be subject to hereunder nor modify
in any respect the contract rights of the Servicer hereunder. Any assignment or
delegation pursuant to this Section 12.01(a) shall not require any approval
pursuant to Section 7.04.
(b) Without limiting the foregoing, any Person who shall become a
successor by assignment or otherwise of AFT 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; provided, however, that the Security
Trustee shall not be required to become a party to this Agreement solely by
reason of the execution and delivery of the Security Trust Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Documentary Conventions. The Documentary Conventions
shall govern this Agreement.
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SECTION 13.02. Power of Attorney. AFT shall, and shall cause each
other Person within the AFT Group to appoint the Servicer and its successors,
and its permitted designees and assigns, as their true and lawful
attorney-in-fact pursuant to the form of Power of Attorney attached as Schedule
13.02 to this Agreement (with such modifications as are necessary under the laws
of the jurisdictions in which such Persons are organized). All services to be
performed and actions to be taken by the Servicer pursuant to this Agreement
shall be performed for and on behalf of AFT. The Servicer shall be entitled to
seek and obtain from AFT (and/or any other Person within the AFT Group as
appropriate) a power of attorney in respect of the execution of any specific
action as the Servicer deems appropriate.
SECTION 13.03. 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, AFT or its Controlling Trustees
(or any duly appointed committee thereof) or the Administrative Agent, to the
extent set forth in Section 2.02(c), and the Transaction Approval Requirements
in carrying out its obligations hereunder, and AFT 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 Conflicts
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 Controlling Trustees of AFT or a duly appointed committee
thereof, or the Administrative Agent.
SECTION 13.04. Year 2000 Readiness Disclosure. Statements made to
you in the course of this sale are subject to the Year 2000 Information and
Readiness Disclosure Act (15 U.S.C. `1). In the case of a dispute, this Act may
reduce your legal rights regarding the use of any such statements, unless
otherwise specified by your contract or tariff.
"You" and "your", as used in this Section 13.04, means AFT and any
other Person within the AFT Group and any agent of any thereof, including the
Administrative Agent.
SECTION 13.05. Certain Information. The parties hereto agree (a) not
to provide to each other competitively sensitive information, other than
information required to be provided by GECAS or AFT, as the case may be, under
contractual arrangements existing on the date hereof (or successor arrangements
thereto), (b) that any party receiving such
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information shall take such action as shall be necessary to maintain the
confidentiality thereof and (c) to establish appropriate procedures and
protocols to ensure compliance with the agreements in clauses (a) and (b).
Similarly, AFT's board of Controlling Trustees shall agree (x) not to provide
competitively sensitive information which it may receive from GECAS pursuant to
this Agreement to any third party and (y) not to use any such competitively
sensitive information for any purpose other than its duties and responsibilities
as a Controlling Trustee of AFT. In addition, to the extent that any Controlling
Trustee of AFT is involved in any other business activities that are competitive
with GECAS, such Controlling Trustee must be screened from receipt of
competitively sensitive information that may be requested by any other
Controlling Trustee of AFT beyond that information which is normally provided to
the board of Controlling Trustees pursuant to this Agreement. Any such
Controlling Trustee must also undertake in writing not to provide competitively
sensitive information which it may receive pursuant to this Agreement to any
third party and not to use any such competitively sensitive information for any
purpose other than its duties and responsibilities as a Controlling Trustee of
AFT. AFT agrees that it will cause the terms of this Section 13.05 to be
included in any other servicing agreement entered into by any Person within the
AFT Group with any other entity pursuant to which such entity will provide
services with respect to any aircraft on behalf of any Person within the AFT
Group, including the UniCapital Servicing Agreement, and, in connection
therewith, the relevant Controlling Trustees shall provide to the servicer under
such other servicing agreement written undertakings substantially similar to
those provided to the Servicer as contemplated by the immediately preceding
sentence.
SECTION 13.06. Original Aircraft. The parties acknowledge that this
Agreement was originally drafted in connection with Aircraft Assets owned or
leased-in by any Person within the AFT Group and not Original Aircraft. In the
event that in the Servicer's reasonable judgment the application of the terms of
any provision hereunder in respect of any Aircraft Asset would not be
appropriate prior to the title to such Aircraft Asset being transferred to a
Person within the AFT Group, then the Servicer shall take such action in respect
of such Aircraft Asset as is commercially reasonable or appropriate in such
context or circumstances. The Servicer shall make a good faith effort to consult
with AFT prior to taking any action in reliance upon this Section 13.06, taking
into account timing and other relevant considerations; provided, however, that
any
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failure to so consult with AFT will not constitute a default under or violation
of this Agreement.
SECTION 13.07. UniCapital Aircraft. It is understood that the
Aircraft Assets may include from time to time UniCapital Aircraft. In the event
that AFT has received written confirmation from each of the Rating Agencies that
no lowering or withdrawal of the then current Ratings of any class or subclass
of Notes will result from UniCapital or one of its Affiliates acting as primary
Servicer with respect to any UniCapital Aircraft pursuant to a servicing
agreement between UniCapital or one of its Affiliates and AFT (the "UniCapital
Servicing Agreement") and subject to compliance with the terms of the Indenture,
AFT may enter into the UniCapital Servicing Agreement pursuant to which
UniCapital or one of its Affiliates will perform services with respect to such
UniCapital Aircraft which are substantially similar to the Services provided by
the Servicer under this Agreement. It is understood that the UniCapital
Servicing Agreement shall cover, at AFT's and UniCapital's option, either (A)
all UniCapital Aircraft or (B) all Additional UniCapital Aircraft that, in the
case of clause (B), were both (1) acquired by any Person within the AFT Group
from UniCapital or any of its Affiliates following the effectiveness of the
UniCapital Servicing Agreement and (2) not previously Aircraft Assets under this
Agreement. In the event that AFT proposes to enter into the UniCapital Servicing
Agreement, then, as far in advance as is reasonably necessary to allow for a
smooth transition but in no event later than 30 Business Days prior to the
effective date of the UniCapital Servicing Agreement, it will deliver to the
Servicer a written notice setting forth (i) the date on which the UniCapital
Servicing Agreement will become effective and (ii) whether all UniCapital
Aircraft or only those Additional UniCapital Aircraft described in clause (B) of
the preceding sentence will become subject to the UniCapital Servicing
Agreement. Upon the effectiveness of the UniCapital Servicing Agreement and
subject to compliance with any relevant provisions of the Indenture, those
UniCapital Aircraft which become subject to such UniCapital Servicing Agreement
shall cease to be Aircraft Assets under this Agreement, except (as provided for
in Section 9.01(b)) for purposes of Sections 9.03, 9.04 and 9.05. AFT shall not,
and shall not permit any other Person within the AFT Group to, (x) permit any
Person (other than the Servicer, UniCapital and their respective Affiliates) to
act as servicer (i.e., to perform any services which are substantially similar
to the Services provided by the Servicer under this Agreement) of any Aircraft
owned or leased-in by any Person within the AFT
69
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Group, (y) enter into any servicing agreement with any Person (other than the
Servicer, UniCapital and their respective Affiliates) or (z) permit UniCapital
to assign or delegate any of its rights or obligations under the UniCapital
Servicing Agreement (or similar servicing agreement) to a Competitor referred to
in clause (ii) of the definition of "Competitor", except in the case of (x) and
(y) with respect to any Aircraft that shall have been an Aircraft Asset, but
shall have ceased to be an Aircraft Asset pursuant to the terms of this
Agreement (other than by reason of clause (z) of the proviso to the definition
of "Aircraft Assets"), in which case, unless such cessation shall have resulted
in the Servicer's no longer servicing any Aircraft Assets hereunder, if at the
time of such cessation UniCapital or any of its Affiliates is able to obtain
written confirmation from each of the Rating Agencies that no lowering or
withdrawal of the then current Ratings of any class or subclass of Notes will
result from such Person's acting as Replacement Servicer with respect to such
Aircraft, then UniCapital or such Affiliate shall act as such Replacement
Servicer with respect to such Aircraft.
70
<PAGE> 76
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date first written above.
GE CAPITAL AVIATION SERVICES,
LIMITED,
by
/s/ BRIAN HAYDEN
-----------------------------------
Name: Brian Hayden
Title: Director
AIRCRAFT FINANCE TRUST,
by
Wilmington Trust Company, as
Owner Trustee
/s/ EMMET HARMON
-----------------------------------
Name: Emmet R. Harmon
Title: Vice President
<PAGE> 77
SCHEDULE 2.02(a) TO
THE SERVICING AGREEMENT
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 7.04(a) of the Servicing
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 Appendix A to the
Servicing Agreement or, in the case of certain defined terms used in Annex 1 or
2 to the Servicing Agreement or Schedule 2.02(a)(i) to the Servicing Agreement,
in copies of the Indenture delivered to the Servicer pursuant to Section 2.1.
AFT shall provide to the Servicer any instructions the Servicer may require in
the interpretation of Annexes 1 and 2 to the Servicing Agreement on which
instructions the Servicer shall be entitled to rely in all respects.
SECTION 1. Lease Services.
SECTION 1.1. Collections and Disbursements. In connection with each
Lease of an Aircraft Asset (other than any Original Aircraft in the case of
clause (a) below) under which any Person within the AFT 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 the AFT Group, for all
payments due from the Lessee, including Rents, 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 reasonable commercial efforts to direct the Lessee, subject
to the terms of the Lease, to make such payments to such account designated as
the "Rental Account" in Schedule 4.03 to the Servicing Agreement (the relevant
details of such Rental Account being set forth in such Schedule) or to such
other accounts as specified in writing
2.02(a)-1
<PAGE> 78
by the Administrative Agent and use reasonable commercial 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, Deposits, Maintenance Reserves and other amounts that may be
adjusted under the Lease and shall propose to the relevant Lessee and/or make
such adjustments to the Rents, Deposits, Maintenance Reserves and other amounts
as are required or that the Servicer otherwise deems reasonably appropriate
considering, among other things, the terms of the relevant Lease and practices
that the Servicer believes are prevalent in the operating lease market;
(c) subject to the timely receipt by the Servicer of the information
related to the receipt of all payments made pursuant to any Lease into any Bank
Account, maintain appropriate records regarding payments under the Leases;
(d) subject to the terms of any applicable Aircraft Assets Related
Document, take such commercially reasonable 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 commercially
reasonable actions as are necessary to give effect to such directions; provided,
however, that, in the event a Lessee is in default under a Lease or a Lessee is
subject to a voluntary or involuntary bankruptcy, liquidation, receivership or
other similar proceeding, the Servicer will consult with the Administrative
Agent prior to applying any funds received from such Lessee to the extent that
such funds could reasonably be applied to leases relating to both Aircraft
Assets and Other Assets; 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 Deposits or Maintenance Reserves and the timely
renewal or drawing on or disbursement thereof as provided under the applicable
Lease or other Aircraft Assets Related Document or otherwise in accordance with
Section 1.5 of this Schedule 2.02(a).
2.02(a)-2
<PAGE> 79
SECTION 1.2. Maintenance. Subject to the availability of adequate
funding to comply with the obligations under this Schedule 2.02(a) and the
Servicing Agreement, the Servicer will perform the following technical services
relating to the maintenance of the Aircraft Assets:
(a) monitor the performance of maintenance obligations by Lessees
under all Leases relating to the Aircraft Assets by including the Aircraft
Assets in the Servicer's technical audit program (which shall include
inspection of each Aircraft Asset and maintenance of a record of all
written reports generated in connection with such inspections) consistent
with practices employed from time to time by GE Capital and its Affiliates
with respect to their own Aircraft; the Servicer shall advise AFT as to
the content of such technical audit program and shall advise AFT 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 Assets under which any Person within the AFT Group is, or
following the Delivery of the related Aircraft Asset will be, the lessor;
(c) in connection with a termination or expiration of a Lease under
which any Person within the AFT Group is, or following the Delivery of the
related Aircraft Asset will be, the lessor:
(i) arrange for the appropriate technical inspection of the
Aircraft Asset for the purpose of determining if the re-delivery
conditions under the Lease have been satisfied;
(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 Persons within the AFT Group;
(iii) on the basis of the final inspection and available
records, determine whether the Lessee has complied with all required
airworthiness directives and mandatory modifications, and establish
the status
2.02(a)-3
<PAGE> 80
of compliance with Airframe and Engine manufacturer service
bulletins and Lessee-originated modifications undertaken, in each
case with respect to the Aircraft Asset and as required by the
Lease;
(iv) (A) determine whether the Lessee has satisfied the
re-delivery conditions applicable to the Aircraft Asset 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 Deposits, Maintenance
Reserves or other payments under the Lease and (C) maintain a record
of the satisfaction of such conditions and accept re-delivery of the
Aircraft Asset; and
(v) determine the need for, procure and monitor the
performance of any maintenance and refurbishment of the Aircraft
Asset upon re-delivery, 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 Asset;
(d) consider and, to the extent the Servicer deems reasonably
necessary or appropriate, approve any Lessee-originated modifications to
any Aircraft Asset 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 Asset or the
interests of any Person within the AFT Group; or
(iii) which are approved by AFT;
(e) determine the amount (if any) that the relevant Person within
the AFT Group (or, with respect to any Original Aircraft, the owner) 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
2.02(a)-4
<PAGE> 81
Lessee) to 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 Asset, at the expense of the relevant
Person within the AFT Group, following termination of a Lease for any
reason and re-delivery of the Aircraft Asset thereunder and prior to
delivery of such Aircraft Asset to a new lessee or purchaser, on the most
economic basis reasonably available and appropriate under the
circumstances.
The Servicer shall generally provide the technical/maintenance
services set forth in this Section 1.2 through the use of its own staff where it
shall deem appropriate and shall utilize third parties to provide such
technical/maintenance services where it shall deem appropriate.
SECTION 1.3. 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 the Servicing
Agreement, as the same may be amended from time to time at the direction
of AFT; provided, however, that, if an agreement with respect to hull or
liability insurance, if any, cannot be reached with any particular Lessee
pursuant to which such Lessee will procure and pay the premiums for such
insurance in amounts consistent with the foregoing, the Servicer shall
arrange for any shortfall in the required amount of insurance to be
covered, at the expense of AFT, pursuant to arrangements entered into
pursuant to clauses (iii) and (v) of this Section 1.3(a);
(ii) monitor the performance of the obligations of Lessees relating
to insurance under Leases of any Aircraft Assets and, where practicable,
ensuring that appropriate evidence of insurance exists with respect to any
Aircraft Assets maintenance providers;
2.02(a)-5
<PAGE> 82
(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 the Servicing Agreement, as the same may be amended from time
to time at the direction of AFT;
(iv) procure such repossession insurance for Aircraft Assets
registered in those countries listed on Annex 1 to the Servicing Agreement
(which list has been established by AFT and may be modified from time to
time by AFT) and with such minimum coverage amounts with respect to hull
insurance as are set forth on Annex 1 to the Servicing Agreement, as the
same may be amended from time to time at the direction of AFT; provided,
however, that, if an agreement with respect to repossession insurance, if
any, cannot be reached with any particular Lessee pursuant to which such
Lessee will pay the premiums for such insurance in amounts consistent with
the foregoing, the Servicer shall pay any premiums to the extent unpaid by
the Lessee, at the expense of AFT;
(v) if at any time any Aircraft Asset ceases to be insured or any
Person within the AFT Group requires insurance coverage relating to an
Aircraft Asset for any reason, including default by the Lessee or an
Aircraft Asset not being leased upon termination of a Lease, the Servicer
will procure, at the expense of the relevant Person within the AFT Group,
alternative insurance coverage, with such minimum coverage amounts with
respect to hull and liability insurance as are set forth on Annex 1 to the
Servicing Agreement, as the same may be amended from time to time at the
direction of AFT; and
(vi) advise AFT of any settlement offers received by the Servicer
with respect to any claim of damage or loss in excess of $10,000,000 with
respect to an Aircraft Asset, and, upon request by AFT, provide AFT with
copies of all relevant documentation related thereto and such other
additional information and advice as AFT may reasonably request and, upon
direction from AFT that any such settlement offer related thereto is
acceptable, prepare the
2.02(a)-6
<PAGE> 83
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 AFT (it being
understood that settlement offers with respect to any such claims up to
and including $10,000,000 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, mutatis
mutandis, 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).
(b) The Servicer may engage, on behalf of, and for the benefit and
at the expense of, any Person within the AFT Group, one or more Advisers and
Brokers, each of whom:
(i) may also act in the same or similar capacities for the Servicer
and its Affiliates;
(ii) shall take directions from the Servicer (as authorized by the
Servicing Agreement) in respect of the Aircraft Assets; and
(iii) may act on behalf of any Person within the AFT Group in
respect of any of their other insurance requirements, if requested to do
so by any such Person within the AFT Group.
The Servicer shall be entitled to rely reasonably on the actions taken by or
recommendations of any such Adviser and Broker, subject to the terms of the
relevant Lease. The Servicer will obtain such advice from the relevant Adviser
or Broker or both, as it deems appropriate, as to the reasonableness of any
insurance arrangements proposed by a Lessee, and as to the levels and types of
insurance to be provided by a Lessee or to be arranged by the Servicer, for any
of the Aircraft Assets. Except to the extent the Servicer can effect more cost
efficient coverage under fleet or group policies, the Servicer will use
reasonable commercial efforts to maintain separate and distinct customer
relationships with such Advisers or Brokers when acting
2.02(a)-7
<PAGE> 84
on behalf of any Person within the AFT Group, on the one hand, and when acting
on its own behalf or on behalf of other Persons not within the AFT Group whose
Aircraft Assets it manages, on the other hand. Any such insurance obtained by
the Servicer shall include as the named insured thereunder, such Persons as are
required to be designated as named insureds pursuant to paragraph 6 of Annex 1
to the Servicing Agreement.
(c) The Servicer shall provide to AFT such periodic reports
regarding insurance matters relating to the Aircraft Assets as AFT may
reasonably request.
SECTION 1.4. Administration. The Servicer shall administer each
Lease in accordance with its terms and as otherwise specifically addressed
herein.
SECTION 1.5. Enforcement. The Servicer shall take commercially
reasonable steps to enforce the obligations to the relevant Person within the
AFT Group (or, with respect to any Original Aircraft, the owner) of the Lessee
and any other parties under each Lease and under any ancillary agreements
thereto delivered by AFT 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 such commercially reasonable steps
as it deems reasonably necessary or appropriate to preserve and enforce the
rights of the relevant Person within the AFT Group (or, with respect to any
Original Aircraft, the owner) 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, drawing
on or making disbursement of any 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 1.6. 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 AFT pursuant to Section 7.04(a) of
the Servicing 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
2.02(a)-8
<PAGE> 85
the entering into of such new Lease to require the approval of AFT pursuant to
Section 7.04(a)(ii) of the Servicing 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,
maintenance reserves or other amount thereunder if any such default is cured
within seven (7) days of the date on which such payment was due.
SECTION 1.7. 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 the AFT Group (or,
with respect to any Original Aircraft, the owner) of any right or option that
such Person (or such owner) may have with respect to any of the Aircraft Assets
or the Leases.
SECTION 2. Compliance with Covenants; Security Interests.
SECTION 2.1. Compliance Generally. (a) Subject to the availability
to the Servicer of adequate funding to comply with its obligations under this
Schedule 2.02(a) and the Servicing Agreement, the Servicer shall take such
commercially reasonable actions as it shall deem reasonably necessary or
appropriate to keep AFT in compliance with its obligations and covenants under
the Indenture solely to the extent that such obligations and covenants
specifically relate to the Services, 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 the Indenture; provided, however, that the
foregoing shall only apply to (A) any Indenture covenants that are set forth
(or, in certain cases, appear as extracts) on Schedule 2.02(a)(i) to the
Servicing Agreement, to the extent that each provision set forth (or extracted)
on such Schedule includes the relevant section references for each such
provision from the Indenture, and which (together with the definitions for any
capitalized terms used therein) are set
2.02(a)-9
<PAGE> 86
forth in full in a copy of the Indenture delivered by AFT to the Servicer,
certified by AFT as a true and complete copy thereof (and AFT shall promptly
provide the Servicer with all amendments, supplements and waivers thereto, so
certified), and AFT 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 2.2 of this
Schedule 2.02(a)) first coming into effect (including through amendments or
modifications) after the date of the Servicing Agreement, or which AFT 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 AFT Group (or, with respect to any
Original Aircraft, the owner) 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 or
interest in any Lease or related agreement or any Aircraft Asset covered
thereby.
SECTION 2.2. Certain Matters Relating to Concentration Thresholds.
(a) Concentration Thresholds Generally. The Servicer shall use
reasonable commercial efforts to comply with any covenants specifically relating
to limitations on Lessee concentration set forth in the Indenture
("Concentration Thresholds") and shall promptly inform AFT of any proposed
transaction that it reasonably determines may result in such Concentration
Thresholds being exceeded, and AFT 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
2.2. The Servicer shall not enter into any such transaction other than pursuant
to the terms of Section 2.2(c) below.
(b) Present Concentration Limits. AFT hereby represents and warrants
to the Servicer that set forth in Annex 2 to the Servicing Agreement are the
Concentration
2.02(a)-10
<PAGE> 87
Thresholds (including, following each provision set forth 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 capitalized terms used therein) are set forth in a
full copy of the Indenture delivered by AFT to the Servicer, certified by AFT as
a true and complete copy thereof (and AFT shall promptly provide the Servicer
with all amendments, supplements and waivers thereto, so certified) and AFT
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) Directions to Servicer. The Servicer shall not enter into any
transaction with respect to which it has provided notice pursuant to Section
2.2(a) until AFT 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 the Servicing Agreement and this Schedule
2.02(a).
SECTION 2.3. Security Interests. In connection with the obligation
of any Person within the AFT Group under the Security Trust Agreement to perfect
any security interest granted by it in its right, title and interest in and to
any Assigned Lease, the Servicer's sole responsibility in respect thereof shall
be to take the following actions with respect to each Assigned Lease: (a) seek
advice from local counsel in the jurisdiction where the related Aircraft Asset
is registered as to what actions would be customarily taken in such jurisdiction
to perfect the security interest created in such Assigned Lease pursuant to the
Security Trust Agreement and to use commercially reasonable efforts to implement
such advice, (b) (1) create an original chattel paper copy of such Assigned
Lease by adding the following language to the cover of such Assigned Lease: "To
the extent, if any, that this [Lease Agreement] or any [Lease Supplement]
hereunder constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this [Lease Agreement] or such [Lease Supplement] may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Security Trustee under and as defined in
the Security Trust Agreement dated as of May 5, 1999, between Aircraft Finance
2.02(a)-11
<PAGE> 88
Trust, Bankers Trust Company as the Security Trustee and the Operating Bank and
the various other parties identified on the signature pages thereof", and (2) no
later than five days after the execution of such Assigned Lease by all the
parties thereto, deliver such original chattel paper copy (which, by way of
clarification, shall not include the signature or the receipt therefor of the
Security Trustee) to a courier service for delivery to the Security Trustee at
Four Albany Street, New York, New York 10006, Attention: Corporate Trust and
Agency Services, Structure Finance Team, (c) notify the Lessee in writing of the
security assignment of such Assigned Lease to the Security Trustee pursuant to
the Security Trust Agreement (which notice may be contained in such Assigned
Lease), (d) obtain from the Lessee a written acknowledgement addressed to, or
for the benefit of, the Security Trustee (1) acknowledging receipt of
notification of such security assignment and (2) containing the agreement of the
Lessee to continue to make all payments required to be made to the lessor under
such Assigned Lease to the account specified in such Assigned Lease unless and
until the Security Trustee otherwise directs (it being understood that the
account specified in such Assigned Lease will be the account specified by the
Administrative Agent to the Servicer as contemplated by Section 1.1(a) of this
Schedule 2.02(a)) and (e) take such other action as AFT shall have reasonably
requested and described in reasonable detail in a written notice to the
Servicer. Notwithstanding the foregoing, the Servicer shall have no obligation
to take any action specified in the prior sentence of this Section 2.3 with
respect to any Assigned Lease or any supplement or amendment thereto that was
executed before the related Aircraft became an Aircraft Asset (it being the
expectation of the parties hereto that such action will be taken by the seller
of any Aircraft Asset related to such Assigned Lease to any Person within the
AFT Group). In connection with any Assigned Lease, AFT will cooperate with the
Servicer in obtaining a letter of quiet enjoyment with respect to such Assigned
Lease referred to in the final sentence of Section 2.08(a) of the Security Trust
Agreement.
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<PAGE> 89
SECTION 3. Lease Marketing.
(a) The Servicer shall provide and perform lease marketing services
with respect to the Aircraft Assets and in connection therewith is authorized:
(i) 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 the AFT Group (or, with respect to any
Original Aircraft, the owner); and
(ii) to include within any commitment for a Lease of an Aircraft
Asset any intermediate Lease or Leases through any Person within the AFT
Group that the Servicer deems reasonably necessary or appropriate.
(b) 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:
(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 or, in the case of the Lease of the
Airbus A320-200 Aircraft (with manufacturer's serial number 373) to
TransMeridian Airlines, the Servicer shall commence the drafting of, and
negotiation with respect to, such Lease based on the form provided by
UniCapital to AFT pursuant to Section 5.03(f) of the Indenture (as either
such form of lease shall be amended from time to time by the Servicer, 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
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previously used with respect to such Lessee (the "Precedent Lease").
Provided that the Servicer commences the negotiation of a Lease of
any Aircraft Asset in accordance with clauses (b)(i) and (b)(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.
Section 3(b) shall not be applicable to the negotiation with respect to, or
execution of, any Lease for Aircraft Assets in which negotiations commenced on
or prior to the Closing Date. The Servicer is authorized to execute and deliver
binding leases and related agreements on behalf of the relevant Person within
the AFT Group (or, with respect to any Original Aircraft, the owner) based on
the foregoing procedures.
(c) (i) Upon ten Business Days' prior written notice from AFT (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
required pursuant to the terms of Section 5.03(f) of the Indenture (the
"Annual Review"), the Servicer shall provide AFT with a copy of its then
current Pro Forma Lease, together with a copy thereof marked (with such
marking to be accomplished to the extent possible with the then current
word processing software employed by the Servicer and, for the avoidance
of doubt, not manually) 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(c)(ii)
below (or from the Pro Forma Lease utilized as of the Closing Date (a copy
of which shall have been delivered to AFT on or before the Closing Date)
in the case of the first such Annual Review).
(ii) On or prior to each anniversary of the Closing Date and
following the Annual Review, AFT shall advise the Servicer in writing
whether any provisions in the then current Pro Forma Lease that correspond
to the Core Lease Provisions are required in accordance with the terms of
Section 5.03(f) 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 such provision was determined to be acceptable in
accordance with the terms of Section 5.03(f) of the Indenture. Following
any such written advice from AFT, the Servicer shall amend the Pro Forma
Lease accordingly and
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shall commence the negotiation of any Lease thereafter with the Pro Forma
Lease as so amended in respect of any such provision.
(d) The Servicer shall take such reasonable commercial actions as
shall be reasonably necessary or appropriate 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.
(e) The Servicer shall generally provide the marketing services set
forth in this Section 3 through the use of its own marketing staff where it
shall deem appropriate and shall utilize third parties to provide such marketing
services where it shall deem appropriate.
SECTION 4. Sales of Aircraft and Engines.
(a) The Servicer shall provide and perform sales services with
respect to the Aircraft Assets at, and on a basis consistent with, the direction
from time to time of AFT, 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 the AFT Group; and
(ii) to include within any sale any intermediate Lease or Leases
through any Person within the AFT 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 AFT pursuant to Section
7.04(a) of the Servicing Agreement.
(b) The Servicer shall negotiate documentation of any sale and,
subject to Section 4(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 the AFT Group.
(c) The Servicer shall take such reasonable commercial actions as
shall be reasonably necessary or
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appropriate to deliver any Aircraft Asset pursuant to the terms of the
documentation of the sale.
(d) In the event that AFT directs the Servicer to sell or arrange
for the sale of any Aircraft Asset, the Servicer will not be required to take
any such action until AFT shall provide the Servicer with an Officer's
Certificate, substantially in the form attached as Schedule 2.02(a)(ii) to the
Servicing Agreement, 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 the Servicing Agreement and this Schedule 2.02(a).
(e) Notwithstanding any other provision in Section 7.04 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 AFT.
SECTION 5. Aircraft Acquisitions.
SECTION 5.1. Limitation on Acquisitions. AFT shall not, and shall
not permit any other Person within the AFT Group to, purchase or otherwise
acquire, directly or indirectly, (x) Aircraft Assets from any Person other than
the Servicer or UniCapital or any of their respective Affiliates or (y) from
UniCapital or any of its Affiliates, without the consent of the Servicer, any
L1011, A300B4-200, B747-100, -200, -300, any Stage II aircraft (including,
without limitation, hushkitted versions), any Fokker aircraft or any regional
jets, and other than as provided herein (including, without limitation, with
respect to any Engine, in Section 4(e) of Schedule 2.02(a) and, in respect of
any Aircraft Assets, pursuant to the terms of the Asset Purchase Agreement).
SECTION 5.2. Firm Orders and Options. With respect to any Aircraft
Assets that AFT or any other Person within the AFT Group shall purchase pursuant
to any firm order, order subject to cancelation, option or other arrangement,
the
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Servicer shall, at the request of AFT, take such reasonable commercial actions
as the Servicer shall deem reasonably necessary or appropriate to accept
delivery of any such Aircraft Assets on behalf of AFT or any other Person within
the AFT Group, as the case may be, in accordance with the terms of such order,
option or other arrangement (including, without limitation, conducting such
pre-delivery inspections as the Servicer deems reasonably appropriate);
provided, however, that the Servicer shall have no obligation to make any
payments to any seller of such Aircraft Assets.
SECTION 5.3. Other Acquisitions. Except as otherwise provided in
Section 2.03(g) of the Servicing Agreement, the Servicer shall not be required
to assist in the solicitation of, or otherwise take any action to obtain, any
lessee consents and/or novations in connection with the acquisition of any
Aircraft Assets or the issuance of Additional Notes or Additional Certificates
(it being the expectation of the parties hereto that the obtaining of any lessee
consents and/or novations with respect to any Aircraft Asset shall be the
responsibility of the seller of such Aircraft Asset to any Person within the AFT
Group). The parties hereto acknowledge that Section 2.03 of the Servicing
Agreement deals with, among other things, the Servicer's involvement in the
issuance of Additional Notes and Additional Certificates.
SECTION 6. Market Research.
SECTION 6.1. Market Research. The Servicer shall maintain research
capability and, subject to the requirements of Section 13.05 of the Servicing
Agreement, shall provide commercial aviation general market industry research
reports to AFT on an annual basis, which reports shall include general market
information with respect to commercial aviation demand in terms of traffic
growth, new Aircraft requirements and other information necessary for AFT
Group's long-term planning with respect to Leases, purchases and sales, and the
Aircraft Assets; provided, however, that, upon the delivery of any Termination
Notice, the Servicer shall cease to provide competitively sensitive information
to the AFT Group.
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SECTION 7. Aircraft Asset Cash Services.
SECTION 7.1. Accounts and Account Information.
(a) Existing Accounts. In the event that the Administrative Agent
desires to modify any of the arrangements relating to any of the bank accounts
set forth on Schedule 4.03 to the Servicing Agreement (the "Existing Accounts")
in accordance with Section 2.04 of the Administrative Agency Agreement, AFT
shall cause the Administrative Agent to (i) 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
Administrative Agency Agreement and (ii) transmit instructions to the relevant
banking institution to effect 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 Administrative Agent
in the event that any new bank accounts need to be established on behalf of any
Person within the AFT 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) jurisdiction of the Lessee and
in which such Aircraft Assets are to be registered. Following receipt of such
notice from the Servicer, AFT shall cause the Administrative Agent promptly to
(i) deliver a certificate to the Servicer specifying (v) the name and location
of the bank at which such account will be established, (w) the name(s) in which
such account will be established, (x) the names of the beneficiaries of such
account, (y) the names of the Persons authorized to make withdrawals from such
account and (z) such other information (including with respect to any security
arrangements) as the Administrative Agent deems appropriate and certifying that
the establishment of such account is in accordance with the applicable
provisions of the Indenture and the Administrative Agency Agreement and (ii)
transmit instructions to the relevant banking institution to effect the
establishment of such account and shall take such other actions as are
incidental thereto in order to give effect to the foregoing (the "New Accounts";
and, together with the Existing Accounts, the "Bank Accounts").
SECTION 7.2. Cash Transfers. (a) In the event that funds are
required to be transferred from any Bank Account to
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the account of another Person (other than any Person within the AFT Group) in
order to give effect to the directions of any Lessee in accordance with Section
1.1(d) of this Schedule 2.02(a), the Servicer shall provide the Administrative
Agent with written notice setting forth the (i) name of the transferor, (ii)
name of the transferee, (iii) accounts from and to which funds are to be
transferred, (iv) amounts to be transferred, (v) amount of the initial payment
from the Lessee and (vi) anticipated date of transfer. No later than the next
following Business Day, AFT shall cause the Administrative Agent to notify the
Servicer in writing whether the proposed transfer will be made on such
anticipated date of transfer or on another stated date. AFT shall instruct the
Administrative Agent to cause such transfer to be made on such date in
accordance with the terms of the written notice provided by the Servicer.
(b) It is understood and agreed that (i) all decisions as to any
transfers contemplated by Section 7.2(a) shall be the decisions and
responsibility of the Administrative Agent and not the decisions and
responsibility of the Servicer (and the Servicer shall not be subject to any
other responsibilities not specified in this Section 7 or any liability
whatsoever for any such transfers or any decisions of the Administrative Agent
related thereto) and (ii) the Servicer shall have no responsibility as to the
actions taken (or omitted) by any banking institution upon receipt of any
payment instruction from the Administrative Agent in accordance with the
procedures set forth in this Section 7.
SECTION 7.3. Payments.
(a) Anticipated Payments. For purposes of the calculation of the
Required Expense Amount by the Administrative Agent pursuant to Section 2.04(b)
of the Administrative Agency Agreement, not less than one Business Day prior to
each Calculation Date, the Servicer shall deliver to the Administrative Agent a
written projection of payment obligations (including projected expenditures, or
return to Lessees, of security deposits and/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 the Servicing 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 later than two
Business Days prior to the date of each cash payment, the Servicer shall deliver
to the Administrative Agent a written
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notice of such payment (whether or not such cash payment was reflected in the
projection referred to in this Section 7.3(a)), and shall state the (i)
anticipated date of such payment, (ii) payee, (iii) amount of such payment and
(iv) obligation in respect of which such payment is to be made (the "Stated
Services Obligation"), with an appropriate notation if, and to what extent, such
payment should be made from the Lessee Funded Account. No later than the
Business Day prior to such anticipated date of payment, AFT shall instruct the
Administrative Agent to notify the Servicer in writing whether the proposed
payment will be made on such anticipated date or on another stated date. AFT
shall instruct the Administrative Agent to pay or cause such payment to be made
on such date to the payee for the Stated Services Obligation from the funds then
available in the Expense Account and/or the Lessee Funded Account, as the case
may be.
(b) Unanticipated Payments. During any Monthly Payment Period the
Servicer may request in writing the Administrative Agent's approval for the
Administrative Agent 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 Administrative Agent pursuant to Section 7.3(a) with respect to
such Monthly Payment Period was delivered to the Administrative Agent. Any such
request shall specify for each such payment obligation the (i) anticipated date
of such payment, (ii) payee, (iii) amount of such payment and (iv) Stated
Services Obligation, with an appropriate notation if, and to what extent, such
payment should be made from the Lessee Funded Account. No later than the
Business Day next following such request by the Servicer, AFT shall instruct the
Administrative Agent to notify the Servicer in writing whether such payment will
be made on such anticipated date of payment or on another stated date. AFT shall
instruct the Administrative Agent to pay or cause such payment to be made on
such date to the payee for the Stated Services Obligation from the funds then
available in the Expense Account or the Lessee Funded Account, as the case may
be. In the event that the funds then available in the Expense Account or the
Lessee Funded Account are insufficient to make any such payment, pursuant to
Section 3.04 of the Administrative Agency Agreement, AFT shall cause the
Administrative Agent to take such actions as are necessary to cause funds
sufficient to make any such payments to be transferred as soon as practicable
from the Collection Account to the Expense Account and/or the Lessee Funded
Account, as the case may be. Following the transfer of such funds from the
Collection Account, AFT shall cause the Administrative Agent
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to pay or cause such payments to made in accordance with the foregoing
provisions.
(c) Limitation on Payments. It is understood and agreed that (i) all
decisions as to the payment of funds from any Bank Account (including the
timing, amount and payee thereof) shall be the decisions and responsibility of
the Administrative Agent and not the decisions or responsibility of the Servicer
(and the Servicer shall not be subject to any other responsibilities not
specified in this Section 7 or any liability whatsoever for any such payments or
any decisions of the Administrative Agent related thereto) and (ii) the Servicer
shall have no responsibility as to the action taken (or omitted) by any banking
institution upon receipt of any payment instructions from the Administrative
Agent in accordance with the procedures set forth in this Section 7 or as to the
application by any payee of any amounts paid to it from any Bank Account in
accordance with the procedures set forth in this Section 7, including no
responsibility as to whether such payee applies such payment toward the Stated
Services Obligation for which such payment was made.
SECTION 8. Professional and Other Services.
SECTION 8.1. Legal Services. The Servicer shall provide or procure
legal services, in all relevant jurisdictions, on behalf of the relevant Persons
within the AFT Group with respect to the lease, sale or financing of the
Aircraft Assets, any amendment or modification of any Lease, the enforcement of
the rights of any Person within the AFT 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. The Servicer shall provide such legal services (which services
shall not, in any case, be deemed to include (i) services or transactions
relating to taxation matters, the laws of foreign jurisdictions, capital markets
transactions or novel or unique transactions or (ii) a high level of services at
fiscal year end or other times of peak activity relative to the level of
services at other times) by using its in-house legal staff where it shall deem
appropriate and shall authorize outside counsel to provide such legal services
where it shall deem appropriate. The Servicer anticipates that it will use
outside counsel to perform some or all the Services set forth in Section 2.3 of
this Schedule 2.02(a). AFT recognizes, and shall cause each other Person within
the AFT Group to recognize, that from time to time
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the Servicer will retain legal counsel to provide legal services on behalf of
Persons within the AFT Group and, in the event that a dispute arises between any
Person within the AFT Group and the Servicer, AFT agrees, and shall cause each
other Person within the AFT Group, to waive any conflict of interest any such
counsel may have with respect to any such dispute or otherwise to enable the
Servicer to retain such counsel on its own behalf (it being understood that
notwithstanding any such waiver of a conflict of interest, any such Persons
within the AFT Group do not waive any rights to retain any such counsel on its
own behalf if such counsel is so agreeable).
SECTION 8.2. 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, sale or
financing 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; provided, however, that the Servicer shall not
be responsible for arranging for any accounting services with respect to the
preparation of any management accounts or any financial statements of any Person
within the AFT Group, any footnotes thereto or any audits thereof.
SECTION 9. Reports; Custody.
SECTION 9.1. Monthly Reports. On the Business Day immediately
preceding each Calculation Date (or, to the extent impracticable, promptly
thereafter), the Servicer shall provide to AFT:
(a) A written report, covering the period from the end of the last
such report, if any, through and including the fourth Business Day prior to such
Calculation Date (the "Reporting Period"), of (i) the leasing, sales and
purchasing activities that were completed during such Reporting Period
(including any proposals to create segregated accounts), which shall include a
summary of the principal financial terms related to any new or amended lease
transactions, (ii) any Aircraft then off-lease, (iii) any Aircraft suffering an
event of loss and of any insurance, condemnation, requisition or other proceeds
received or claims made in respect thereof and (iv) any default notices issued,
in each case with respect to the Aircraft Assets, in such detail as AFT and the
Servicer may agree from time to time.
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(b) A detailed statement of receivables and payables covering the
Reporting Period (including details, if any, of any set-offs among Lessee
receivables, Lessee payables, Maintenance Reserves and security deposits and
past-due amounts) analyzed by Lessee for each account balance outstanding
(including with respect to restructured Leases), categorized by number of days
outstanding, in such detail as AFT and the Servicer may agree from time to time.
(c) A statement of material cash disbursements not previously
reported in a prior monthly statement (i) which the Servicer believes will be
due and payable during the period extending from the second Payment Date
following such Calculation Date through to the fifth succeeding Payment Date and
(ii) which were not contemplated in the then current Approved Budget or, to the
extent that any of the succeeding five months is not covered by the then current
Approved Budget, which are not usual or customary.
SECTION 9.2. Quarterly Reports. The Servicer shall provide written
reports to AFT within thirty days after the end of each calendar quarter which
shall set forth the following information for such calendar quarter:
(a) A list of each Aircraft in the portfolio identified by
manufacturer's serial number and specifying the following with respect thereto:
(i) Lessee, (ii) lease rate, (iii) lease commencement date and (iv) changes in
the foregoing, if any, from the prior quarterly report.
(b) A list (which may be made available in writing or
electronically) setting forth the concentration of Aircraft by country of
habitual base, region, Lessee, aircraft type and age, in summary form on the
basis of aircraft type, numbers of aircraft and appraised values as of the most
recent appraisal, in such detail as AFT and the Servicer may agree from time to
time.
(c) A report on all pending and potential (with respect to which a
member of the Servicer's in-house legal staff has received written notice
threatening litigation, which, in the sole judgment of the Servicer, is
material) litigation involving any Aircraft Assets or Leases of which the
Servicer has written notice.
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(d) A report of any claims being made with respect to any of the
Aircraft Assets of which the Servicer is aware with an actual or potential
liability in excess of $10,000,000.
(e) A report (which may be included in clause (a) above) by Lessee
identifying termination, extension, purchase and any other material options.
(f) A report of Leases expiring during the following two quarters.
SECTION 9.3. Other Information.
(a) To the extent the Servicer is in possession of the relevant
information, the Servicer shall prepare and submit to AFT the following
information with respect to each Person within the AFT Group or, in the case of
clause (i) below, any holder of the Beneficial Interest Certificates:
(i) upon request by AFT, information with respect to transactions
relating to Aircraft Assets necessary for each Person within the AFT Group
or any holder of the Beneficial Interest Certificates to prepare value
added tax and other tax returns; and
(ii) promptly after the occurrence thereof, notify AFT of any
accident or incident of which the Servicer has notice involving any
Aircraft Asset where (A) the potential loss in connection therewith
exceeds the higher of the damage notification threshold under the relevant
Lease, if any, and $2,000,000 or (B) the potential liability in connection
therewith exceeds $2,000,000.
(b) Upon request by AFT, the Servicer shall provide to AFT copies of
any financial statements received by the Servicer from any Lessee under and in
accordance with the provisions of its Lease of an Aircraft Asset.
(c) Upon request by AFT, the Servicer shall provide to AFT such
factual information and data about the Aircraft Assets which may reasonably be
requested by AFT; provided, however, that the Servicer shall not be required to
provide any valuations, interpretations, comparisons, evaluations, opinions,
forecasts, predictions or analytical analysis.
SECTION 9.4. Ratings Information. Upon request by AFT, the Servicer
shall provide to AFT such information and data
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about the Aircraft Assets and other commercially reasonable assistance relating
to the Aircraft Assets as AFT shall deem reasonably necessary or appropriate in
connection with providing information to the ratings agencies for AFT's debt
ratings.
SECTION 9.5. Custody of Documents. The Servicer agrees to hold all
original documents of any Person within the AFT Group that relate to the
Aircraft Assets in the possession of the Servicer in safe custody and according
to the commercially reasonable instructions of AFT.
SECTION 9.6. Reporting Obligations Generally. Notwithstanding
anything herein to the contrary, AFT acknowledges and agrees that it shall be
responsible for, and the Servicer shall not have any responsibility for, (a) any
Compliance Obligations to any holders of outstanding Notes, any holders of any
other securities issued by any Person within the AFT Group or any Governmental
Authorities and (b) all instructions, discretion, judgments and assumptions
related to such Compliance Obligations, and AFT agrees to indemnify the Servicer
and its Affiliates in respect of the foregoing as further provided in Section
11.05 of the Servicing Agreement.
SECTION 9.7. Aircraft Assets Related Documents. The Servicer shall
provide to the Security Trustee a copy of each fully executed Aircraft Assets
Related Document received by the Servicer no later than ten Business Days after
the receipt thereof by the Servicer. For purposes of this Section 9.7, the term
"Aircraft Assets Related Documents" does not include letters of intent,
memoranda of understanding or similar documents.
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SCHEDULE 2.02(a)(i)
TO THE SERVICING AGREEMENT
(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
("Ownership Interest") 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
<PAGE> 103
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 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 the Issuer and any other Issuer Group Member
from such Lease had such Encumbrance not been created) or (iv) 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 the ownership of voting Ownership
Interest, 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, conditional sale agreement or Purchase Option under the Initial
Lease of any Initial Aircraft existing on the date of acquisition of such
Aircraft or otherwise existing on the relevant Closing Date or Aircraft
Agreement meeting the requirements of clause (iii) or (v) 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;
(viii) any Encumbrance arising under an Eligible Credit Facility and (ix) any
other lien not referred to in clauses (i) through (viii) of this paragraph which
would not adversely affect the owner's rights and does not exceed, individually,
$250,000 per Aircraft or, in the aggregate, 1% of the Initial Appraised Value of
the Portfolio for all Aircraft.
<PAGE> 104
(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, including without limitation 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, excluding any capital
expenditure made in the ordinary course of business in connection with a new
lease of such Aircraft (each such non-excluded 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
Servicing Agreement) on such Aircraft, including the airframe and the related
Engines thereof; (ii) (A) such Modification Payment is included in the annual
operating budget of the Issuer Group and approved by the Controlling Trustees or
(B) 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)(xxviii) 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 Issuer Group Members,
taken as a whole, pursuant to this Section 5.02(i) after the Initial Closing
Date, including such Modification Payment, shall not exceed 5% of the aggregate
Initial Appraised Value of all Aircraft acquired by the Issuer Group.
<PAGE> 105
Section 5.03 Operating Covenants. The Issuer covenants with the Trustee as
follows:
(a) Concentration Limits. Without a 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 to exceed any of
the Concentration Limits set forth in Exhibit E hereto (as such limits may be
adjusted by the Issuer from time to time, subject to a 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 to any Lessee located in, or as a result of which such
Aircraft would be or would be permitted to be habitually operated, in a
jurisdiction set forth in clause (a) of the Repossession Guidelines as set forth
on Exhibit E hereto and as amended from time to time upon the approval of the
Rating Agencies (the "Repossession Guidelines") as "Prohibited Countries".
(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) 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
<PAGE> 106
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 or 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 later than 30 days prior to May 31 of each year, commencing
in 2000, deliver to the Trustee (with no obligation of review or inquiry on the
part of 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, 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
Aircraft and Engine that is subject to a Lease, cause, directly or indirectly,
through any Issuer Subsidiary, such Aircraft and Engine to be maintained in a
state of repair and condition 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 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.
<PAGE> 107
(f) Leases. The Issuer shall (i) adopt and shall cause the Servicer
and any Additional Servicer to utilize the pro forma lease in the form provided
to the Issuer on the Initial Closing Date (in the case of the Servicer) or the
Closing Date for the acquisition of the first Additional Aircraft to be serviced
by the Additional Servicer (in the case of any Additional Servicer) as such pro
forma lease agreement or agreements may be revised for purposes of the Issuer
Group specifically or generally from time to time by the Servicer or such
Additional Servicer, as applicable (or, with respect to the Lease with respect
of the Initial Aircraft model number A320-200 bearing manufacturer's serial
number 373, the form provided by the Seller thereof to the Issuer on the Initial
Closing Date) (the "Servicer's Pro Forma Lease"), for use by the Servicer or
such Additional Servicer on behalf of the Issuer or any Issuer Subsidiary as a
starting point in the negotiation of Future Leases with Persons who are not
Issuer Group Members; provided, however, that with respect to any Future Lease
entered into in connection with (x) the renewal or extension of an Initial
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 such Additional Servicer, as applicable (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 applicable, 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
Issuer Group Members and provided further, however, that if the Controlling
Trustees determine, 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 Controlling Trustees (or, with 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 Holders, 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
Controlling Trustees 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
Controlling Trustees determine that any such revision to the Servicer's Pro
Forma Lease will not have a material adverse effect on the Holders, then the
Controlling Trustees shall amend the applicable Core Lease Provisions and (ii)
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 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 a Rating
Agency Confirmation.
<PAGE> 108
(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 Issuer 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 or registration of such Aircraft (or within a
commercially reasonable period thereafter), the Servicer or the Additional
Servicer, as applicable, 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
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 F hereto for each model of aircraft and as amended from
time to time with the approval of the Rating Agencies and (iii) airline
repossession insurance ("Repossession Insurance") for each Aircraft subject to a
Lease and habitually based in a jurisdiction determined in accordance with
clause (b) of the Repossession Guidelines, which may be amended from time to
time only 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 days after the
Initial Closing Date to one year from the Initial Closing Date (any such 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
Repossession Insurance 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 Repossession Insurance, any
governmental authority or agency of any jurisdiction for which Repossession
Insurance must be obtained), the sovereign foreign currency debt of which is
rated at least 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
<PAGE> 109
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.
(h) 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 Issuer 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.
<PAGE> 110
SCHEDULE 2.02(a)(ii)
TO THE SERVICING AGREEMENT
[Form of Officer's Certificate for AFT]
The undersigned, representing Aircraft Finance Trust ("AFT"), a
Delaware business trust, in accordance with Section 4(d) of Schedule 2.02(a) to
the Servicing Agreement dated as of May 5, 1999, (the "Servicing Agreement")
between AFT and GE Capital Aviation Services, Limited (the "Servicer"), hereby
certifies as follows:
(a) the sale of the [insert description of asset(s) to be sold], which AFT
has directed the Servicer to arrange pursuant to Section 4 of Schedule 2.02(a)
to the Servicing Agreement (the "Sale"), complies in all respects with the terms
of the Trust Indenture dated as of May 5, 1999, between AFT, ReSource/Phoenix,
Inc. and Bankers Trust Company;
(b) the Sale has been approved by the Controlling Trustee of AFT in
accordance with Section 7.04(a) of the Servicing Agreement;
(c) in connection with such Sale, the Servicer is entitled to rely upon
this certification for all purposes of the Servicing Agreement and Schedule
2.02(a) thereto; and
(d) the undersigned is a duly appointed, qualified and acting officer of
AFT and the signature appearing below after his/her name is a genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand on and as of this
[ ] day of [ ], [ ].
By:_____________________________
Name:
Title:
2.02(a)(ii)-1
<PAGE> 111
SCHEDULE 4.01 TO
THE SERVICING AGREEMENT
Aircraft Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TYPE S/N Owner/Head Lessee
- --------------------------------------------------------------------------------
<S> <C> <C>
A310-300 448 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 210 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 221 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 222 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 231 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 373 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 737 AFT Trust - Sub I
- --------------------------------------------------------------------------------
A320-200 749 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28333 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28548 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28554 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28557 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28558 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28559 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28561 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28562 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28563 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28564 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-300 28740 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-400 25663 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-400 25664 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-400 28489 AFT Trust - Sub I
- --------------------------------------------------------------------------------
</TABLE>
4.01-1
<PAGE> 112
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TYPE S/N Owner/Head Lessee
- --------------------------------------------------------------------------------
<S> <C> <C>
B737-400 28490 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B737-400 28491 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-200ER 23805 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-200ER 23806 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-300ER 25221 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-300ER 25403 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-300ER 29617 AFT Trust - Sub I
- --------------------------------------------------------------------------------
B767-300ER 30008 AFT Trust - Sub I
- --------------------------------------------------------------------------------
DC-10-30 46584 AFT Trust - Sub I
- --------------------------------------------------------------------------------
DC-10-30 48292 AFT Trust - Sub I
- --------------------------------------------------------------------------------
MD83 49398 AFT Trust - Sub I
- --------------------------------------------------------------------------------
MD83 49791 AFT Trust - Sub I
- --------------------------------------------------------------------------------
MD83 53198 AFT Trust - Sub I
- --------------------------------------------------------------------------------
MD83 53199 AFT Trust - Sub I
- --------------------------------------------------------------------------------
</TABLE>
4.01-2
<PAGE> 113
SCHEDULE 4.02 TO
THE SERVICING AGREEMENT
Aircraft Assets Related Documents
PROJECT POOL
INDEX
AIRCRAFT PAGE
MSN 28554 - British Midland Airways Limited ............................... 1
MSN 28557 - British Midland Airways Limited ............................... 2
MSN 28558 - British Midland Airways Limited ............................... 3
MSN 221 - Airtours International Airways Limited .......................... 4
MSN 222 - Airtours International Airways Limited .......................... 5
MSN 28548 - British Airways plc ........................................... 6
MSN 29617 - Air 2000 Limited .............................................. 7
MSN 53199 - Eurofly ....................................................... 8
MSN 28559 - Air Holland ................................................... 9
MSN 737 - Star Europe ..................................................... 10
MSN 749 - Societe de Transport Aerien Regional, Trading as Star Europe .... 11
MSN 53198 - Spanair/GECC .................................................. 12
MSN 49398- Spanair S.A .................................................... 13
MSN 49791 - Spanair S.A ................................................... 14
MSN 28333 - Virgin Express ................................................ 15
MSN 28489 - Virgin Express (Ireland) Limited .............................. 16
MSN 25663 - Jet Airways ................................................... 17
MSN 25664 - Jet Airways ................................................... 18
MSN 28561 - China General Aviation Corporation ............................ 19
MSN 28562 - China General Aviation Corporation ............................ 20
MSN 23805 - Varig ......................................................... 21
MSN 23806 - Varig ......................................................... 22
MSN 28564 - Transbrasil ................................................... 23
MSN 28563 - Frontier Airlines ............................................. 24
MSN 210 - Canadian ........................................................ 25
MSN 231 - Canadian ........................................................ 26
MSN 448 - Royal Aviation .................................................. 27
MSN 46584 - Continental ................................................... 28
MSN 48292 - Continental ................................................... 29
MSN 28740 - America West .................................................. 30
MSN 30008 - Alitalia ...................................................... 31
MSN 28491 - Istanbul Hava Yollari A.S. .................................... 32
MSN 28490 - Istanbul Hava Yollari A.S. .................................... 33
MSN 25221 - Britannia Airways Limited ..................................... 34
MSN 373 - Midway .......................................................... 35
MSN 25403 - Air Madagascar ................................................ 36
<PAGE> 114
MSN 28554 (BRITISH MIDLAND AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 8 November 1996 made between Alnitak FSC
One Corporation and British Midland Airways Limited.
2 Aircraft Lease Amendment Agreement dated 6 December 1996 made between
Alnitak FSC One Corporation and British Midland Airways Limited.
3 Aircraft Lease Amendment Agreement dated 30 September 1998 made between
Alnitak FSC One Corporation and British Midland Airways Limited.
4 Aircraft Warranty Agreement dated 16 December 1996 made between Alnitak
FSC One Corporation and British Midland Airways Limited.
1
<PAGE> 115
MSN 28557 (BRITISH MIDLAND AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 8 November 1996 made between Alnitak FSC
Two Corporation and British Midland Airways Limited.
2 Aircraft Lease Amendment Agreement dated 6 December 1996 made between
Alnitak FSC Two Corporation and British Midland Airways Limited.
3 Aircraft Lease Amendment Agreement dated 30 September 1998 made between
Alnitak FSC Two Corporation and British Midland Airways Limited.
4 Aircraft Warranty Agreement dated 15 March 1997 made between Alnitak FSC
Two Corporation and British Midland Airways Limited.
2
<PAGE> 116
MSN 28558 (BRITISH MIDLAND AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 8 November 1996 made between Alnitak FSC
Three Corporation and British Midland Airways Limited.
2 Aircraft Lease Amendment Agreement dated 6 December 1996 made between
Alnitak FSC Three Corporation and British Midland Airways Limited.
3 Aircraft Lease Amendment Agreement dated 30 September 1998 made between
Alnitak FSC Three Corporation and British Midland Airways Limited.
4 Aircraft Warranty Agreement dated 26 April 1997 made between British
Midland Airways Limited and Alnitak FSC Three Corporation.
3
<PAGE> 117
MSN 221 (AIRTOURS INTERNATIONAL AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 26 January 1996 made between Jodrell
Aviation Limited and Airtours International Airways Limited.
2 Side Letter dated 26 January 1996 made between Avion Aviation Limited,
Castle Aviation, Airtours International Airways Limited and Jodrell
Aviation Limited.
3 Side Letter dated 26 January 1996 made between Airtours International
Airways Limited and GE Capital Aviation Services Limited.
4 Side Letter dated 26 January 1996 made between GPAA Funding Limited, GPAA
Limited, Jodrell Aviation Limited and Airtours International Airways
Limited.
5 Aircraft Lease Novation and Amendment Agreement dated 11 March 1996 made
between General Electric Capital Corporation, Airtours International
Airways Limited and Jodrell Aviation Limited.
6 Aircraft Sub-Lease Agreement dated 28 February 1997 made between Airtours
International Airways Limited and Premiair A/S.
7 Amendment Agreement dated 21 March 1997 made between Airtours
International Airways Limited and Premiair A/S.
8 Second Amendment Agreement dated 22 May 1997 made between Airtours
International Airways Limited and Premiair A/S.
9 Third Amendment Agreement dated 18 July 1997 made between Airtours
International Airways Limited and Premiair A/S.
10 Fourth Amendment Agreement.
11 Fifth Amendment Agreement.
12 Sixth Amendment Agreement dated 25 February 1998 made between Airtours
International Airways Limited and Premiair A/S.
13 Seventh Amendment Agreement dated 24 March 1998 made between Airtours
International Airways Limited and Premiair A/S.
14 Certificate of Acceptance dated 15 May 1996 by Airtours International
Airways Limited to General Electric Capital Corporation.
4
<PAGE> 118
MSN 222 (AIRTOURS INTERNATIONAL AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 26 January 1996 made between Jodrell
Aviation Limited and Airtours International Airways Limited.
2 Side Letter dated 26 January 1996 made between Avion Aviation Limited,
Castle Aviation Limited, Jodrell Aviation Limited and Airtours
International Airways Limited.
3 Side Letter dated 26 January 1996 made between Airtours International
Airways Limited and GE Capital Aviation Services Limited.
4 Side Letter dated 26 January 1996 made between GPAA Limited, GPAA Funding
Limited, Jodrell Aviation Limited and Airtours International Airways
Limited.
5 Aircraft Lease Novation and Amendment Agreement dated 11 March 1996 made
between Jodrell Aviation Limited, General Electrical Capital Corporation
and Airtours International Airways Limited.
6 Aircraft Sub-Lease Agreement dated 28 February 1997 made between Airtours
International Airways Limited and Premiair A/S.
7 Amendment Agreement dated 21 March 1997 made between Airtours
International Airways Limited and Premiair A/S.
8 Second Amendment Agreement dated 22 May 1997 made between Airtours
International Airways Limited and Premiair A/S.
9 Third Amendment Agreement dated 18 July 1997 made between Airtours
International Airways Limited and Premiair A/S.
10 Fourth Amendment Agreement.
11 Fifth Amendment Agreement.
12 Sixth Amendment Agreement dated 25 February 1998 made between Airtours
International Airways Limited and Premiair A/S.
13 Seventh Amendment Agreement dated 24 March 1998 made between Airtours
International Airways Limited and Premiair A/S.
14 Certificate of Acceptance dated 15 May 1996 by Airtours International
Airways Limited to General Electric Capital Corporation.
5
<PAGE> 119
MSN 28548 (BRITISH AIRWAYS PLC)
1 Aircraft Lease Agreement dated 9 December 1997 made between Bowtie Leasing
(Bermuda) Limited and British Airways plc.
2 Letter to British Airways plc from Bowtie Leasing (Bermuda) Limited
stating the scheduled delivery date.
3 Aircraft Lease Novation and Amendment Agreement dated 27 November 1998
made between Bowtie Leasing (Bowtie) Limited, British Airways plc, General
Electric Capital Corporation and AerFi Group plc (formerly known as GPA
Group plc).
4 Assignment of Warranties dated 27 November 1998 made between General
Electric Capital Corporation and AerFi Group plc (formerly known as GPA
Group plc).
6
<PAGE> 120
MSN 29617 (AIR 2000 LIMITED)
1 Aircraft Lease Agreement dated 24 June 1998 made between Alcyone FSC
Corporation and Air 2000 Limited.
2 Side Letter dated 24 June 1998 made between Alcyone FSC Corporation and
Air 2000 Limited.
3 Deposit Agreement dated 24 June 1998 made between Alcyone FSC Corporation
and Air 2000 Limited.
4 Certificate of Acceptance dated 30 March 1999 by Air 2000 Limited to
Alcyone FSC Corporation.
5 Guaranty dated 26 February 1999 by General Electric Capital Corporation in
favour of Air 2000 Limited.
7
<PAGE> 121
MSN 53199 (EUROFLY)
1 Aircraft Lease Agreement dated 25 March 1997 made between Dormacken
Limited and Eurofly.
2 Lease Agreement dated 25 March 1997 made between GECC as Head Lessor and
Dormacken Limited.
3 Certificate of Acceptance dated 12 April 1997 be Eurofly S.p.A. to
Dormacken Limited.
8
<PAGE> 122
MSN 28559 (AIR HOLLAND)
1 Aircraft Lease Agreement dated 21 November 1996 made between Arcturus FSC
Corporation and Air Holland Charter BV.
2 Aircraft Lease Amendment Agreement dated 20 March 1998 made between
Arcturus FSC Corporation and Air Holland Charter BV.
3 Aircraft Warranty Agreement dated 12 May 1997 made between Arcturus FSC
Corporation and Air Holland Charter BV.
4 Aircraft Lease Amendment Agreement dated 25 April 1999 made between
Arcturus FSC Corporation and Air Holland Charter BV.
9
<PAGE> 123
MSN 737 (STAR EUROPE)
1 Aircraft Lease Agreement dated 9 October 1997 made between GECC and
Societe De Transport Aerien Regional ("STAR").
2 Side letter dated 31 October 1997 made between GECC and STAR.
3 Letter Agreement dated 28 November 1997 made between GECC and STAR.
10
<PAGE> 124
MSN 749 (SOCIETE DE TRANSPORT AERIEN REGIONAL,
TRADING AS STAR EUROPE)
1 Aircraft Lease Agreement dated 16 October 1997 made between GECC and
Societe De Transport Aerien Regional.
2 Aircraft Lease Amendment Agreement dated 10 December 1997 made between
GECC and Societe De Transport Aerien Regional.
3 Side Letter undated from GECC to Societe De Transport Aerien Regional.
4 Certificate of Acceptance dated 10 December 1997 by Societe de Transport
Aerien Regional to General Electric Capital Corporation.
11
<PAGE> 125
MSN 53198 (SPANAIR/GECC)
1 Aircraft Lease Agreement dated 13 May 1997 made between GECC and Spanair
S.A.
2 Side Letter dated 5 June 1997 made between GECC and Spanair S.A.
3 Side Letter dated 5 June 1997 re Demonstration Flight made between GECC
and Spanair.
12
<PAGE> 126
MSN 49398 (SPANAIR S.A.)
1 Aircraft Lease Agreement dated 5 October 1995 made between General
Electric Capital Corporation and Spanair S.A.
2 Security Letter of Credit dated 6 November 1995 issued by Banco Central
Hispanoamericano S.A.
3 Letter of Intent dated 10 August 1995 from GE Capital Aviation Services,
Ltd. to Spanair.
4 Aircraft Lease Extension and Amendment Agreement dated 5 October 1998 made
between GECC and Spanair S.A.
5 Certificate of Acceptance dated 2 April 1996 by Spanair S.A. to General
Electric Capital Corporation.
13
<PAGE> 127
MSN 49791 (SPANAIR S.A.)
1 Aircraft Lease Agreement dated 5 October 1995 made between GECC and
Spanair S.A.
2 Aircraft Lease Extension and Amendment Agreement dated 5 October 1995 made
between Aviation Financial Services Inc. and Spanair S.A.
3 Side Letter No. 1 re "C" Check dated 5 October 1995 made between GECC and
Spanair S.A.
4 Side Letter No. 2 re Purchase of Aircraft dated 5 October 1995 made
between GECC and Spanair S.A.
5 Aircraft Transfer Agreement dated 11 September 1997 made between Aviation
Financial Services Inc. and GECC.
6 Assignment, Assumption and Novation Agreement dated 11 September 1997 made
between GECC and Spanair S.A. and Aviation Financial Services Inc.
14
<PAGE> 128
MSN 28333 (VIRGIN EXPRESS)
1 Aircraft Lease Agreement dated 14 August 1996 made between Dormacken
Limited and Virgin Express.
2 Maintenance Escalation Letter dated 23 September 1997 from GE Capital
Aviation Services to Virgin Express.
3 Head Lease Agreement dated 14 August 1996 made between GECAS Brussels FSC,
Inc. and Dormacken Limited.
4 Certificate of Acceptance dated 22 August 1996 by Eurobelgian Airlines
S.A.N.V. to Dormacken Limited.
15
<PAGE> 129
MSN 28489 (VIRGIN EXPRESS (IRELAND) LIMITED)
1 Aircraft Lease Agreement dated 21 November 1996 made between Aldebaran FSC
One Corporation and Virgin Express (Ireland) Ltd.
2 Side Letter dated 11 September 1997 made between GECC and China Airlines
Ltd.
3 Certificate of Acceptance dated 23 October 1998 by Virgin Express
(Ireland) Limited to Aldebaran FSC One Corporation.
16
<PAGE> 130
MSN 25663 (JET AIRWAYS)
1 Aircraft Lease Agreement dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
2 Side Letter No. 1 dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
3 Side Letter No. 2 dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
4 Side Letter No. 2 dated 13 April 1998 made between Mercurbank
Aktiengesellschaft and Jet Airways.
5 Head Lease Agreement dated 5 October 1997 made between Birds of Paradise I
and II and Mercurbank Aktiengesellschaft.
6 Letter dated 10 November 1998 between GE Capital Bank GmbH, Jet Airways
(India) Limited, Birds of Paradise I and Birds of Paradise II.
17
<PAGE> 131
MSN 25664 (JET AIRWAYS)
1 Aircraft Lease Agreement dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
2 Side Letter No. 1 dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
3 Side Letter No. 2 dated 5 October 1997 made between Mercurbank
Aktiengesellschaft and Jet Airways.
4 Side Letter No. 2 dated 13 April 1998 made between Mercurbank
Aktiengesellschaft and Jet Airways.
5 Head Lease Agreement dated 5 October 1997 made between Birds of Paradise I
and II and Mercurbank Aktiengesellschaft.
6 Letter dated 10 November 1998 between GE Capital Bank GmbH, Jet Airways
(India) Limited, Birds of Paradise I and Birds of Paradise II.
18
<PAGE> 132
MSN 28561 (CHINA GENERAL AVIATION CORPORATION)
1 Aircraft Lease Agreement dated 25 November 1996 made between Antares FSC
Two Corporation and China General Aviation Corporation and China Aviation
Supplies Import & Export Corporation.
2 Side Letter dated 25 November 1996 made between Antares FSC Two
Corporation and China General Aviation Corporation and China Aviation
Supplies Import & Export Corporation.
19
<PAGE> 133
MSN 28562 (CHINA GENERAL AVIATION CORPORATION)
1 Aircraft Lease Agreement dated 25 November 1996 made between Antares FSC
Three Corporation and China General Aviation Corporation and China
Aviation Supplies Import & Export Corporation.
2 Side Letter dated 25 November 1996 made between Antares FSC Three
Corporation and China General Aviation Corporation and China Aviation
Supplies Import & Export Corporation.
20
<PAGE> 134
MSN 23805 (VARIG)
1 Aircraft Lease Agreement dated 15 August 1994 made between Varig, S.A. and
First Security Bank of Utah, N.A.
2 Amendment No. 1 dated 4 November 1994 made between First Security Bank of
Utah, N.A. and Varig, S.A.
3 Letter Agreement dated 4 November 1994 made between First Security Bank of
Utah, N.A. and Varig, S.A.
4 Amendment No. 2 dated 21 March 1995 made between First Security Bank of
Utah, N.A. and Varig, S.A.
5 Aircraft Lease Agreement Supplement No. 1 and Certificate of Acceptance
dated 21 March 1995 made between First Security Bank of Utah, N.A. and
Varig, S.A.
21
<PAGE> 135
MSN 23806 (VARIG)
1 Aircraft Lease Agreement dated 15 August 1994 made between Varig, S.A. and
First Security Bank of Utah, N.A.
2 Amendment No. 1 dated 4 November 1994 made between First Security Bank of
Utah, N.A. and Varig, S.A.
3 Letter Agreement dated 4 November 1994 made between First Security Bank of
Utah, N.A. and Varig, S.A.
4 Amendment No. 2 dated 21 March 1995 made between First Security Bank of
Utah, N.A. and Varig, S.A.
5 Aircraft Lease Agreement Supplement No. 1 and Certificate of Acceptance
dated 21 March 1995 made between First Security Bank of Utah, N.A. and
Varig, S.A.
22
<PAGE> 136
MSN 28564 (TRANSBRASIL)
1 Aircraft Lease Agreement dated 5 November 1997 made between Transbrasil
S/A Linhas Aereas and Alcyone FSC Corporation.
2 Letter Agreement dated 14 November 1997 made between Transbrasil S/A
Linhas Aereas and Alcyone FSC Corporation.
3 Certificate of Acceptance dated 14 November 1997 by Transbrasil S/A to
Alcyone FSC Corporation.
23
<PAGE> 137
MSN 28563 (FRONTIER AIRLINES)
1 Aircraft Lease Agreement dated 25 March 1997 made between Frontier
Airlines, Inc. and GECC.
2 Letter Agreement No. 1 dated 25 March 1997 made between GECC and Frontier
Airlines, Inc.
3 Tax Indemnity Agreement dated 25 March 1997 made between GECC and Frontier
Airlines, Inc.
4 Lease Supplemental No. 1 dated 26 August 1997 made between GECC and
Frontier Airlines, Inc.
5 Letter Agreement No. 2 dated 26 August 1997 made between GECC and Frontier
Airlines, Inc.
6 Certificate of Technical Acceptance dated 25 March 1997 by Frontier
Airlines, Inc. to GECC.
7 Aircraft Lease Amendment Agreement dated as of 30 April 1999 between GECC
and Frontier Airlines, Inc.
24
<PAGE> 138
MSN 210 (CANADIAN)
1 Aircraft Lease Agreement [210] dated 8 February 1996 made between GECC and
Canadian Airlines International Ltd.
2 Aircraft Sub-lease Agreement [210] dated 8 February 1996 made between GPAG
and Canadian Airlines International Ltd.
3 Aircraft Lease Amendment Agreement dated 16 June 1997 made between GECC
and Canadian Airlines International Ltd.
4 Aircraft Lease Novation and Amendment Agreement dated 8 May 1998 made
between GECC, Canadian Airlines International Ltd. and Aviation Financial
Services Inc.
5 Short Form Lease Novation Agreement dated 8 May 1998 made between GECC,
Aviation Financial Services Inc. and Canadian Airlines International Ltd.
6 Letter of Intent dated 23 June 1998 from GE Capital Aviation Services Inc.
to Canadian Airlines International Ltd.
7 Amending Agreement dated 5 July 1998 made between Aviation Financial
Services Inc. and Canadian Airlines International Ltd.
8 Certificate of Acceptance dated 5 July 1991 by Canadian Airlines
International Ltd. to Asset Management A/A.
9 Certificate of Acceptance dated 8 February 1996 by Canadian Airlines
International Ltd. to GECC.
25
<PAGE> 139
MSN 231 (CANADIAN)
1 Aircraft Lease Agreement [231] dated 8 February 1996 made between GECC and
Canadian Airlines International Ltd.
2 Aircraft Sub-lease Agreement dated 8 February 1996 made between GPAG and
GECC.
3 Option Agreement dated 8 February 1996 made between GECC and Canadian
Airlines International Ltd.
4 Aircraft Lease Amendment dated 16 June 1997 made between GECC and Canadian
Airlines International Ltd.
5 Aircraft Lease Novation and Amendment Agreement dated 8 May 1998 made
between GECC, Canadian Airlines International Ltd. and Aviation Financial
Services Inc.
6 Short Form Lease Novation Agreement dated 8 May 1998 made between GECC,
Aviation Financial Services Inc. and Canadian Airlines International Ltd.
7 Option Novation and Amendment Agreement dated 8 May 1998 made between
GECC, Aviation Financial Services Inc. and Canadian Airlines International
Ltd.
8 Letter of Intent dated 23 June 1998 from GE Capital Aviation Services Inc.
to Canadian Airlines International Ltd.
9 Amending Agreement dated 19 July 1998 made between Aviation Financial
Services Inc. and Canadian Airlines International Ltd.
10 Certificate of Acceptance dated 19 September 1991 by Canadian Airlines
International Ltd. to Asset Management A/S.
11 Certificate of Acceptance dated 8 February 1996 by Canadian Airlines
International Ltd. to GECC.
26
<PAGE> 140
MSN 448 (ROYAL AVIATION)
1 Aircraft Lease Agreement dated 12 May 1998 made between GECC and Royal
Aviation, Inc.
2 Letter Agreement No. 1 dated 12 May 1998 made between GECC and Royal
Aviation, Inc.
3 Certificate of Technical Acceptance dated 16 May 1998 by Royal Aviation,
Inc. to GECC.
4 Lease Supplement No. 1 dated 16 May 1998 made between GECC and Royal
Aviation, Inc.
5 Aircraft Lease Agreement (Short Form) dated 16 May 1998 made between GECC
and Royal Aviation, Inc.
27
<PAGE> 141
MSN 46584 (CONTINENTAL)
1 Aircraft Lease Agreement dated 15 May 1992 made between Continental
Airlines, Inc. and Polaris Holding Company.
2 Letter Agreement No. 1 dated 15 May 1992 made between Polaris Holding
Company and Continental Airlines, Inc.
3 Tax Indemnification Agreement dated 15 May 1992 made between Polaris
Holding Company and Continental Airlines, Inc.
4 Lease Supplement No. 1 dated 18 August 1992 made between Polaris Holding
Company and Continental Airlines, Inc.
5 Certificate as to Status of Aircraft dated 18 August 1995 by Continental
Airlines, Inc. to Polaris Holding Company.
6 Aircraft Lease Agreement Amendment dated 30 March 1995 made between
Polaris Holding Company and Continental Airlines, Inc.
7 Aircraft Lease Agreement Amendment No. 2 dated 31 July 1997 made between
Polaris Holding Company and Continental Airlines, Inc.
8 Letter Agreement No. 2 dated 31 July 1997 made between Polaris Holding
Company and Continental Airlines, Inc.
28
<PAGE> 142
MSN 48292 (CONTINENTAL)
1 Aircraft Lease Agreement dated 15 May 1992 made between Continental
Airlines, Inc. and Polaris Holding Company.
2 Letter Agreement No. 1 to Aircraft Lease Agreement dated 15 May 1992 made
between Polaris Holding Company and Continental Airlines, Inc.
3 Tax Indemnification Agreement dated 15 May 1992 made between Polaris
Holding Company and Continental Airlines, Inc.
4 Certificate as to Status of Aircraft dated 1 June, 1992 by Continental
Airlines, Inc. to Polaris Holding Company.
5 Lease Supplement No. 1 dated 2 June 1992 made between Polaris Holding
Company and Continental Airlines, Inc.
6 Aircraft Lease Agreement Amendment dated 30 March 1995 made between
Polaris Holding Company and Continental Airlines, Inc.
7 Aircraft Lease Agreement Amendment No. 2 dated 31 July 1997 made between
Polaris Holding Company and Continental Airlines, Inc.
29
<PAGE> 143
MSN 28740 (AMERICA WEST)
1 Aircraft Lease Agreement dated 30 June 1998 made between America West
Airlines, Inc. and GECC.
2 Letter Agreement No. 1 dated 30 June 1998 made between GECC and America
West Airlines, Inc.
3 Tax Indemnity Agreement dated 30 June 1998 made between GECC and America
West Airlines, Inc.
4 Lease Supplement No. 1 dated 8 July 1998 made between GECC and America
West Airlines, Inc.
5 Certificate of Technical Acceptance dated 8 July 1998 by America West
Airlines, Inc. to GECC.
30
<PAGE> 144
MSN 30008 (ALITALIA)
1 Aircraft Lease Agreement dated 2 April 1998 made between GECAS Technical
Services Limited and Alitalia (Linee Aeree Italiane S.p.A.).
2 Modifications side letter dated 2 April 1998 from GECAS Technical Services
Limited to Alitalia (Linee Aeree Italiane S.p.A.).
3 Certificate of Acceptance dated 22 March 1999 by Alitalia (Linee Aeree
Italiana S.p.A.) to GECAS Technical Services Limited.
31
<PAGE> 145
MSN 28491 (ISTANBUL HAVA YOLLARI A.S.)
1 Aircraft Lease Agreement dated 16 October 1998 between Aldebaran FSC -
Three Corporation and Istanbul Hava Yollari A.S.
2 Side letter dated 7 December 1998 from Aldebaran FSC - Three Corporation
to Istanbul Hava Yollari A.S.
3 Side letter dated 10 December 1998 from Aldebaran FSC - Three Corporation
to Istanbul Hava Yollari A.S.
4 Certificate of Acceptance dated 15 December 1998.
32
<PAGE> 146
MSN 28490 (ISTANBUL HAVA YOLLARI A.S.)
1 Aircraft Lease Agreement dated 16 October 1998 between Aldebaran FSC - Two
Corporation and Istanbul Hava Yollari A.S.
2 Side letter (undated) between Aldebaran FSC - Two Corporation to Istanbul
Hava Yollari A.S.
3 Certificate of Acceptance dated 29 November 1998 by Istanbul Hava Yollari
A.S. to Aldebaran FSC - Two Corporation.
33
<PAGE> 147
MSN 25221 (BRITANNIA AIRWAYS LIMITED)
1 Aircraft Lease Agreement dated 4 December 1997 made between First Security
Bank, National Association and Britannia Airways Limited.
2 Sub-Lease Agreement dated 2 September 1998 made between Britannia Airways
Limited and Britannia Airways AB.
3 Assignment (of Aircraft Lease Agreement dated 2 September 1998) dated 23
October 1998 made between Britannia Airways Limited and First Security
Bank, National Association.
4 Notice and Acknowledgement of Lease Assignment dated 26 November 1998.
5 Beneficial Interest Purchase Agreement dated 7 December 1998 made between
Pacific Asia Leasing Limited, Aircraft 25221, Inc., Amerilease Capital
Corporation Limited and UniCapital Corporation.
6 Assignment of Beneficial Interest dated 31 December 1998 made between
Pacific Asia Leasing Limited and Aircraft 25221, Inc.
7 Schedule of Parties to whom notice is to be given.
34
<PAGE> 148
MSN 373 (MIDWAY)
(NB: This aircraft will be leased to Transmeridian Airlines, Inc.
from June 1999)
1 Aircraft Lease Agreement dated 24 May 1995 made between Wilmington Trust
Company and Midway Airlines Corporation.
2 Trust Agreement dated 24 May 1995 made between Kawasaki Leasing
International Inc. and Wilmington Trust Company.
3 Purchase Agreement Assignment dated 1 March 1996 made between Kawasaki
Leasing International Inc., KE Aircraft Leasing Inc., Kawasaki Steel Trade
Funding (USA) Inc. and Midway Airlines Corporation.
4 Assignment Agreement of Certain Warranty and Product Support Rights dated
1 March 1996 made between KE Aircraft Leasing Inc., Midway Airlines
Corporation and IAE International Aero Engines AG and Consents to
Assignment dated 28 August 1998.
5 Lease Assignment, Assumption and Amendment Agreement dated 28 August 1998
made between Wilmington Trust Company, Aircraft 373, Inc. and Midway
Airlines Corporation.
6 Certificate of Insurance dated 19 October 1998.
35
<PAGE> 149
MSN 25403 (AIR MADAGASCAR)
(NB: This aircraft will be leased to TWA before the lease is novated)
1 Aircraft Lease Agreements dated 10 February 1998 made between Polaris
Aircraft (Pacific Coast), Inc. and Air Madagascar.
2 Configuration Side Letter Agreement dated 21 March 1998 made between
Polaris Aircraft (Pacific Coast), Inc. and Air Madagascar.
3 Aircraft Lease Agreement dated 31 March 1999 made between Polaris Aircraft
(Pacific Coast), Inc. and Trans World Airlines, Inc.
36
<PAGE> 150
SCHEDULE 4.03 TO
SERVICING AGREEMENT
Bank Accounts
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ACCOUNT NAME Account Number
- --------------------------------------------------------------------------------
<S> <C>
AFT RENTAL ACCOUNT 00-330-149
- --------------------------------------------------------------------------------
AFT RENTAL ACCT - SUSPENSE 27629
- --------------------------------------------------------------------------------
AFT COLLECTIONS ACCT 27631
- --------------------------------------------------------------------------------
AFT EXPENSE ACCT 27630
- --------------------------------------------------------------------------------
AFT VARIG RESERVE ACCT 23805 27638
- --------------------------------------------------------------------------------
AFT VARIG RESERVE ACCT 23806 27630
- --------------------------------------------------------------------------------
AFT LESSEE FUND BRITISH MIDLAND 28557 27640
- --------------------------------------------------------------------------------
AFT LESSEE FUND AIR HOLLAND 28559 27641
- --------------------------------------------------------------------------------
AFT LESSEE FUND BRITISH MIDLAND 28558 27642
- --------------------------------------------------------------------------------
AFT LESSEE FUND CHINA GENERAL 28561 27643
- --------------------------------------------------------------------------------
AFT LESSEE FUND CHINA GENERAL 28562 27644
- --------------------------------------------------------------------------------
AFT LESSEE FUND FRONTIER 28563 27645
- --------------------------------------------------------------------------------
AFT LESSEE FUND TRANSBRASIL 28564 27647
- --------------------------------------------------------------------------------
AFT LESSEE FUND BRITISH MIDLAND 28554 27646
- --------------------------------------------------------------------------------
AFT LESSEE FUND STAR 737 27648
- --------------------------------------------------------------------------------
AFT LESSEE FUND CANADIAN 210 27649
- --------------------------------------------------------------------------------
AFT LESSEE FUND CANADIAN 231 27650
- --------------------------------------------------------------------------------
AFT LESSEE FUND SPANAIR 49791 27651
- --------------------------------------------------------------------------------
AFT LESSEE FUND AIRTOURS 221 27652
- --------------------------------------------------------------------------------
AFT LESSEE FUND AIRTOURS 222 27653
- --------------------------------------------------------------------------------
AFT LESSEE FUND VIRGIN 28489 27654
- --------------------------------------------------------------------------------
AFT LESSEE FUND ISTANBUL 28491 27655
- --------------------------------------------------------------------------------
AFT LESSEE FUND JET AIRWAYS 25663 27656
- --------------------------------------------------------------------------------
AFT LESSEE FUND JET AIRWAYS 25664 27657
- --------------------------------------------------------------------------------
AFT LESSEE FUND AMERICA WEST 28740 27658
- --------------------------------------------------------------------------------
AFT LESSEE FUND STAR 749 27659
- --------------------------------------------------------------------------------
AFT LESSEE FUND ALITALIA 30008 27660
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 151
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
AFT LESSEE FUND TWA 25403 27661
- --------------------------------------------------------------------------------
AFT LESSEE FUND ISTANBUL 28490 27662
- --------------------------------------------------------------------------------
AFT LESSEE FUND VARIG 23805 27663
- --------------------------------------------------------------------------------
AFT LESSEE FUND VARIG 23806 27664
- --------------------------------------------------------------------------------
AFT LESSEE FUND ROYAL AVIATION 448 27665
- --------------------------------------------------------------------------------
AFT LESSEE FUND BRITANNIA 25221 27683
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 152
WIRE INSTRUCTIONS
RENTAL ACCOUNT Only;
Bankers Trust Co.
ABA 021001033
for the account of
BTCO Sect. TTEE AFT Rental
Account number 00-330-149
Other Accounts:
Bankers Trust Company
ABA# 021-001-033
New York, NY
Account Number 01-41-9647
Attn: Structured Finance Team / Joel Evaristo ext 2-4305
Reference: AFT (Account Name) (Account Number)
<PAGE> 153
SCHEDULE 4.04(a) TO
THE SERVICING AGREEMENT
List of Persons within the AFT
Group and Jurisdictions
<TABLE>
<CAPTION>
Entity Jurisdiction
- ------ ------------
<S> <C>
Aircraft Finance Trust Delaware
AFT Trust-Sub I Delaware
Aircraft Finance Trust
Ireland Limited Ireland
</TABLE>
4.04(a)-1
<PAGE> 154
SCHEDULE 7.01 TO
THE SERVICING AGREEMENT
Responsibilities of AFT Group
A. With respect to Aircraft Assets, each Person within the AFT Group shall
retain such responsibilities as are expressly set forth in Article VII of
the Servicing Agreement.
B. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, assets which do not constitute Aircraft Assets and for any or
all AFT Group Liabilities.
C. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all finance functions which are not expressly the
responsibility of the Servicer under the Servicing Agreement. Such
responsibilities of the AFT Group shall include:
(i) all matters relating to the arrangement and procurement of any
financings of any type or nature for the AFT Group;
(ii) all matters relating to the management of borrowings and payments
under such financings and the management of the respective
borrowers' or issuers', as the case may be, compliance with the
terms of such financings, including compliance with the reporting
requirements thereunder and any computations required in connection
with such reporting;
(iii) all matters relating to the arrangement and procurement of
refinancings of any type or nature of any outstanding indebtedness
of the AFT Group;
(iv) all matters relating to the restructuring of any type or nature of
any indebtedness of the AFT Group; and
(v) all communications with creditors (other than trade creditors and
Lessees) of any type or nature of the AFT Group.
7.01-1
<PAGE> 155
It is expressly understood by the parties that while the Servicer will, to
the extent expressly provided in Schedule 2.02(a) to the Servicing
Agreement, provide AFT with assistance and information required to assist
in its compliance with its obligations and covenants under the Indenture
to the extent such compliance specifically relates to the Services, the
Servicer shall not deal directly with any of AFT Group's creditors, except
to the extent such dealings with trade creditors are incidental to the
Servicer's provision of the Services under the Servicing Agreement.
D. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all treasury functions of the AFT Group that are not expressly
the responsibility of the Servicer under the Servicing Agreement,
including:
(i) cash management;
(ii) currency and interest rate risk management (including the
establishment of related policies and the arrangement and
procurement of appropriate swap programs); and
(iii) reconciliation of all Bank Account-related information.
E. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all accounting functions not expressly the responsibility of
the Servicer under the Servicing Agreement, including:
(i) the monitoring of cash receipts and disbursements and accounts
payable and accounts receivable of the AFT Group;
(ii) the promulgation, maintenance, interpretation, amending and
supplementing of accounting policies for the AFT Group, and the
review and approval of any potential exceptions to the accounting
policies established by the AFT Group;
(iii) maintaining the accounting ledgers, preparing balance sheets,
statements of changes in shareholders' equity and statements of
income and cash flows and arranging
7.01-2
<PAGE> 156
for financial audits, as required, and for the preparation of
audited financial reports for the AFT Group;
(iv) the provision of overhead services to the AFT Group; and
(v) preparing annual Lease Operating Budgets and Aircraft Asset Expenses
Budgets, preparing and analyzing actual results to budget and
performing profitability analysis.
F. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all corporate secretarial activities and other matters related
to the existence of any Person within the AFT Group.
G. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all matters relating to the holders of the share capital of
any Person within the AFT Group.
H. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, all legal and regulatory matters which are not expressly the
responsibility of the Servicer under the Servicing Agreement, including:
(i) the preparation and filing of reports required to be filed with
the U.S. Securities and Exchange Commission or any other
Governmental Authority;
(ii) all legal services (including the negotiation of documents) not
constituting the provision of Services relating to all matters
described herein for which any Person within the AFT Group has
responsibility; and
(iii) the preparation and filing of corporate and tax returns of each
Person within the AFT Group with any Governmental Authority.
I. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, any and all litigation or other legal proceedings against or
brought by any Person
7.01-3
<PAGE> 157
within the AFT Group, other than enforcement actions relating to any
Aircraft Assets (including any counterclaim arising from any such action
to the extent any such counterclaim relates to the Aircraft Assets)
brought by AFT or any other Person within the AFT Group commencing after
the date of the Servicing Agreement.
J. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, the arrangement and procurement of all insurance other than
insurance related to the Aircraft Assets which the Servicer is to arrange
and procure (at the expense of the AFT Group) under the Servicing
Agreement.
K. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, employees of any Person within the AFT Group.
L. Each of AFT and each other Person within the AFT Group shall be
responsible for, and the Servicer shall have no responsibilities in
respect of, purchase orders and options to purchase Aircraft Assets,
except to the extent the same constitute the provision of Services.
M. Except to the extent provided for in Section 2.3 of Schedule 2.02(a) to
the Servicing Agreement, each of AFT and each other Person within the AFT
Group shall be responsible for, and the Servicer shall have no
responsibilities in respect of, keeping AFT in compliance with its
obligations and covenants under the Security Trust Agreement.
Notwithstanding anything contained herein to the contrary, AFT
acknowledges and agrees that it shall be responsible for, and the Servicer shall
not have any responsibility for, (a) any Compliance Obligations to any holders
of outstanding Notes or Beneficial Interest Certificates, any holders of any
other securities issued by any Person within the AFT Group or any Governmental
Authorities, (b) all instructions, discretion, judgments and assumptions related
to such Compliance Obligations and (c) any adverse consequences (including any
Losses) in connection with any Year 2000 Compatibility problems, or any Year
2000 Problem relating to the Services, or the operation or functionality of the
Aircraft Assets or of the AFT Group as either may relate to the
7.01-4
<PAGE> 158
processing of any dates, and AFT agrees to indemnify the Servicer and its
Affiliates in respect of the foregoing as further provided in Sections 11.05 and
11.06 of the Servicing Agreement.
7.01-5
<PAGE> 159
SCHEDULE 7.04 TO
THE SERVICING AGREEMENT
Liabilities Incurred in Ordinary Course of Business
1. Acquisitions, dispositions or replacements of Aircraft, Engines or Parts
(including BFE) including, without limitation, by leasing in.
2. Modifications, maintenance, overhauls, repairs, upgrades or other
technical expenditures.
3. Dry Leases and wet Leases (including extensions, renewals, amendments and
terminations thereof).
4 Repossessions.
5. Registrations and Deregistrations.
6. Governmental approvals, certifications, permits, licenses, consents,
filings and authorizations.
7. Third party professional services including, without limitation, legal,
tax advisory and insurance.
8. Taxes.
9. Aircraft operator transition costs (including, without limitation, flight
operations, storage and maintenance, technical consultants costs, and
purchase, storage and scrapping of spare Parts).
10. Lessee Liens.
11. Insurance
7.04-1
<PAGE> 160
SCHEDULE 8.01 TO
THE SERVICING AGREEMENT
Conditions to Execution
1. Each Person within the AFT Group (other than AFT) shall have executed and
delivered an AFT Group Guarantee in favor of the Servicer substantially in the
form attached to the Servicing Agreement as Appendix B.
2. Each appendix, annex, exhibit or schedule to the Servicing Agreement and each
AFT Group Guarantee shall have been completed to the reasonable satisfaction of
the Servicer and delivered with the Servicing Agreement and the AFT Group
Guarantees at the Closing.
3. The Aircraft Assets Related Documents shall have been delivered to the
Servicer, pursuant to Section 4.02 of the Servicing Agreement, at the Servicer's
offices in Shannon, Ireland, on or prior to the Closing Date.
4. AFT shall have executed and delivered to the Servicer the acknowledged power
of attorney contemplated by Section 13.02 of the Servicing Agreement.
5. AFT shall have delivered to the Servicer a copy of the Indenture, certified
by AFT as a true and complete copy thereof.
6. AFT and each other Person within the AFT Group shall have delivered to the
Servicer satisfactory evidence, in the reasonable judgment of the Servicer, as
to the appointment of agents for service of process as required by the
Documentary Conventions set forth in Appendix A to the Servicing Agreement.
8.01-1
<PAGE> 161
7. AFT and each other Person within the AFT Group shall have delivered to the
Servicer, in form and substance reasonably satisfactory to the Servicer:
(A) a certificate dated the Closing Date of the secretary, any
assistant secretary or another appropriate officer of each such
Person certifying as to:
(1) the attached corporate charter, by-laws and other
constituent documents of such Person, recently certified, in
the case of any such document filed with the secretary of
state or similar Governmental Authority of the jurisdiction in
which such Person is organized by such Governmental Authority;
(2) the absence of amendments to any constituent
document since the date of the last amendment (a) shown on the
official evidence as to filed constituent documents furnished
pursuant to (B) below if such official evidence is available
and (b) in any event reflected in the constituent documents
furnished pursuant to (1) above;
(3) resolutions or other written evidence of corporate
action of the board of directors or Controlling Trustees, as
applicable (or appropriate committee thereof) and, if
applicable, the shareholders of such Person duly authorizing
or ratifying the execution, delivery and performance by such
Person of the Servicing Agreement and AFT Group Guarantee, as
applicable, to which it is or is to be party and the absence
of any modification, amendment or revocation thereof or any
other resolutions relating thereto;
(4) the absence of proceedings for the dissolution,
liquidation, receivership or similar proceedings with respect
to such Person;
(5) if applicable, its corporate seal; and
8.01-2
<PAGE> 162
(6) the incumbency and signatures of the individuals
authorized to execute and deliver documents on such Person's
behalf; and
(B) to the extent available from appropriate Governmental
Authorities, recent official evidence from appropriate Governmental
Authorities of appropriate jurisdictions as to constituent documents
on file, good standing, payment of franchise taxes and qualification
to do business in the jurisdiction in which such Person is
organized.
8. AFT and each other Person within the AFT Group shall have delivered to the
Servicer an Officer's Certificate dated the Closing Date, in form and substance
reasonably satisfactory to the Servicer, stating that:
(A) each representation and warranty of such Person contained
in the Servicing Agreement and AFT Group Guarantee, as applicable,
is true and correct as of the Closing Date;
(B) such Person has duly performed and complied in all
material respects with all covenants, agreements and conditions
contained in the Servicing Agreement and AFT Group Guarantee, as
applicable, required to be performed or complied with by it on or
before the Closing Date;
(C) no event has occurred and is continuing or condition
exists or would result from the consummation of any transaction
contemplated by the Servicing Agreement or AFT Group Guarantee, as
applicable, to which such Person is a party that constitutes, or
with the giving of notice or lapse of time or both would constitute,
a default in any material respect under such Servicing Agreement or
AFT Group Guarantee, as applicable, or a breach thereof or would
give any party thereto the right to terminate, or not to perform any
material obligation under, any thereof; and
(D) the Servicing Agreement and AFT Group Guarantee, as
applicable, to which it is a party is in full force and effect with
respect to it, has not been amended, modified or terminated and
constitutes its
8.01-3
<PAGE> 163
legal, valid and binding obligation enforceable against it in
accordance with its terms.
9. The Servicer (and such Affiliates of the Servicer that the Servicer
designates as addressees) shall have received legal opinions dated as of the
Closing Date, which shall cover the following matters and shall also cover such
other matters as the Servicer and its counsel may reasonably request:
(A) Each of AFT and each other Person within the AFT Group has
been duly organized and is validly existing as a [business
trust/corporation] in good standing under the laws of its
jurisdiction of incorporation.
(B) Neither the execution and delivery of the Servicing
Agreement and AFT Group Guarantee, as applicable, nor the
consummation of the transactions contemplated thereby nor the
performance by AFT or any other Person within the AFT Group of any
of their obligations thereunder in accordance with the terms thereof
will (i) violate any order, writ, injunction, judgment or decree in
effect as of the date hereof of any [insert appropriate courts] to
which AFT or any other Person within the AFT Group, or any of their
respective Affiliates, is a party or by which any of their
respective properties or assets are bound, (ii) violate in any
material respect any applicable law of [insert applicable law] in
effect as of the date hereof or (iii) result in any conflict with,
breach of or default (or give rise to any right of termination,
cancelation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, warrant or other
similar instrument or any license, permit material agreement or
other material obligation to which any such Person is a party or by
which any such Person's properties or assets may be bound.
(C) Upon execution and delivery thereof, the Servicing
Agreement and AFT Group Guarantee, as applicable, to which AFT and
each other Person within the AFT Group is a party shall be valid and
legally binding on and enforceable against such party in accordance
with its terms, subject to applicable bankruptcy, reorganization,
insolvency, fraudulent transfer, moratorium or other laws affecting
8.01-4
<PAGE> 164
creditors' rights generally from time to time in effect and to
general equity principles regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(D) No action, consent or approval by, or filing with, any
[insert appropriate Governmental Authorities] or other third party
is required in connection with the execution, delivery or
performance by AFT or any other Person within the AFT Group of the
Servicing Agreement and AFT Group Guarantee, as applicable, to which
it is a party or the consummation by AFT or any other Person within
the AFT Group of the transactions contemplated thereby.
10. The Servicer shall have delivered to AFT, in form and substance reasonably
satisfactory to AFT:
(A) a certificate dated the Closing Date of the secretary, any
assistant secretary or another appropriate officer of the Servicer
certifying as to:
(1) the attached corporate charter, by-laws and other
constituent documents of the Servicer, recently certified, in the
case of any such document filed with the secretary of state or
similar Governmental Authority of the jurisdiction in which the
Servicer is organized by such Governmental Authority;
(2) the absence of amendments to any constituent document
since the date of the last amendment (a) shown on the official
evidence as to filed constituent documents furnished pursuant to (B)
below if such official evidence is available and (b) in any event
reflected in the constituent documents furnished pursuant to (1)
above;
(3) resolutions or other written evidence of corporate action
of the board of directors (or appropriate committee thereof) and, if
applicable, the shareholders of the Servicer duly authorizing or
ratifying the execution, delivery and performance by the Servicer of
the Servicing Agreement and the absence of any modification,
amendment or revocation thereof or any other resolutions relating
thereto;
8.01-5
<PAGE> 165
(4) the absence of proceedings for the dissolution,
liquidation, receivership or similar proceedings with respect to the
Servicer;
(5) if applicable, its corporate seal; and
(6) the incumbency and signatures of the individuals
authorized to execute and deliver documents on the Servicer's
behalf; and
(B) to the extent available from appropriate Governmental
Authorities, recent official evidence from appropriate Governmental
Authorities of appropriate jurisdictions as to constituent documents on
file, payment of franchise taxes and qualification to do business in the
jurisdiction in which the Servicer is organized.
11. The Servicer shall have delivered to AFT an Officer's Certificate dated the
Closing Date, in form and substance reasonably satisfactory to AFT, stating
that:
(A) each representation and warranty of the Servicer contained in
the Servicing Agreement is true and correct as of the Closing Date;
(B) the Servicer has duly performed and complied in all material
respects with all covenants, agreements and conditions contained in the
Servicing Agreement required to be performed or complied with by it on or
before the Closing Date;
(C) no event has occurred and is continuing or condition exists or
would result from the consummation of any transaction contemplated by the
Servicing Agreement that constitutes, or with the giving of notice or
lapse of time or both would constitute, a default in any material respect
under the Servicing Agreement or a breach thereof or would give any party
thereto the right to terminate, or not to perform any material obligation
under, the Servicing Agreement; and
(D) the Servicing Agreement is in full force and effect with respect
to it, has not been amended, modified or terminated and constitutes its
legal, valid and binding obligation enforceable against it in accordance
with its terms.
8.01-6
<PAGE> 166
12. AFT shall have received legal opinions dated as of the Closing Date,
substantially in the form of the opinions set forth in Appendix D and Appendix E
to the Purchase Agreement.
8.01-7
<PAGE> 167
SCHEDULE 9.06(a) TO
THE SERVICING AGREEMENT
Overhead Expenses
1. Salary, bonuses, company cars and benefits of Servicer's employees.
2. Travel and entertainment expenses of Servicer's employees.
3. Office, office equipment and rental expenses of the Servicer.
4. Telecommunications expenses of the Servicer.
5. Advertising and promotional expenses of the Servicer.
6. Taxes on the income, receipts, profits, gains, net worth or franchise of
Servicer and payroll, employment and Social Security Taxes for employees
of the Servicer.
9.06(a)-1
<PAGE> 168
SCHEDULE 9.06(b) TO
THE SERVICING AGREEMENT
Categories of Aircraft Asset Expenses
1. Storage, maintenance, repossession (whether or not successful),
reconfiguration, refurbishment and repair expenses relating to Aircraft
Assets, including all 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 retained for any of the foregoing purposes.
2. Insurance expense related to Aircraft Assets, including all fees and
expenses of insurance advisors and brokers.
3. Expenses incurred in connection with the effectuation or acceptance of
delivery of any Aircraft Asset, whether being sold or leased by any Person
within the AFT Group.
4. Special studies expenses related to Aircraft Assets authorized by any
Person within the AFT Group and fees and expenses of independent advisors
retained for providing valuation and appraisal services and general
financial advice such as structuring leases and sales and financing
transactions.
5. Outside legal counsel, advisory fees and expenses and other professional
fees and expenses related to Aircraft Assets (including in connection with
the sale, lease, release, lease extension or repossession of Aircraft
Assets or any enforcement actions relating to any lease).
6. Extraordinary fees and expenses not incurred in the ordinary course of
business which the Servicer reasonably determines appropriate in rendering
the Services.
7. Taxes reimbursable to Servicer pursuant to Section 9.07.
8. Any other expenses relating to or associated with Aircraft Assets other
than Overhead Expenses of the Servicer and such Overhead Expenses of the
AFT Group as are expressly the responsibility of the Servicer under
Section 9.06(a) of the Servicing Agreement.
9.06(b)-1
<PAGE> 169
SCHEDULE 13.02 TO THE
SERVICING AGREEMENT
MANAGEMENT SERVICES
POWER OF ATTORNEY
OF
[GRANTOR]
WHEREAS [GRANTOR], having its [registered] office at [insert address]
(hereinafter called "the Grantor") desires to appoint GE CAPITAL AVIATION
SERVICES, LIMITED having its registered office at 1 Earlsfort Centre, Hatch
Street, Dublin 2, Ireland ("the Attorney") as the true and lawful attorney of
the Grantor for and in the name of and on behalf of the Grantor in such
Attorney's absolute discretion to execute each and every Requisite Document and
Requisite Act as defined below and do all or any of the acts or things
hereinafter mentioned.
KNOW ALL MEN BY THESE PRESENTS that in consideration for the mutual promises and
benefits set forth in the Servicing Agreement (defined below) the Grantor does
hereby make, constitute and irrevocably and unconditionally appoint for the
period (the "Term") as and from the date hereof until termination or expiry of
the Servicing Agreement between AFT and GE Capital Aviation Services, Limited
dated as of May 5, 1999 ("the Servicing Agreement") in accordance with its terms
the Attorney as a true and lawful attorney of the Grantor for and in the name of
and on behalf of the Grantor with absolute discretion to exercise, do, execute
and/or deliver all or any of the acts, documents and things hereinafter
mentioned that is to say:
1. To negotiate, approve, settle the terms of, agree, make, sign, execute
(whether under hand or seal) and deliver all deeds, agreements, documents,
commitments, arrangements, instruments, applications, oaths, affidavits,
declarations, notices, confirmations, certificates, approvals,
acceptances, deliveries and to do all other acts, matters and things
whatsoever which are in each case necessary or desirable for the Attorney
to do for and on behalf of the Grantor in respect of the provision of the
Services (as
13.02(b)-1
<PAGE> 170
defined in and contemplated by the Servicing Agreement) (each such
document a "Requisite Document" and each such act a "Requisite Act").
2. To make such amendments, modifications and variations to the Requisite
Documents and to enter into ancillary documentation in respect thereof,
all on such terms as any such Attorney may, in its sole discretion,
determine from time to time for and on behalf of the Grantor; and to make,
give, sign, execute and do all things including without limitation any
material acts which may be necessary in order to effect the terms of such
Requisite Documents or in connection with the making, signature,
executions and delivery of the Requisite Documents or any other documents
required to be executed by the Grantor in connection therewith or the
performance of any acts, matters and things contemplated thereby or by the
Requisite Acts as may be necessary in accordance with the provision of the
Services.
3. To nominate and appoint one or more substitutes as attorney or attorneys
under it for all and any of the purposes aforesaid and the appointment of
same with liberty to revoke.
4. To acknowledge this Power of Attorney as the act and deed of the Grantor
and generally to do all other acts which may be necessary and desirable
for carrying the purpose of this Power of Attorney into effect.
IT IS HEREBY DECLARED THAT:-
(A) The Grantor hereby ratifies and confirms and agrees to ratify and
confirm whatsoever any Attorney shall do or cause to be done in, or
by virtue of this Power of Attorney as long as such act is not
inconsistent with the terms of the Servicing Agreement or this Power
of Attorney or in violation of Applicable Law.
(B) This Power of Attorney shall be irrevocable for the Term and at all
times both before and after the Term shall be conclusive and binding
upon the Grantor and no person or corporation having dealings with
any Attorney under this Power of Attorney shall be under any
obligation to make any inquiries as to whether or
13.02(b)-2
<PAGE> 171
not this Power of Attorney has been revoked and all acts hereunder
shall be valid and binding on the Grantor unless express notice of
its revocation shall have been received by such person or
corporation.
(C) Subject to the provisions of the Servicing Agreement the Grantor
unconditionally undertakes to indemnify and keep indemnified each
Attorney and his agents, and their respective successors and
estates, against all actions, proceedings, claims, costs, expenses
and liabilities of whatsoever nature arising from the exercise or
purported exercise in good faith of any of the powers conferred on
each Attorney by this Power of Attorney.
(D) Subject to the provisions of the Servicing Agreement any Attorney or
other person, making or doing any payment or act, in good faith, in
pursuance of this Power of Attorney shall not be liable in respect
of the payment or act by reason that before the payment or act the
Grantor was insolvent or had revoked this power if the fact of such
insolvency or revocation was not at the time of payment or act known
to the Attorney or other person making or doing same.
(E) The particular powers enumerated above shall be given the widest
interpretation.
(F) This Power of Attorney shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF the Grantor has caused this Power of Attorney duly executed
by the Grantor this day of [ ], 1999.
SIGNED BY:____________________
For and on behalf of
[GRANTOR]
in the presence of:
13.02(b)-3
<PAGE> 172
ANNEX 1
INSURANCE GUIDELINES
1. Hull and Repossession Insurance: With respect to any Aircraft Asset, hull
and repossession insurance, when applicable, shall be maintained in an
amount equal to the greatest of (a) the Note Target Price for such
Aircraft (as such Note Target Price is set forth on Schedule 1(a) attached
hereto, as the same shall be amended in writing from time to time by AFT),
(b) the appraised value for such Aircraft (as such appraised value is set
forth on Schedule 1(b) attached hereto, as the same shall be amended in
writing from time to time by AFT), (c) 110% of the net book value of such
Aircraft (as such net book value is set forth on Schedule 1(c) attached
hereto, as the same shall be amended in writing from time to time by AFT),
and (d) such other amounts as may be directed in writing by AFT from time
to time. Spare engines and parts, if any, shall be insured on the basis of
their "replacement cost".
2. Liability Insurance: Liability insurance shall be maintained for each
Aircraft Asset and occurrence in an amount not less than the amount set
forth on Schedule 2 attached hereto, as the same shall be amended in
writing from time to time by AFT. Liability Insurance shall be maintained
for each non-passenger Aircraft Asset and occurrence in an amount not less
than 75% of the amounts set forth on Schedule 2. With respect to each
Aircraft Asset acquired pursuant to the Asset Purchase Agreement,
liability insurance shall include, without limitation, cover, to the
extent generally available in the leading insurance markets, for the
indemnity of each Purchaser (as defined in the Asset Purchase Agreement)
contained in Section 10.1 of the Asset Purchase Agreement, with the
relevant Seller Indemnitees (as defined in the Asset Purchase Agreement)
as additional insureds, during the period commencing on the date of
Delivery of the relevant Aircraft Asset and ending on the earlier of (i)
the third anniversary of the date of such Delivery and (ii) the date of
completion of the next major check in respect of the relevant Aircraft
Asset.
3. Insurance Deductibles:
(a) Deductibles and self-insurance for Aircraft Assets subject to a
Lease may be maintained in an amount
Annex 1-1
<PAGE> 173
(i) not to exceed $10.0 million in aggregate in respect of any one
occurrence in respect of such Aircraft Assets provided that the
Lessee related thereto has a rating of not less than A or its
equivalent on its long-term, unsecured debt obligations by at least
one Rating Agency or (ii) pursuant to commercially reasonable
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).
(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 equal to $200,000 or such other amount as AFT may direct
in writing from time to time.
4. Repossession Insurance: Subject to prior confirmation from AFT on a case
by case basis, repossession insurance shall be maintained for Aircraft
Assets subject to a Lease that are or will be registered in any
jurisdiction listed on Schedule 4 attached hereto, as the same may be
amended in writing from time to time by AFT.
5. Other Insurance Matters: Apart from the matters set forth above, the
coverage and terms of any insurance with respect to any Aircraft Assets
(a) subject to a Lease, shall be negotiated on a basis consistent with
Sections 3(b) and (c) of Schedule 2.02(a) to the Servicing Agreement and
(b) not subject to a Lease, shall be substantially consistent with the
commercial practices of leading international aircraft operating lessors
regarding similar equipment.
6. Named Insureds: Any insurance arrangements entered into with respect to
any Aircraft Assets shall include as named insureds such Persons as are
set forth on Schedule 6 attached hereto, as the same shall be amended in
writing from time to time by AFT. With respect to clauses 2(f) and 2(g) of
Schedule 6, the Servicer shall use commercially reasonable efforts to
cause Lessees to include the Persons set forth in such clauses as named
insureds in connection with liability insurance; provided, however, that
to the extent that a Lessee is not willing to include such Persons, the
Servicer will, subject to the provisions of the Servicing Agreement and at
the expense of AFT, arrange for alternative liability insurance coverage
with respect
Annex 1-2
<PAGE> 174
to such Persons. GECAS and such of its Affiliates as it determines
appropriate may, in GECAS' sole discretion, be named as additional
insureds in connection with any such liability insurance arrangements.
7. 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.
8. Availability: The insurance guidelines set forth herein are subject in all
cases to such insurance being generally available in the relevant
insurance market from time to time.
9. Revisions to Required Amounts of Insurance: AFT shall use commercially
reasonable efforts to provide to the Servicer amendments to Schedules 1(a)
and 1(c) attached hereto, on a quarterly basis, and Schedule 1(b) attached
hereto, on an annual basis, promptly (and in any event within seven
Business Days) following receipt or calculation by AFT of the relevant
information that would form the basis of any such amendment. With respect
to each proposed amendment to any schedule to this Annex 1, AFT shall
provide the Servicer with (x) a signed hard copy thereof and (y) an
e-mailed Excel version thereof. The Servicer shall not be required to
implement any change in the amount of insurance required to be maintained
with respect to any Aircraft Asset pursuant to Section 1.3 of Schedule
2.02(a) to the Servicing Agreement and this Annex 1 as a result of the
receipt by the Servicer from AFT of any written notice, direction,
amendment or similar communication pursuant to this Annex 1 until the
seventh Business Day following receipt thereof (including, with respect to
the immediately preceding sentence, receipt of the items listed in both
clauses (x) and (y) thereof.
Annex 1-3
<PAGE> 175
SCHEDULE 1(a) TO ANNEX 1
Note Target Price
<TABLE>
<CAPTION>
Outstanding Principal
Serial Balance Allocable to
Type Number Aircraft Note Target Price
- ----------- -------- ----------------------- --------------------
<S> <C> <C> <C>
A310-300 448 $31,785,561 $32,739,128
A320-200 210 26,167,024 26,952,035
A320-200 221 27,452,828 28,276,413
A320-200 222 27,471,110 28,295,243
A320-200 231 26,310,230 27,099,537
A320-200 373 28,692,928 29,553,716
A320-200 737 37,379,722 38,501,114
A320-200 749 37,227,375 38,344,197
B737-300 28333 30,780,074 31,703,476
B737-300 28548 32,245,647 33,213,016
B737-300 28554 30,441,865 31,355,121
B737-300 28557 31,895,250 32,852,108
B737-300 28558 31,910,485 32,867,799
B737-300 28559 31,950,095 32,908,598
B737-300 28561 31,895,250 32,852,108
B737-300 28562 32,001,893 32,961,949
B737-300 28563 32,209,084 33,175,356
B737-300 28564 32,434,557 33,407,593
B737-300 28740 33,330,354 34,330,264
B737-400 25663 24,957,393 25,706,115
B737-400 25664 24,798,953 25,542,922
B737-400 28489 32,075,019 33,037,270
B737-400 28490 31,992,752 32,952,534
B737-400 28491 32,017,127 32,977,641
B767-200ER 23805 32,748,390 33,730,842
B767-200ER 23806 32,745,343 33,727,704
B767-300ER 25221 58,101,884 59,844,941
B767-300ER 25403 61,069,593 62,901,681
B767-300ER 29617 82,017,228 84,477,745
B767-300ER 30008 82,126,918 84,590,725
DC-10-30 46584 17,702,656 18,233,736
DC-10-30 48292 19,993,946 20,593,765
MD-83 49398 18,040,865 18,582,091
MD-83 49791 20,188,950 20,794,618
MD-83 53198 22,105,468 22,768,632
MD-83 53199 22,736,182 23,418,268
Total $1,209,000,000 $1,245,270,000
</TABLE>
Schedule 1(a) to Annex 1-1
<PAGE> 176
SCHEDULE 1(b) TO ANNEX 1
Appraised Values
<TABLE>
<CAPTION>
Type Serial Number Appraised Value
- ---- ------------- ---------------
<S> <C> <C>
A310-300 448 $34,773,333
A320-200 210 28,626,667
A320-200 221 30,033,333
A320-200 222 30,053,333
A320-200 231 28,783,333
A320-200 373 31,390,000
A320-200 737 40,893,333
A320-200 749 40,726,667
B737-300 28333 33,673,333
B737-300 28548 35,276,667
B737-300 28554 33,303,333
B737-300 28557 34,893,333
B737-300 28558 34,910,000
B737-300 28559 34,953,333
B737-300 28561 34,893,333
B737-300 28562 35,010,000
B737-300 28563 35,236,667
B737-300 28564 35,483,333
B737-300 28740 36,463,333
B737-400 25663 27,303,333
B737-400 25664 27,130,000
B737-400 28489 35,090,000
B737-400 28490 35,000,000
B737-400 28491 35,026,667
B767-200ER 23805 35,826,667
B767-200ER 23806 35,823,333
B767-300ER 25221 63,563,333
B767-300ER 25403 66,810,000
B767-300ER 29617 89,726,667
B767-300ER 30008 89,846,667
DC-10-30 46584 19,366,667
DC-10-30 48292 21,873,333
MD-83 49398 19,736,667
MD-83 49791 22,086,667
MD-83 53198 24,183,333
MD-83 53199 24,873,333
Total $1,322,643,333
</TABLE>
Schedule 1(b) to Annex 1-1
<PAGE> 177
SCHEDULE 1(c) TO ANNEX 1
Net Book Value
<TABLE>
<CAPTION>
Serial 110% of Net Book
Type Number Net Book Value Value
- ------------- ----------- -------------------- ------------------
<S> <C> <C> <C>
A310-300 448 $31,446,068 $34,590,675
A320-200 210 25,887,541 28,476,295
A320-200 221 27,159,612 29,875,573
A320-200 222 27,177,698 29,895,468
A320-200 231 26,029,217 28,632,139
A320-200 373 28,386,467 31,225,113
A320-200 737 36,980,479 40,678,527
A320-200 749 36,829,760 40,512,736
B737-300 28333 30,451,321 33,496,453
B737-300 28548 31,901,240 35,091,364
B737-300 28554 30,116,724 33,128,396
B737-300 28557 31,554,586 34,710,044
B737-300 28558 31,569,658 34,726,623
B737-300 28559 31,608,845 34,769,729
B737-300 28561 31,554,586 34,710,044
B737-300 28562 31,660,089 34,826,098
B737-300 28563 31,865,067 35,051,574
B737-300 28564 32,088,132 35,296,945
B737-300 28740 32,974,361 36,271,797
B737-400 25663 24,690,830 27,159,913
B737-400 25664 24,534,082 26,987,490
B737-400 28489 31,732,434 34,905,678
B737-400 28490 31,651,046 34,816,151
B737-400 28491 31,675,161 34,842,677
B767-200ER 23805 32,398,614 35,638,475
B767-200ER 23806 32,395,599 35,635,159
B767-300ER 25221 57,481,314 63,229,445
B767-300ER 25403 60,417,325 66,459,058
B767-300ER 29617 81,141,224 89,255,347
B767-300ER 30008 81,249,742 89,374,717
DC-10-30 46584 17,513,579 19,264,937
DC-10-30 48292 19,780,397 21,758,436
MD-83 49398 17,848,176 19,632,993
MD-83 49791 19,973,317 21,970,649
MD-83 53198 21,869,366 24,056,302
MD-83 53199 22,493,343 24,742,678
</TABLE>
Schedule 1(c) to Annex 1-1
<PAGE> 178
<TABLE>
<S> <C> <C>
$1,196,087,000 $1,315,695,700
</TABLE>
Schedule 1(c) to Annex 1-2
<PAGE> 179
SCHEDULE 2 TO ANNEX 1
Liability Insurance
<TABLE>
<CAPTION>
Model Minimum Limit
----- -------------
<S> <C>
ATP/ATR/Dash-8/RJ/F50/F70 US $250 million
HS146/AVRO/F28/F100 US $300 million
B727/B737/A320/MD80/DC9 US $500 million
DC8/A310 US $600 million
B747/B757/B767/A300 US $750 million
L1011/DC10/A330/A340/MD11/B777 US $750 million
</TABLE>
Notwithstanding the foregoing, with respect to any liability insurance
maintained by any Person within the AFT Group for the benefit of the Persons
listed in clause 2(h) of Schedule 6 to Annex 1, such amount of insurance shall
be not less than US$750 million for wide-body Aircraft and US$600 million for
any other type of Aircraft.
Schedule 2 to Annex 1-1
<PAGE> 180
SCHEDULE 4 TO ANNEX 1
Repossession Insurance
Country
- -------
Angola
Armenia
Azerbaijan
Belarus
Benin
Bhutan
Cameroon
Cape Verde Islands
Chad
Comoros
Congo
Cuba
Equatorial Guinea
Eritrea
Ethiopia
Grenada
Iran
Iraq
Kazakhstan
Kirbati
Kyrgistan
Liberia
Libya
Moldova
Mongolia
Myanmar
Niger
North Korea
Sao Tome & Principe
Somalia
Sudan
Syria
Turkmenistan
Uzbekistan
Schedule 4 to Annex 1-1
<PAGE> 181
SCHEDULE 6 TO ANNEX 1
Named Insureds
1. Hull and Repossession Insurance
(a) with respect to each Aircraft Asset other than an Original
Aircraft, owner (and head lessor, if applicable) of Aircraft (Person
within AFT Group)
(b) with respect to each Aircraft Asset other than an Original
Aircraft, intermediate lessor(s), if any, of Aircraft (Person(s) within
AFT Group)
(c) with respect to each Original Aircraft other than an Original
UniCapital Aircraft, GE Capital and/or one or more of its Affiliates
(d) with respect to each Original UniCapital Aircraft, UniCapital
and/or one or more of its Affiliates
2. Liability Insurance
(a) with respect to each Aircraft Asset other than an Original
Aircraft, owner (and head lessor, if applicable) of Aircraft (Person
within AFT Group)
(b) with respect to each Aircraft Asset other than an Original
Aircraft, intermediate lessor(s), if any, of Aircraft (Person(s) within
AFT Group)
(c) GECAS, the Servicer
(d) the Administrative Agent
(e) the Trustee
(f) with respect to each Original Aircraft, the AFT Group
(g) any holder of the Beneficial Interest Certificates in AFT from
time to time
(h) with respect to each Aircraft Asset acquired pursuant to the
Asset Purchase Agreement, the relevant Seller Indemnitees (as defined in
the Asset Purchase
Schedule 6 to Annex 1-1
<PAGE> 182
Agreement) during the period commencing on the date of Delivery of such
Aircraft Asset and ending on the earlier of (i) the third anniversary of
such date of Delivery and (ii) the date of completion of the next major
check in respect of such Aircraft Asset
Schedule 6 to Annex 1-2
<PAGE> 183
ANNEX 2
CONCENTRATION LIMITS
<TABLE>
<CAPTION>
Percentage of Most
Recent Appraised
Lessee Concentration Limits Value of Portfolio (1)
--------------------------- ----------------------
<S> <C>
Single Lessee rated BBB/Baa2 (or the
equivalent) or better ................................ 15%
Other single Lessees ................................. 10%
Five largest Lessees ................................. 35%
<CAPTION>
Percentage of Most
Recent Appraised
Country Concentration Limits Value of Portfolio (1)
---------------------------- ---------------------
<S> <C>
Countries rated AAA/Aa2
(or the equivalent) or better (2) .................... 25%
Countries rated BBB/Baa2
(or the equivalent) or Better (2) .................... 20%
Other ................................................ 15%
<CAPTION>
Percentage of Most
Recent Appraised
Region Concentration Limits Value of Portfolio (1)
--------------------------- ----------------------
<S> <C>
Any Single Developed Market Region (3) ............... 50%
Any Single Emerging Market Region (3) ................ 25%
Asia/Pacific (3) ..................................... 45%
Undesignated (4) ..................................... 20%(4)
</TABLE>
- ----------
(1) Percentage to be obtained by dividing the aggregate most recent Appraised
Values of all Aircraft leased or to be leased to Lessees habitually based
in the applicable country by the aggregate most recent Appraised Values of
all Aircraft then owned by the Issuer Group.
(2) 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.
(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. Asia/Pacific represents
the aggregate of the Aircraft leased to Lessees habitually based in the
Asia area of the Emerging Market Region and the Pacific area of the
Developed Market Region. The current designations are as set out below:
<PAGE> 184
Region Country
------ -------
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
UNDESIGNATED
All other countries (generally those that have small or under-developed
capital markets, including Iceland, Fiji and Guyana)
(4) In addition, within the "Undesignated" country catagory, no more than 10%
of the most recent Appraised Value of the Portfolio shall be leased to
Lessees habitually based in "Undesignated" 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
"Undesignated" countries in Africa.
Repossession Guidelines
(a) Prohibited Countries:
Cuba Myanmar
North Korea Iran
Sudan Iraq
Syria Libya
(b) Countries with respect to which Repossession Insurance must be procured:
Angola Equatorial Guinea Mongolia
Armenia Eritrea Myanmar
Azerbaijan Ethiopia Niger
Belarus Grenada North Korea
Benin Iran Sao Tome & Principe
Bhutan Iraq Somalia
Cameroon Kazakhstan Sudan
Cape Verde Islands Kirbati Syria
Chad Kyrgistan Turkmenistan
Comoros Liberia Uzbekistan
Congo Libya
Cuba Moldova
2
<PAGE> 185
APPENDIX A TO THE
SERVICING AGREEMENT
CONSTRUCTION AND USAGE; DEFINITIONS
Construction and Usage
The terms defined below have the meanings set forth below for all
purposes. "Include", "includes" and "including" shall be deemed to be followed
by "without limitation" whether or not they are in fact followed by such words
or words of like import. "Writing", "written" and comparable terms refer to
printing, typing, lithography or other means of reproducing words in a visible
form. Any agreement or instrument or any law, rule or regulation of any
Governmental Authority defined or referred to below means such agreement or
instrument or such law, rule or regulation as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of such law, rule or regulation) by
succession of any comparable successor law, rule or regulation and includes (in
the case of agreements or instruments) references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns. Any term defined below by reference to any
agreement or instrument or any law, rule or regulation of any Governmental
Authority has such meaning whether or not such agreement, instrument or law,
rule or regulation is in effect. "Agreement", "hereof", "herein", "hereunder"
and comparable terms refer to the agreement in which such term appears
(including all exhibits and schedules hereto) and not to any particular article,
section, clause or other subdivision thereof or attachment thereto. References
to any gender include, unless the context otherwise requires, references to all
genders, and references to the singular include, unless the context otherwise
requires, references to the plural and vice versa. "Shall" and "will" have equal
force and effect. References to "Article", "Section", "Clause" or another
subdivision or to an attachment are, unless the context otherwise requires, to
an article, section, clause or subdivision of or attachment to such agreement.
Appendix A-1
<PAGE> 186
Definitions
"Acceleration Default" means any Event of Default of the type
described in Section 4.01(e) or 4.01(f) of the Indenture.
"Accounting Claims" has the meaning assigned to such term in Section
11.05 of the Servicing Agreement.
"Acquisition" has the meaning assigned to such term in the Final
Prospectus.
"Additional Certificates" means any Beneficial Interest Certificates
issued pursuant to the Trust Agreement (or pursuant to supplements thereto) at
any time after the Closing Date, the proceeds of which are used, in substantial
part, to acquire Aircraft.
"Additional Disposition Fee" has the meaning assigned to such term
in Section 9.05(a)(ii) of the Servicing Agreement.
"Additional Fee Period" has the meaning assigned to such term in
Section 9.05(a)(iii) of the Servicing Agreement.
"Additional Notes" means any class or subclass of Notes issued
pursuant to the Indenture (or pursuant to supplements thereto) at any time after
the Closing Date, the proceeds of which are used, in substantial part, to
acquire Aircraft.
"Additional Rent Collected Fee" has the meaning assigned to such
term in Section 9.05(a)(iii) of the Servicing Agreement.
"Additional Sales Fee" has the meaning assigned to such term in
Section 9.05(a)(i) of the Servicing Agreement.
"Additional Servicing Fees" has the meaning assigned to such term in
Section 9.01 of the Servicing Agreement.
"Additional UniCapital Aircraft" means any Aircraft (other than any
Initial UniCapital Aircraft) acquired by any Person within the AFT Group from
UniCapital or any of its Affiliates.
"Adjusted Base Value" has the meaning assigned to such term in
Section 1.01 of the Indenture.
Appendix A-2
<PAGE> 187
"Adjusted Gross Proceeds" has the meaning assigned to such term in
Section 9.05(a)(ii) of the Servicing Agreement.
"Adjusted Portfolio Value" has the meaning assigned to such term in
Section 1.01 of the Indenture.
"Administrative Agency Agreement" means the Administrative Agency
Agreement dated as of May 5, 1999, among ReSource/Phoenix, Inc., as
Administrative Agent, AFT, Bankers Trust Company, as Security Trustee, and the
entities listed on Appendix A thereto.
"Administrative Agency Fees" means the fees paid to the
Administrative Agent in consideration of the services rendered by the
Administrative Agent pursuant to Section 6.01(a) of the Administrative Agency
Agreement.
"Administrative Agent" means ReSource/Phoenix, Inc., as
administrative agent under the Administrative Agency Agreement.
"Adviser" means an insurance adviser engaged by the Servicer in
accordance with Section 1.3(b) of Schedule 2.02 to the Servicing Agreement.
"AerFi" means AerFi Group plc, a company incorporated under the laws
of Ireland.
"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) AFT and its
Subsidiaries, on the one part, and GE and its Subsidiaries, on the other part,
shall not be considered to be Affiliates of each other and (ii) no holder of any
Beneficial Interest Certificates shall be considered to be an Affiliate of AFT
and its Subsidiaries.
"AFT" means Aircraft Finance Trust, a Delaware business trust.
"AFT Group" has the meaning assigned to such term in Section 2.01(a)
of the Servicing Agreement.
"AFT Group Guarantees" means each Guarantee, in the form set forth
as Appendix B to the Servicing Agreement, issued
Appendix A-3
<PAGE> 188
by each Person within the AFT Group pursuant to Section 6.13 of the Servicing
Agreement.
"AFT Group Liabilities" means any obligations or liabilities of any
Person within the AFT Group (whether accrued, absolute, contingent, unasserted,
known or unknown or otherwise).
"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), be equal to the payment received, deemed to have been
received or receivable.
"Aggregate Gross Proceeds" has the meaning assigned to such term in
Section 9.04(b) of the Servicing Agreement.
"Aircraft" means any airframe together with (i) any Engine installed
on such airframe (or any Engine substituted therefor), (ii) parts or components
thereof, (iii) spare parts or ancillary equipment or devices furnished therewith
and (iv) the Aircraft Documents with respect thereto.
"Aircraft Asset Expenses Budget" has the meaning assigned to such
term in Section 7.03(a) of the Servicing Agreement.
"Aircraft Assets" means (a) all Aircraft owned or leased-in by any
Person within the AFT Group as of the Closing Date or at any time or from time
to time thereafter (taking into account any acquisitions or dispositions made in
accordance with this Agreement); provided, however, that Aircraft Assets shall
not include (x) any Aircraft Asset that shall have ceased to be an Aircraft
Asset in accordance with the provisions of Sections 2.04(b) or 3.02(d) of the
Servicing Agreement, but shall include any Former Aircraft Asset that shall have
become an Aircraft Asset pursuant to Section 6.07 of the Servicing Agreement,
(y) any Aircraft Asset in respect of which the
Appendix A-4
<PAGE> 189
obligation of the Servicer to provide Services shall have been terminated in
accordance with Article X of the Servicing Agreement or (z) any UniCapital
Serviced Aircraft except (to the extent provided for in Section 9.01(b) of the
Servicing Agreement) for purposes of Sections 9.03, 9.04 and 9.05 of the
Servicing Agreement and (b) all Original Aircraft.
"Aircraft Assets Expenses" has the meaning assigned to such term in
Section 9.06(b)(i) of the Servicing Agreement.
"Aircraft Assets Related Documents" means all Leases and other
contracts and agreements of Persons within the AFT Group the terms of which
relate to or affect any of the Aircraft Assets.
"Aircraft Documents" means, in relation to an Aircraft, all records,
logs, technical data, manuals and other documents relating to the maintenance
and operation of such Aircraft.
"Amended and Restated Servicing Agreement" means the Amended and
Restated Servicing Agreement dated as of March 28, 1996, between GECAS and
AerFi.
"Annex 1" means Annex 1 to the Servicing Agreement, which annex sets
forth the Insurance Guidelines.
"Annex 2" means Annex 2 to the Servicing Agreement, which annex sets
forth the Concentration Thresholds contained in Section 5.03(a) of the
Indenture.
"Annual Review" has the meaning assigned to such term in Section
3(c)(i) of Schedule 2.02(a) to the Servicing 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 EU or any Irish or other
foreign or international Governmental Authority that applies to such Person or
any of its properties or assets.
"Appraised Value" means with respect to any Aircraft, the average of
the most recent appraisals by each of the Appraisers of the Base Value of such
Aircraft.
Appendix A-5
<PAGE> 190
"Appraiser" means at least three independent appraisers that are
members of the International Society of Transport Aircraft Trading or any
similar organization.
"Approved Budget" has the meaning assigned to such term in Section
7.03(d) of the Servicing Agreement.
"Asset Purchase Agreement" means the Master Aircraft Purchase
Agreement dated as of May 5, 1999, among GE Capital, AFT and the other parties
thereto.
"Assigned Lease" has the meaning assigned to such term in Section
1.01 of the Security Trust Agreement.
"Bank Accounts" has the meaning assigned to such term in Section
7.1(b) of Schedule 2.02(a) to the Servicing Agreement.
"Base Value" has the meaning assigned to such term in Section 1.01
of the Indenture.
"Beneficial Interest Certificates" means any Beneficial Interest
Certificates issued pursuant to the Trust Agreement (or pursuant to any
supplements thereto).
"best efforts" has the meaning assigned to such term in Section
2.03(a)(i) of the Servicing Agreement.
"Broker" means an insurance broker engaged by Servicer in accordance
with Section 1.3(b) of Schedule 2.02(a) to the Servicing Agreement.
"Business Day" means a day on which U.S. dollar deposits may be
traded 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 fourth Business Day immediately
preceding each Payment Date.
"Changed Circumstance" means the occurrence of 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
Section 7.03 of the Servicing Agreement.
Appendix A-6
<PAGE> 191
"Closing" means the closing of the offering and sale of the Notes by
AFT and the consummation of the Acquisition and the other transactions described
in the Final Prospectus.
"Closing Date" means May 5, 1999.
"Code" has the meaning assigned to such term in Section 9.07(c) of
the Servicing Agreement.
"Collection Account" has the meaning assigned to such term in
Section 3.01(a) of the Indenture.
"Competitor" means any of the following Persons:
(i) any Person (other than GE Capital and its Affiliates) engaged
in, or which has an Affiliate engaged in, the business of manufacturing
aircraft or aircraft engines, which business had consolidated revenues
attributable to such business for such Person's and/or its Affiliate's, as
the case may be, most recently completed fiscal year in excess of $200
million; or
(ii) any of the following Persons (or any of their respective
Affiliates) and their respective successors and assigns:
(a) International Lease Finance Corporation;
(b) Ansett Worldwide Aviation Services;
(c) GATX Corporation;
(d) ORIX;
(e) Pembroke Capital Limited;
(f) Babcock & Brown Limited;
(g) AerFi; and
(h) IAMG; or
(iii) any other Person (or any Affiliate thereof) (other than GE and
its Affiliates) which engages in a business as an operating lessor of
Aircraft Assets in competition with any Person within the AFT Group either
(x) in succession to any of the Persons specified in clause (ii) above or
(y) which has consolidated aircraft leasing-related revenues (excluding
revenues from sales of aircraft) attributable to such business for its
most recently completed fiscal year in excess of $200 million.
"Compliance Obligations" has the meaning assigned to such term in
Section 11.05 of the Servicing Agreement.
Appendix A-7
<PAGE> 192
"Concentration Thresholds" has the meaning assigned to such term in
Section 2.2(a) of Schedule 2.02(a) to the Servicing Agreement.
"Conflicts Standard" has the meaning assigned to such term in
Section 3.02(b) of the Servicing Agreement.
"control" (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);
"Controlling Trustees" means the controlling trustees of AFT.
"Core Lease Provisions" means the core lease provisions included as
Exhibit L to the Indenture, as the same may be amended from time to time.
"Default Notice" has the meaning assigned to such term in Section
1.01 of the Indenture.
"Delivery" has the meaning assigned to such term in Section 1.1 of
the Asset Purchase Agreement.
"Deposits" means the deposits required under a Lease.
"Disposition" has the meaning assigned to such term in Section
9.04(b) of the Servicing Agreement.
"Documentary Conventions" with respect any agreement, instrument or
other document that states it is governed thereby, means that, except as
otherwise expressly provided therein:
(a) No Partnership. The parties thereto expressly recognize and
acknowledge that such agreement, instrument or other document is not
intended to create a partnership, joint venture or other similar
arrangement between or among any of the parties thereto or their
respective Affiliates.
(b) Notices. Subject to paragraph (d) below, all notices, consents,
directions, approvals, instructions, requests and other communications
required or permitted by such agreement, instrument or other document to
be given to
Appendix A-8
<PAGE> 193
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 in
Appendix C to the Servicing Agreement. From time to time any party to such
agreement, instrument or other document may designate a new address or
number for purposes of notice thereunder by notice to each of the other
parties thereto.
(c) Governing Law. SUCH AGREEMENT, INSTRUMENT OR OTHER DOCUMENT
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
(d) Jurisdiction; Court Proceedings; Waiver of Jury Trial. Any suit,
action or proceeding against any party to such agreement, instrument or
other document arising out of or relating to such agreement, instrument or
other document, any transaction contemplated thereby or any judgment
entered by any court in respect of any thereof may be brought in any New
York State court located in the County of New York or Federal court
sitting in the Second Circuit, and each such party hereby submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. To the extent that service of process by mail is
permitted by applicable law, each party thereto irrevocably consents to
the service of process in any such suit, action or proceeding in such
courts by the mailing of such process by registered or certified mail,
postage prepaid, at its address for notices provided for above. Each party
to such agreement, instrument or other document irrevocably agrees not to
assert any objection which it may ever have to the laying of venue of any
such suit, action or proceeding in any New York State court located in the
County of New York or Federal court sitting in the Second Circuit, and any
claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. To the fullest extent permitted
by Applicable Law, each party to such agreement, instrument or other
document waives any right it may have to a trial by jury in respect of any
litigation directly or indirectly arising out of, under or
Appendix A-9
<PAGE> 194
in connection with such agreement, instrument or other document. AFT
agrees, and it shall cause each other Person within the AFT Group not to
bring any action, suit or proceeding against GE Capital, the Servicer or
any of their respective Affiliates or any of GE Capital's, the Servicer's
or their respective Affiliates' Representatives arising out of, in
connection with or related to any such agreement, instrument or other
document or any transaction contemplated thereby except in a New York
State court located in the County of New York or Federal court sitting in
the Second Circuit.
(e) Agent. AFT and each other Person within the AFT Group hereby
appoints CT Corporation System (the "Agent"), 1633 Broadway, New York, New
York, U.S.A. 10019, as its nonexclusive agent for service of process in
connection with each Operative Agreement. The parties may use any other
legally available means of service of process. AFT will promptly notify
the Servicer and GE Capital of any change in the address of the Agent;
provided, however, that AFT will at all times maintain an agent located
within New York State for service of process in connection with each
Operative Agreement, the identity of any successor Agent to be reasonably
satisfactory to the Servicer and GE Capital.
The Servicer hereby appoints GE Capital (the "Servicer's Agent"),
335 Madison Ave., 12th Floor, New York, N.Y. 10017, U.S.A., as its
nonexclusive agent for service of process in connection with each
Operative Agreement. The parties may use any other legally available means
of service of process. The Servicer will promptly notify AFT of any change
in the address of the Servicer's Agent; provided, however, that the
Servicer will at all times maintain an agent located within New York State
for service of process in connection with each Operative Agreement, the
identity of any successor Servicer's Agent to be reasonably satisfactory
to AFT.
(f) Consequential Damages. In no event will any party to such
agreement, instrument or other document be liable to any other for lost
profits, income tax consequences, lost savings or any other consequential
damages, even if such party has been advised of the possibility of such
damages, or for punitive damages, resulting from the breach of any
obligation under such agreement, instrument or other document.
Appendix A-10
<PAGE> 195
(g) Counterparts. Each such agreement, instrument or other document
may be executed by the parties thereto in separate counterparts, each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same agreement,
instrument or other document. All signatures need not be on the same
counterpart.
(h) Entire Agreement; Amendment and Waiver. Such agreement,
instrument or other document, together with the other Operative
Agreements, shall constitute the entire agreement of the parties thereto
with respect to the subject matter thereof and supersedes all prior
written and oral agreements and understandings with respect to such
subject matter. Neither any such agreement, instrument or other document
nor any of the terms thereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement,
waiver or modification shall be sought. No failure or delay of any party
to any such agreement, instrument or other document, in exercising any
power or right thereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power.
(i) Table of Contents; Headings. The table of contents and headings
of the various articles, sections and other subdivisions of such
agreement, instrument or other document are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
of such agreement, instrument or other document.
(j) Parties in Interest; Limitation on Rights of Others. The terms
of such agreement, instrument or other document shall be binding upon, and
inure to the benefit of, the parties thereto and their permitted
successors and assigns and, to the extent applicable, their respective
Affiliates and Representatives. Except as expressly set forth in any such
agreement, instrument or other document with respect to Affiliates and
Representatives of the parties thereto, nothing in such agreement,
instrument or other document, whether express or implied, shall be
construed to give any Person (including any past, present
Appendix A-11
<PAGE> 196
or future employee of any Person within the AFT Group) (other than the
parties thereto and their permitted successors and assigns and, with
respect to Sections 2.01(a) and 2.03(m) of the Servicing Agreement and
Section 9.3 of Schedule 2.02 to the Servicing Agreement, any holders of
the Beneficial Interest Certificates and, with respect to Section 2.03(m)
of the Servicing Agreement, UniCapital) any legal or equitable right,
remedy or claim under or in respect of such agreement, instrument or other
document or any covenants, conditions or provisions contained therein.
(k) Method of Payment. Except as otherwise agreed, all amounts
required to be paid by any party to such agreement, instrument or other
document to any other party thereunder (including in respect of any
judgment or settlement entered in respect of such agreement, instrument or
other document) shall be paid in dollars, by wire transfer, or other
acceptable method of payment, of same day funds to a dollar account
located in the United States as such party may specify by notice to the
other party.
(l) Payment on Business Days. If any payment under such agreement,
instrument or other document is required to be made on a day other than a
Business Day, the date of payment shall be extended to the next Business
Day.
(m) Past Due Payments. Any amount payable to any party or any of its
Representatives under any such agreement, instrument or other document
shall be paid on the date therein specified for payment of such amounts.
To the extent that all or a portion of such amount is not paid on such
date, such amount (or the unpaid portion thereof) shall bear interest at
the Stipulated Interest Rate from such date until and through the date
that such amount has been paid in full.
(n) Severability. Any provision of such agreement, instrument or
other document that shall be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by Applicable Law, each
of AFT and the Servicer waives any provision of law
Appendix A-12
<PAGE> 197
that renders any provision of any agreement, instrument or other document
prohibited or unenforceable in any respect.
"Dollar" or "$" means the lawful money of the United States of
America.
"Due Date" has the meaning assigned to such term in Section 9.07(a)
of the Servicing Agreement.
"Effectiveness Date" has the meaning assigned to such term in
Section 10.02(c)(ii) of the Servicing Agreement.
"Engine" means owned or leased-in aircraft engines or, with respect
to any Original Aircraft, any aircraft engine required to be delivered together
with such Original Aircraft pursuant to the terms of the Asset Purchase
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EU" means the European Union.
"Event of Default" has the meaning assigned to such term in Section
1.01 of the Indenture.
"Exchange Notes" means any notes of AFT containing terms identical
to the Notes issued on the Closing Date, any Additional Notes or any Refinancing
Notes (except that such Exchange Note shall be registered under the Securities
Act of 1933) that are issued and exchanged for the Notes issued on the Closing
Date, such Additional Notes or such Refinancing Notes, as the case may be,
pursuant to a Registration Rights Agreement and the Indenture.
"Exchange Offer" means any exchange offer pursuant to which any of
the Notes will be exchanged for Exchange Notes issued pursuant to an effective
registration statement under the Securities Act of 1933.
"Existing Accounts" has the meaning assigned to such term in Section
7.1(a) of Schedule 2.02(a) to the Servicing Agreement.
"Expense Account" has the meaning assigned to such term in Section
3.01(a) of the Indenture.
Appendix A-13
<PAGE> 198
"Fee Period" has the meaning assigned to such term in Section
9.03(a)(i) of the Servicing Agreement.
"Final Prospectus" has the meaning assigned to such term in Section
2.03(a)(ii) of the Servicing Agreement.
"Former Aircraft Asset" has the meaning assigned to such term in
Section 2.04(b) of the Servicing Agreement.
"GE" means General Electric Company, a New York corporation.
"GE Capital" means General Electric Capital Corporation, a New York
corporation.
"GECAS" means GE Capital Aviation Services, Limited, a company
incorporated under the laws of Ireland.
"GE Policy" has the meaning assigned to such term in Section 2.04(a)
of the Servicing 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.
"Gross Proceeds" has the meaning assigned to such term in Section
9.04(b) of the Servicing Agreement.
"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, however, that the term
Guarantee shall not include (x) endorsements for collection or deposit, in
either case in the ordinary course of business, (y) any guarantee by any Person
within the AFT Group of the obligations of another Person within the AFT Group
in respect of such Person's obligations in connection with any Aircraft Assets,
Appendix A-14
<PAGE> 199
whether as lessor, seller or otherwise, or (z) the delivery of a bond or similar
instrument by or on behalf of any Person within the AFT Group in connection with
the detention or repossession of any Aircraft Assets.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (d) 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, (e)
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, (f) all Indebtedness of other Persons secured by a lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person, and
(g) all Indebtedness of other Persons Guaranteed by such Person.
"Indemnified Parties" means GE Capital, the Servicer and their
respective Affiliates and each of GE Capital's, the Servicer's and their
respective Affiliates' Representatives.
"Indenture" means the Trust Indenture dated as of May 5, 1999, among
AFT, the Administrative Agent and Bankers Trust Company, as trustee.
"Independent Representative" has the meaning assigned to such term
in Section 3.02(c) of the Servicing Agreement.
"Independent Trustees" means the independent trustees of AFT.
"Initial Exchange Offer" means the Exchange Offer with respect to
the Notes issued on the Closing Date.
Appendix A-15
<PAGE> 200
"Initial UniCapital Aircraft" means any Aircraft acquired by any
Person within the AFT Group pursuant to the Asset Purchase Agreement with the
proceeds of the Notes issued on the Closing Date following the acquisition of
such Aircraft by GE Capital or any of its Affiliates from UniCapital or any of
its Affiliates.
"Lease" means any lease or other agreement or arrangement pursuant
to which any Person (other than a Person within the AFT Group) has the right to
possession and use of any Aircraft Asset.
"Lease Operating Budget" has the meaning assigned to such term in
Section 7.03(a) of the Servicing Agreement.
"Lessee" means the lessee (or equivalent Person) in respect of a
Lease.
"Lessee Funded Account" has the meaning assigned to such term in
Section 3.01(a) of the Indenture.
"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 under any conditional sale
agreement, capital lease or title retention 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, however, the term
"Losses" shall not include any Indemnified Party's management time or overhead
expenses.
"Maintenance Reserves" means the maintenance reserves under each 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
Appendix A-16
<PAGE> 201
franchises, businesses, operation or prospects of such Person or the ability of
such Person to perform fully any of its obligations under any of the Operative
Agreements.
"Monthly Base Fee" has the meaning assigned to such term in Section
9.01 of the Servicing Agreement.
"Monthly Payment Period" has the meaning assigned to such term in
Section 7.3(a) of Schedule 2.02(a) to the Servicing Agreement.
"Net Proceeds" has the meaning assigned to such term in Section
2.03(g) of the Servicing Agreement.
"New Accounts" has the meaning assigned to such term in Section
7.1(b) of Schedule 2.02(a) to the Servicing Agreement.
"Nonterminating Party" has the meaning assigned to such term in
Section 10.02(c)(i) the Servicing Agreement.
"Notes" means any class or subclass of Notes issued pursuant to the
Indenture on the Closing Date, and any Exchange Notes, any Additional Notes and
any Refinancing Notes, in each case issued pursuant to the Indenture (or
pursuant to any supplements thereto).
"Note Target Price" has the meaning assigned to such term in Section
5.02(g) of the Indenture.
"Notes Offering" has the meaning assigned to such term in Section
2.03(a)(i) of the Servicing Agreement.
"Notice of Termination" means a Termination Notice.
"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, the Secretary or any Assistant Secretary, or any
Director.
"Operative Agreements" means the Servicing Agreement, the AFT Group
Guarantees and all other agreements, instruments or other documents which are
required by the terms of any thereof to be delivered in connection with any of
the foregoing documents.
Appendix A-17
<PAGE> 202
"Original Aircraft" means any "Aircraft" (as defined in the Asset
Purchase Agreement); provided, however, that Original Aircraft shall not include
any "Aircraft" (x) which shall have suffered an "Event of Loss" (as defined in
the Asset Purchase Agreement) and in respect of which the loss proceeds shall
have become payable to the appropriate Person within the AFT Group, (y) with
respect to which a payment has been made pursuant to Section 4.2 of the Asset
Purchase Agreement or (z) with respect to which a Delivery has been effected.
"Original UniCapital Aircraft" means any Original Aircraft which
will become an Initial UniCapital Aircraft upon its Delivery.
"Other Assets" has the meaning assigned to such term in Section
3.02(a) of the Servicing Agreement.
"Outstanding Principal Balance" has the meaning assigned to such
term in Section 1.01 of the Indenture.
"Overhead Expenses" has the meaning assigned to such term in Section
9.06(a) of the Servicing Agreement.
"Partial Termination" has the meaning assigned to such term in
Section 10.02(a)(ii) of the Servicing Agreement.
"Payment Date" means the 15th day of each month, commencing on June
15, 1999; provided, however, that, if any Payment Date would otherwise fall on a
day that is not a Business Day, the relevant Payment Date shall be the first
following day which is a Business Day.
"Permitted Account Investments" has the meaning assigned to such
term in Section 1.01 of the Indenture.
"Person" means any individual, firm, corporation, partnership,
trust, body of persons, joint venture, governmental authority or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Precedent Lease" has the meaning assigned to such term in Section
3(b) of Schedule 2.02(a) to the Servicing Agreement.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by Bankers Trust Company as its prime rate in effect at its
principal office in New York
Appendix A-18
<PAGE> 203
City; each change in the "Prime Rate" shall be effective on the date such change
is announced.
"Pro Forma Lease" has the meaning assigned to such term in Section
3(b) of Schedule 2.02(a) to the Servicing Agreement.
"Prospectus" has the meaning assigned to such term in Section
2.03(a)(i) of the Servicing Agreement.
"Purchase Agreement" means the Purchase Agreement dated as of April
21, 1999, among AFT, GE Capital and Lehman Brothers Incorporated.
"Quarter" means each fiscal quarter.
"Rating Agencies" means each of Standard & Poor's Ratings Group, a
division of the McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc.
and any successors to either of the foregoing.
"Ratings" means the then current rating assigned by a Rating Agency
in respect of the Notes.
"Refinancing Notes" means any class or subclass of Notes issued
pursuant to the Indenture (or pursuant to supplements thereto) at any time after
the Closing Date, the proceeds of which are used to repay all or any part of the
then outstanding Notes.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, between AFT and Lehman Brothers
Incorporated and any other agreement entered into between AFT and a purchaser of
Notes providing for the registration of such Notes under the Securities Act of
1933.
"Rent Collected Fee" has the meaning assigned to such term in
Section 9.03(a)(ii) of the Servicing Agreement.
"Rent Fees" has the meaning assigned to such term in Section 9.01 of
the Servicing Agreement.
"Rent Payable Fee" has the meaning assigned to such term in Section
9.03(a)(i) of the Servicing Agreement.
"Rents" means the basic rent payable pursuant to a Lease and in the
event that the agreement or arrangement
Appendix A-19
<PAGE> 204
pursuant to which possession of any Aircraft Asset is given is other than as a
lease, amounts equivalent to any basic rent.
"Replacement Servicer" means a replacement servicer to perform some
or all of the Services under the Servicing Agreement formerly performed by the
Servicer, appointed in accordance with Section 10.04(c) of the Servicing
Agreement.
"Representatives" with respect to any Person means the officers,
directors, employees, advisors and agents of such Person.
"Required Expense Amount" has the meaning assigned to such term in
Section 1.01 of the Indenture.
"Sales Fee" has the meaning assigned to such term in Section 9.01 of
the Servicing Agreement.
"Security Trust Agreement" means the Security Trust Agreement dated
as of the Closing Date among AFT, the Administrative Agent, the Servicer,
Bankers Trust Company, as Trustee, Security Trustee and reference agent, and the
other parties thereto.
"Security Trustee" means Bankers Trust Company, a New York banking
corporation, in its capacity as security trustee pursuant to the Security Trust
Agreement dated as of the Closing Date among AFT and Bankers Trust Company, as
Security Trustee, and the other parties thereto.
"Servicer" means GECAS.
"Servicer Delegate" has the meaning assigned to such term in Section
12.01 of the Servicing Agreement.
"Servicer Disclosure" has the meaning assigned to such term in
Section 2.03(a)(i) of the Servicing Agreement.
"Servicer Information" has the meaning assigned to such term in
Section 2.03(m) of the Servicing Agreement.
"Services" has the meaning assigned to such term in Section 2.02(a)
of the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of May
5, 1999, between AFT and the Servicer.
Appendix A-20
<PAGE> 205
"Servicing Fees" means the Monthly Base Fee, the Sales Fee, the Rent
Fees and the Additional Servicing Fees.
"Shadow Director/Related Company Claims" has the meaning assigned to
such term in Section 11.04 of the Servicing Agreement.
"Significant Subsidiary" means any Person within the AFT Group that
has title to, or any other indicia of ownership in, any Aircraft Assets.
"Standard of Care" has the meaning assigned to such term in Section
3.01 of the Servicing Agreement.
"Standard of Liability" has the meaning assigned to such term in
Section 3.03 of the Servicing Agreement.
"Stated Services Obligation" has the meaning assigned to such term
in Section 7.3(a) of Schedule 2.02(a) to the Servicing Agreement.
"Stipulated Interest Rate" means, for any period, a rate per annum
equal to the Prime Rate in effect during such period plus 2 percent 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.
"Swap Provider" has the meaning assigned to such term in the
Indenture.
"Tax" or "Taxes" means all fees (including documentation, license
and registration fees), taxes, assessments, levies, impositions, duties,
withholdings and other governmental charges of any nature whatsoever (including
taxes based upon or measured by gross receipts, income, profits, sales, use or
occupation, and value added, ad valorem, transfer,
Appendix A-21
<PAGE> 206
franchise, withholding, payroll, social security, employment, excise,
documentary, stamp, corporation, corporation profits, advance corporation,
capital duty, capital gains, capital acquisitions, wealth, vehicle registration,
social insurance, and property taxes), together with all interest, fines,
penalties and additions imposed with respect to such amounts.
"Taxpayer" means any Person within the AFT Group or any predecessor
of any Person within the AFT Group, or any successor to any Person within the
AFT Group (but not including GE Capital, the Servicer or any of their
Affiliates).
"Terminating Party" has the meaning assigned to such term in Section
10.02(c)(i) of the Servicing Agreement.
"Termination Notice" has the meaning assigned to such term in
Section 10.02(c)(i) of the Servicing 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 the Servicing Agreement.
"Transaction Approval Requirements" has the meaning assigned to such
term in Section 7.04(c) of the Servicing Agreement.
"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 Prospectus) 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.
"Trust Agreement" means the Trust Agreement dated as of April 13,
1999, among UniCapital AFT-I, Inc. and UniCapital AFT-II, Inc., as depositors,
Wilmington Trust Company, as Owner Trustee, the Controlling Trustees and the
Independent Trustees.
Appendix A-22
<PAGE> 207
"Trustee" has the meaning assigned to such term in the Indenture.
"Trustee Fees" means the fees paid to the Trustee in consideration
of the services rendered by the Trustee pursuant to Article VI of the Indenture.
"UniCapital" means UniCapital Corporation, a Delaware corporation.
"UniCapital Aircraft" means all Initial UniCapital Aircraft and all
Additional UniCapital Aircraft.
"UniCapital Serviced Aircraft" means any UniCapital Aircraft that
shall have become subject to the UniCapital Servicing Agreement.
"UniCapital Servicing Agreement" has the meaning assigned to such
term in Section 13.07 of the Servicing Agreement.
"U.S. GAAP" means generally accepted accounting principles in the
United States.
"U.S. Tax Code" means the United States Internal Revenue Code of
1986, as amended.
"Year" means each fiscal year ended December 31.
"Year 2000 Claims" has the meaning assigned to such term in Section
11.06 of the Servicing Agreement.
"Year 2000 Compatibility" refers to the ability of computer systems
and non-computing equipment containing embedded microchips to perform properly
date sensitive functions and to avoid any Year 2000 Problem.
"Year 2000 Problem" means the vulnerability of systems to errors and
failures in connection with the use, exchange, or other processing of dates (for
example, the use of two digits to represent the year rather than four digits,
resulting in a system being unable to distinguish between the year 1900 and the
year 2000).
Appendix A-23
<PAGE> 208
APPENDIX B TO THE
SERVICING AGREEMENT
GUARANTEE dated as of [insert date], made
by [insert name] ("Guarantor") in favor of GE CAPITAL AVIATION
SERVICES, LIMITED (the "Servicer") and its Affiliates relating
to the Servicing Agreement dated as of [insert date] (the
"Agreement"), between the Servicer and Aircraft Finance Trust
(the "Obligor").
WHEREAS pursuant to the Agreement, the Servicer has agreed to
provide Services to each Person within the AFT Group in accordance with and to
the extent set forth in the Agreement;
WHEREAS the Obligor is a party to the Agreement and is liable for
any and all amounts due and owing to the Servicer and any of its Affiliates
under the Agreement; and
WHEREAS each Person within the AFT Group is a direct or indirect
beneficiary of the Services performed by the Servicer pursuant to the Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Servicer to enter in the Agreement and to perform the Services thereunder,
Guarantor hereby agrees, for the benefit of the Servicer and its Affiliates, as
follows:
1. Guarantor unconditionally and irrevocably guarantees to the
Servicer and its Affiliates (a) the due and punctual payment of all amounts due
to the Servicer and its Affiliates from the Obligor under the Agreement, whether
now existing or hereafter incurred, and (b) the due and punctual performance of
all other obligations of the Obligor to the Servicer and its Affiliates under
the Agreement (all the foregoing being hereinafter collectively called the
"Obligations") and any and all fees and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by the Servicer and its
Affiliates in enforcing any rights under this Guarantee, all without regard to
any counterclaim, set-off, deduction or defense of any kind which the Obligor or
Guarantor may have or assert, and without abatement, suspension, deferment or
diminution on account of any event or condition whatsoever. In case of failure
of the Obligor punctually to pay any of the amounts referred to in
Appendix B-1
<PAGE> 209
clause (a) above, Guarantor hereby agrees to cause such amounts to be paid
punctually when and as the same shall become due and payable as if such payment
were made by the Obligor. Guarantor further agrees that this Guarantee
constitutes a guarantee of payment when due and not of collection.
2. The liability of the undersigned under this Guarantee shall, to
the fullest extent permitted by Applicable Law, be unconditional irrespective of
(i) any lack of enforceability against the Obligor of any Obligation, (ii) any
change of the time, manner or place of payment, or any other term, of any
Obligation, (iii) any exchange, release or nonperfection of any collateral
securing payment of any Obligation or any other guarantee in respect thereof,
(iv) any law, regulation or order of any jurisdiction affecting any term of any
Obligation or the Servicer's or any of its Affiliates' rights with respect
thereto and (v) any other circumstance which might vary the risk of or otherwise
constitute a defense available to, or a discharge of, the Obligor, Guarantor or
any surety. The Guarantor waives, to the fullest extent permitted by Applicable
Law, promptness, diligence and notices with respect to any Obligation and this
Guarantee and any requirement that the Servicer or any of its Affiliates exhaust
any right or take any action against the Obligor, any collateral security or any
other guarantor.
3. In the event that the Guarantor is required by any applicable law
to make any deduction or withholding for or on account of Taxes from any payment
to be made by it hereunder, then it shall (i) pay over to the government or
taxing authority imposing such Tax the full amount required to be deducted or
withheld (including the full amount required to be deducted or withheld from the
additional amounts required to be paid pursuant to clause (ii) below), (ii) pay
to the Servicer or its Affiliates, as the case may be, together with such
payment such additional amounts as may be necessary in order that the net amount
received by the Servicer or its Affiliates, as the case may be, will be not less
than the full amount of such payment which would otherwise have been receivable
had no such deduction or withholding been required and (iii) forward to the
Servicer as soon as possible such tax receipts or other official documentation
with respect to the payment of the Taxes so deducted or withheld as may be
issued from time to time by such government or taxing authority.
4. Guarantor further agrees that this Guarantee shall continue to be
effective or be reinstated, as the case may be,
Appendix B-2
<PAGE> 210
if at any time payment, or any part thereof, of any Obligation or interest
thereon is rescinded or must otherwise be restored by the Servicer upon the
bankruptcy or reorganization of the Obligor, Guarantor or otherwise.
5. Upon payment by Guarantor of any sums to the Servicer or its
Affiliates under this Guarantee, all rights of Guarantor against the Obligor
arising as a result thereof by way of right of subrogation or otherwise shall in
all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full of all the obligations of the Obligor under the
Agreement.
6. The Guarantor represents and warrants as of the date hereof to
the Servicer and its Affiliates that:
(a) the Guarantor is a corporation or business trust duly organized
and validly existing and, if relevant, in good standing under the laws of
the jurisdiction in which it is legally organized, 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,
constituent documents 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, is
required in connection with the execution delivery, performance,
Appendix B-3
<PAGE> 211
validity or enforceability with respect to the Guarantor of this
Guarantee.
7. This Guarantee shall remain in full force and effect and be
binding in accordance with its terms upon the Guarantor and shall inure to the
benefit of the Servicer and its Affiliates until all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
indefeasible payment in full.
8. The obligations of Guarantor under this Guarantee may not be
assigned or delegated without the prior written consent of the Servicer.
9. The liability of the Guarantor under this Guarantee 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.
10. This Guarantee shall be governed by the Documentary Conventions,
and all capitalized terms used but not defined herein have the meanings assigned
to such terms in Appendix A to the Agreement. The construction and usage set
forth in such Appendix A are incorporated herein by reference.
IN WITNESS WHEREOF, Guarantor has executed this Guarantee as of the
date first above written.
[Insert Name of Guarantor]
by
________________________________
Name:
Title:
Appendix B-4
<PAGE> 212
APPENDIX C TO THE
SERVICING AGREEMENT
Notices
GE Capital Aviation Services, Limited
Aviation House
Shannon
Ireland
Attention: Company Secretary
Fax: (353) 61-360888
Telephone: (353) 61-706500
with a copy to:
GE Capital Aviation Services, Inc.
201 High Ridge Road (Ground Floor)
Stamford, Connecticut 06927
Attention: General Counsel
Fax: (203) 921-0029
Telephone: (203) 961-2985
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
Fax: (302) 651-8882
Telephone: (302) 651-1000
with a copy to:
ReSource/Phoenix, Inc.
2401 Kerner Boulevard
San Rafael, California 94901
Attention: Mike Ulyatt
Fax: (415) 485-4522
Telephone: (415) 485-4500
Appendix C-1
<PAGE> 1
Exhibit 10.4
EXECUTION COPY
ADMINISTRATIVE AGENCY AGREEMENT
between
AIRCRAFT FINANCE TRUST,
as the Issuer
THE ISSUER SUBSIDIARIES IDENTIFIED HEREIN,
BANKERS TRUST COMPANY
in its capacity as the Trustee and the Security Trustee
and
RESOURCE/PHOENIX, INC.
as the Administrative Agent
Dated as of May 5, 1999
<PAGE> 2
Table of Contents
Page
ARTICLE I DEFINITIONS..........................................................1
Section 1.01 Definitions..............................................1
ARTICLE II APPOINTMENT; ADMINISTRATIVE SERVICES................................4
Section 2.01 Appointment..............................................4
Section 2.02 Limitations..............................................5
Section 2.03 Administrative Services..................................6
Section 2.04 Bank Account Management and Calculation Services........11
Section 2.05 Accounting Services.....................................14
Section 2.06 Additional Administrative Services......................16
Section 2.07 Additional Aircraft.....................................17
Section 2.08 New Subsidiaries........................................17
Section 2.09 The Issuer Group Responsibility.........................17
ARTICLE III STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY..................17
Section 3.01 Standard of Performance.................................17
Section 3.02 Liability and Indemnity.................................18
ARTICLE IV ADMINISTRATIVE AGENT UNDERTAKINGS..................................19
Section 4.01 Administrative Agent Undertakings.......................20
ARTICLE V UNDERTAKINGS OF THE ISSUER GROUP....................................22
Section 5.01 Cooperation.............................................22
Section 5.02 Information.............................................22
Section 5.03 Scope of Services.......................................22
Section 5.04 Ratification............................................23
Section 5.05 Covenants...............................................23
i
<PAGE> 3
Page
----
Section 5.06 Ratification by Subsidiaries............................24
ARTICLE VI ADMINISTRATION FEES AND EXPENSES...................................24
Section 6.01 Administration Fees.....................................24
Section 6.02 Expenses................................................25
Section 6.03 Payment of Expenses.....................................25
ARTICLE VII TERM; REPLACEMENT OF OR RESIGNATION BY THE ADMINISTRATIVE AGENT...25
Section 7.01 Term....................................................25
Section 7.02 Replacement or Resignation..............................26
Section 7.03 Consequences of Replacement or Resignation..............27
Section 7.04 Survival................................................28
ARTICLE VIII ASSIGNMENT AND DELEGATION........................................28
Section 8.01 Assignment and Delegation...............................28
ARTICLE IX MISCELLANEOUS......................................................28
Section 9.01 Notices.................................................28
Section 9.02 Governing Law...........................................30
Section 9.03 Jurisdiction............................................30
Section 9.04 WAIVER OF JURY TRIAL....................................30
Section 9.05 Counterparts; Third Party Beneficiaries.................30
Section 9.06 Entire Agreement........................................31
Section 9.07 Table of Contents; Headings.............................31
Section 9.08 Amendments..............................................31
Section 9.09 No Partnership..........................................31
Section 9.10 Concerning the Security Trustee and the Trustee.........31
Section 9.11 Restrictions on Disclosure..............................32
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SCHEDULES
SCHEDULE 1 - Accounts
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THIS ADMINISTRATIVE AGENCY AGREEMENT (this "Agreement") dated as of
May 5, 1999, is made between AIRCRAFT FINANCE TRUST (the "Issuer"), a Delaware
business trust, each ISSUER SUBSIDIARY signatory to this Agreement or that
becomes a party under Section 5.06 hereof (collectively with the Issuer, the
"Issuer Group"), BANKERS TRUST COMPANY, a New York banking corporation, not in
its individual capacity but solely as the trustee under the Indenture and as the
security trustee under the Security Trust Agreement, and RESOURCE/PHOENIX, INC.,
a California corporation.
For the consideration set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Administrative
Agent, the Trustee, the Security Trustee, the Issuer and the other Issuer Group
Members agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For purposes of this Agreement, the
following terms 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.
"Administrative Agent" means the Person, at the time of
determination, appointed as the Administrative Agent under this Agreement. The
initial Administrative Agent for both the Issuer Group Services and the Bank
Account Management Services is ReSource/Phoenix, Inc. If at any time a different
person is appointed as the Administrative Agent for the Issuer Group Services
and as the Administrative Agent for the Bank Account Management Services, the
term "Administrative Agent" shall apply to both or one such Person as
applicable.
"Administrative Fee" has the meaning assigned to such term in
Section 6.01 hereof.
"Administrative Services" has the meaning assigned to such terms in
Section 2.01 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 the Issuer, the other Issuer
Group Members, the Trustee, the Security Trustee and the Administrative Agent
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 U.S. federal, state, local and 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 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.
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"Aircraft Asset Expenses Budget" has the meaning assigned to such
term in Section 7.03(a)(i) of the Servicing Agreement.
"Aircraft Assets" has the meaning assigned to such term in the
Servicing Agreement.
"Annual Appraised Value" means initially the average Base Value of
an Aircraft at the time acquired by an Issuer Group Member and thereafter as
determined annually by the Appraisers.
"Approved Budget" has the meaning assigned to such term in Section
7.03(d) of the Servicing Agreement.
"Bank Account Management Services" has the meaning assigned to such
term in Section 2.01 hereof.
"Capital Markets Advisor" means Lehman Brothers Inc.
"Concentration Thresholds" has the meaning assigned to such term in
Section 2.2(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.
"Dollars" or "$" means the lawful currency of the United States of
America.
"Draft Accounts" has the meaning assigned to such term in Section
2.05(b)(iii) hereof.
"EU" means the European Union.
"Fee Period" has the meaning assigned to such term in Section 6.01
hereof.
"Governmental Authority" means any court, administrative agency or
commission or other governmental agency or instrumentality (or any Responsible
Officer thereof), domestic, foreign or international, of competent jurisdiction
including, without limitation, the EU.
"Indenture" means the Trust Indenture dated as of May 5, 1999,
between the Issuer, the Administrative Agent and the Trustee.
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"Issuer Group Services" has the meaning assigned to such term in
Section 2.01 hereof.
"Lease" means any lease or other agreement or arrangement pursuant
to which any Person (other than an Issuer Group Member) has the right to
possession and use of any Aircraft.
"Lease Operating Budget" has the meaning assigned to such term in
Section 7.03(a)(i) of the Servicing Agreement.
"Ledgers" has the meaning assigned to such term in Section
2.04(b)(i) hereof.
"Maintenance Reserves" has the meaning assigned to such term in the
Asset Purchase Agreement.
"Owner Trustee" means the Wilmington Trust Company, as owner trustee
of the Issuer.
"Quarter" means the fiscal quarter of each Issuer Group Member, as
applicable.
"Ratings" means the ratings assigned to the Securities by the Rating
Agencies.
"Reimbursable Expenses" has the meaning assigned to such term in
Section 6.02(b) hereof.
"Schedule 2.02(a)" has the meaning assigned to such term in Section
2.03(k)(viii) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Service Providers" means the Persons providing services to the
Issuer Group, including, without limitation, where the context admits, the
Servicer, the Financial Advisor, the Capital Markets Advisor and other Persons
performing similar services or advising the Issuer Group.
"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 hereof.
"Subsidiary" means, with respect to any Person, 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
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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.
"U.S. Bankruptcy Code" has the meaning assigned to such term in
Section 7.02(b)(iii) hereof.
"Year" has the meaning assigned to such term in the Servicing
Agreement.
ARTICLE II
APPOINTMENT; ADMINISTRATIVE SERVICES
Section 2.01 Appoinment. Each Issuer Group Member hereby appoints the
Administrative Agent as the provider of the administrative and related services
set forth in Section 2.03 hereof, the accounting services set forth in Section
2.05 hereof and the additional administrative services set forth in Sections
2.06, 2.07 and 2.08 hereof (collectively, the "Issuer Group Services") to each
Issuer Group Member on the terms and subject to the conditions set forth in this
Agreement. Each Issuer Group Member acknowledges that it has assigned its
rights, among other things, to administer the Non-Trustee Accounts and it rights
and draw upon any Credit Facility to the Security Trustee pursuant to the
Security Trust Agreement and that pursuant to this Agreement the Security
Trustee has appointed the Administrative Agent its agent to administer the
Non-Trustee Accounts and to administer and draw upon any Credit Facility. In the
event the Trustee or the Security Trustee receives any notice or instruction
from the Administrative Agent with regard to any Issuer Group Services, the
Trustee or the Security Trustee, as applicable, may regard such notice or
instruction as given by the Issuer or any other Issuer Group Member unless
previously notified otherwise in writing by the Issuer.
(b) The Trustee and the Security Trustee hereby appoint the
Administrative Agent as their agent for the purposes of providing the bank
account management, calculation and other services set forth in Section 2.04
hereof and in the Indenture and performing the other activities (excluding those
under Section 2.03(j) hereof and the provisions of the Indenture referenced in
Section 2.03(k)(ii) hereof, the performance of which constitute Issuer Group
Services) to be performed by the Administrative Agent under the Indenture
(collectively, the "Bank Account Management Services" and, together with the
Issuer Group Services, the "Administrative Services") and delegate to the
Administrative Agent (except as otherwise specified in the Indenture or the
Security Trust Agreement) their respective authority to administer the Accounts
and to otherwise perform the Bank Account Management Services on the terms and
subject to the conditions set forth in this Agreement. Each of the Trustee and
the Security Trustee hereby directs the Administrative Agent, in its capacity as
such, to enter into and to perform its obligations under the Indenture.
(c) The Administrative Agent hereby accepts such appointments and
agrees to perform the Issuer Group Services on behalf of the Issuer Group
Members and the Bank Account Management Services on behalf of the Trustee and
the Security Trustee, in each case on the terms and subject to the conditions
set forth in this Agreement. Each party agrees that the Administrative Agent, in
performing the Bank Account Management Services, is acting exclusively as the
agent of the Trustee and the Security Trustee and not in any agency or other
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capacity on behalf of any Issuer Group Member and that no Issuer Group Member
has any right to direct the Administrative Agent with respect to all or any
aspect of the Bank Account Management Services.
(d) The Issuer Group Services do not include any service or matter
that is the responsibility of the Servicer under the Servicing Agreement, the
Financial Advisor under the Financial Advisory Agreement, the Capital Markets
Advisor under the Capital Markets Advisory Letter, the Reference Agent under the
Reference Agency Agreement or the company secretaries of any Issuer Group
Member.
(e) The Issuer Group 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 2.02 Limitations. (a) The Administrative Agent agrees (with
respect to the Issuer Group Services) to comply with the terms of the articles
of incorporation, by-laws, trust agreements or similar constituting documents of
each Issuer Group Member and all agreements to which any Issuer Group Member 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 Issuer
Group Member, 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 Issuer Group Member save (i) as expressly permitted by the
terms of this Agreement or (ii) upon a Controlling Trustees' Resolution. The
Administrative Agent (in performing the Bank Account Management Services) agrees
to comply with the terms of the Indenture, the Security Trust Agreement and the
terms of each relevant Credit Facility).
(b) In connection with the performance of (i) the Issuer Group
Services, the Administrative Agent shall (A) 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 8.01 hereof)
providing services directly to the Issuer Group to perform its obligations to
the Issuer Group and (B) in all cases be entitled to rely upon the instructions
of the Issuer Group with respect to any Issuer Group Services and upon notices,
reports or other communications made by any Person providing services to the
Issuer 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, (ii) the Bank Account Management
Services, the Administrative Agent shall not be responsible for acting upon the
instructions of the Trustee or the Security Trustee (as applicable) and (iii)
the Administrative Services, the Administrative Agent shall not be obligated to
act in any manner that 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.
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(c) Subject to the limitations set forth in Section 2.02(a), in
connection with the performance of the Issuer Group Services, the Administrative
Agent is expressly authorized by the Issuer and each other Issuer Group Member,
(i) to engage in and conclude commercial negotiations with the Persons providing
services to the Issuer Group, including, without limitation, where the context
admits, the Servicer, the Additional Servicer, the Capital Markets Advisor, the
Financial Advisor, the Reference Agent and other Persons performing similar
services or advising the Issuer Group (the "Service Providers") and with their
Responsible Officers, and (ii) after such consultation, if any, as the
Administrative Agent deems necessary under the circumstances, to act on such
Issuer Group Member's behalf with regard to any and all matters requiring any
action on the part of the Administrative Agent under the Servicing Agreement.
The Issuer 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(c).
(d) The Administrative Agent may rely on the advice of any law firm,
accounting firm, risk management adviser, tax adviser, insurance adviser,
technical adviser, aircraft appraiser or other professional adviser appointed by
the Issuer and any Person appointed in good faith by the Administrative Agent
and shall not be liable for any claim by any Issuer Group Member to the extent
that it was acting in good faith upon the advice of any such persons.
(e) Notwithstanding the appointment of, and the delegation of
authority and responsibility to, the Administrative Agent with respect to the
Issuer Group Services, the Issuer and each other Issuer Group Member shall
continue to have and exercise through its respective controlling trustees or
board 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 Issuer Group Member 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 Issuer Group Members is merely lending its
name to decisions taken by others.
Section 2.03 Administrative Services. The Administrative Agent hereby
agrees to perform and provide the following services for each Issuer Group
Member and its 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 trustees or board 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 Issuer Group Member, other
than those required to be maintained by the Owner Trustee;
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(iii) providing any administrative assistance reasonably
necessary to assist any Issuer Group Member 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 the obligations of
any Issuer Group Member under any of the Related Documents are only required
upon receipt of notice to such Issuer Group Member 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;
(iv) assisting the Issuer in arranging for directors and
officers liability insurance for and on behalf of the Issuer and each other
Issuer Group Member;
(v) procuring, at the direction of the Controlling Trustees,
and coordinating the advice of, legal counsel, accounting, tax and other
professional advisers at the expense of the relevant Issuer Group Member, to
assist such Issuer Group Member in carrying out its obligations, and
supervising, in accordance with instructions from such Issuer Group Member, such
legal counsel, accounting, tax and other advisers;
(vi) as frequently as is necessary for each Issuer Group
Member to comply with its obligations under the Related Documents, arranging for
the Appraisals to be made and providing the Appraisals to the relevant Service
Providers; and
(vii) 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 or the Additional Servicer to
perform its duties in accordance with the Servicing Agreement or the Additional
Servicing Agreement;
(b) to monitor the performance of the Service Providers and to
report on such performance to the Controlling Trustees 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 or the Additional
Servicer pursuant to the Additional 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 the Issuer in evaluating the Servicer's
performance relative to the Standard of Care and the Conflicts Standard; and
(C) monitoring the compliance of the Servicer with its
obligations under the Servicing Agreement;
(ii) with respect to the other Service Providers, assisting in
evaluating the performance and compliance of each Service Provider against its
obligations under the relevant agreement;
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(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 the Issuer 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 the Issuer Group, including, without limitation:
(i) informing the Rating Agencies from time to time of any
material changes in the Portfolio, coordinating with the Issuer Group and the
Service Providers and providing the Rating Agencies with such statistical and
other information as they may from time to time request (such information to be
provided at the Issuer 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 ratios
(i.e., ratio of debt to Annual Appraised Value of the Issuer Group's assets) or
any other financial information the Rating Agencies shall request; and
(iii) coordinating among the Issuer Group, the Servicer and
the Appraisers to ensure that the Appraisals are received as required;
(d) to provide assistance to the Issuer 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;
(e) to provide assistance to the Issuer Group in the execution of
(1) the acquisition of Pledged Stock and/or Aircraft under the Asset Purchase
Agreement, (2) the re-lease and/or sale of the Aircraft, (3) the acquisition of
Additional Aircraft and (4) financing transactions relating to the Issuer Group
after the Initial Closing Date, including:
(i) coordinating with the Service Providers, legal and other
professional advisers to monitor the protection of the Issuer 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, the Additional Servicing Agreement and the
Indenture) at the closings in connection with the acquisition of Pledged Stock
and/or Aircraft under the Asset Purchase Agreement, sales or re-leases of the
Aircraft and the acquisition of any Additional Aircraft, if required (it being
understood that the Administrative Agent will not be obligated to provide legal
counsel or legal or technical services to the Issuer Group);
(iii) coordinating with the Issuer 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; and
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(v) appointing counsel and other appropriate professional
advisers to represent the Issuer Group in connection with any such closings;
(f) to coordinate with the Capital Markets Advisor, including
reviewing the effect on the cash flows required for payment of the Notes of
investments and reinvestments of cash pursuant to this Agreement;
(g) 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 any Issuer
Group Member or its governing bodies, subject to the approval of the Controlling
Trustees in the case of any exchange offer documents filed by the Issuer under
the Securities Act and the Exchange Act, and any reports filed by the Issuer on
Form 10-K and 10-Q and, if such form is being filed with any information other
than the Monthly Report to Holders, any Form 8-K under the Exchange Act,
including:
(i) filings (including, without limitation, Uniform Commercial
Code filings) any Issuer Group Member 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) filings the Issuer is required to make under the
Securities Act and the Exchange Act in connection with the preparation and
filing of any exchange offer documents;
(iii) compliance by the Issuer with applicable periodic
reporting requirements of the Exchange Act, in particular, working with
necessary professional advisers to the Issuer and the Service Providers, as
appropriate, to prepare on behalf of the Issuer and to arrange for the filing
and distribution of an annual report on Form 10-K in respect of the Issuer and,
as periodic reporting requirements of the Exchange Act, quarterly reports on
Form 10-Q and any required reports on Form 8-K in respect of the Issuer;
(iv) reports required or recommended to be distributed to
investors (including press releases), and managing investor relations on behalf
of the Issuer Group, and preparing or arranging for the preparation and
distribution of such reports at the Issuer Group's expense; and
(v) reports required to be filed with any Governmental
Authorities, and preparing on behalf of any Issuer Group Member 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 such Issuer Group Member not to be in
violation of Applicable Law or any applicable covenants;
(h) with respect to amendments:
(i) to report on the substance of any proposed amendments to
any Related Documents; and
(ii) to the extent requested by the Issuer Group or by the
parties to Related Documents and subject to approval by the appropriate
controlling trustees or board, to coordinate
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with the Issuer 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;
(i) to the extent reasonably requested by the Servicer, to
coordinate and provide assistance on behalf of the Issuer Group with the
Servicer in the performance of the Servicer's obligations under the Servicing
Agreement;
(j) 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, (ii) to the extent required by the terms of the
Servicing Agreement or the Indenture or (iii) approved by the Controlling
Trustees and to determine the Required Expense Amount and the amount of
Permitted Accruals determined in accordance with the Indenture;
(k) providing assistance to the Issuer with respect to matters for
which action by the Issuer is required under the Servicing Agreement or the
Indenture, including such assistance that may be necessary for the Issuer to:
(i) comply with Sections 6.08, 7.03(a)(i) and 7.04 of the
Servicing Agreement;
(ii) comply with Sections 5.02, 5.03, 6.12 and 6.13 of the
Indenture;
(iii) provide such instructions to the Servicer as the
Servicer may require in interpreting the Indenture, the Concentration Thresholds
and Annex 2 to the Servicing Agreement;
(iv) direct the Servicer to amend the minimum hull and
liability insurance coverage amounts set forth in Annex 1 to the Servicing
Agreement;
(v) direct the Servicer as to whether settlement offers
received by the Servicer with respect to claims for damage or loss in excess of
$10,000,000 with respect to an Aircraft Asset are acceptable;
(vi) review and request such periodic and other reports as the
Servicer is obligated to provide under the Servicing Agreement;
(vii) provide the Servicer with such information as the
Servicer may reasonably request in connection with the Concentration Thresholds
and certify to the Servicer whenever the proposed Aircraft-related transactions
will result in the violation of such Concentration Thresholds;
(viii) advise the Servicer as required by Section 3(c) of
Schedule 2.02(a) of the Servicing Agreement ("Schedule 2.02(a)"); and
(ix) request market research industry information from the
Servicer in regard to valuations of Aircraft Assets in accordance with Section
6.1 of Schedule 2.02(a);
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(l) to inform the Controlling Trustees 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 the
Issuer Group and (ii) an Event of Default will result from such insufficiency,
and to advise the Controlling Trustees 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 Controlling Trustees to
be implemented so as to avoid an Event of Default, if it is possible to do so;
(m) to advise the Controlling Trustees as to the appropriate levels
of Reserved Cash;
(n) to oversee the general operation of any credit or liquidity
enhancement facility provided for the benefit of the Issuer, including without
limitation each Credit Facility (including without limitation monitoring the
amounts committed and available for drawing, and outstanding and required to be
repaid, under each such facility);
(o) to determine whether it is necessary or appropriate at any time
that the Issuer make a drawing under any back-up letter of credit of which the
Issuer is the beneficiary and, if so, to administer such drawing on the Issuer's
behalf;
(p) to provide such assistance and financial information to the
Capital Markets Advisor as the Capital Markets Advisor may so reasonably request
to enable the Capital Markets Advisor to perform its obligations under its
Capital Markets Advisory Letter with the Issuer and, consistent with the
interest rate hedging policy adopted by the Issuer on the Initial Closing Date
(as the same may be amended or otherwise modified from time to time;
(q) to assure compliance by each Issuer Group Member with its
obligations under Section 2.07 of the Security Trust Agreement with respect to
the Non-Trustee Accounts, including notifying and instructing each Obligor (as
defined in the Security Trust Agreement) to make payments directly to a
Non-Trustee Account; and
(r) to provide all necessary assistance and information to legal and
other professional advisers to the Issuer Group in connection with any claim,
action, proceeding or petition brought against any Issuer Group Member.
Section 2.04 Bank Account Management and Calculation Services. The
Administrative Agent hereby agrees for the benefit of the Trustee and the
Security Trustee to perform and provide the following bank account management
calculation and other services:
(a) Indenture Obligations. The Administrative Agent shall, in its
capacity as such hereunder, execute and deliver, and perform the obligations of
the Administrative Agent under the Indenture in accordance with the terms
thereof. In particular and without limiting the foregoing:
(i) The Accounts
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(A) Establishment and Operations of Accounts. The
Administrative Agent shall cause the Operating Bank to establish and maintain
(in accordance with Section 3.01(a) of the Indenture and as provided in the
Security Trust Agreement) (1) on the Initial Closing Date (t) the Collections
Account, (u) the Lessee Funded Accounts consisting of the separate accounts so
designated on Schedule 1 hereto, (v) the Rental Accounts designated on Schedule
1 hereto, (w) the Expense Account, (x) a Note Account for each subclass of
Initial Notes, (y) the Varig Reserve Accounts and (z) the Owner Trustee Account
and (2) thereafter, as and when required by the Indenture or as specified in a
Controlling Trustees' Resolution delivered to the Administrative Agent, the
Trustee and the Security Trustee or, in the case of any Rental Account or any
Lessee Funded Account, as requested by the Servicer under the Servicing
Agreement, any Account referred to in Section 3.01(a)(ii) of the Indenture. Each
such Account shall, when established, be operated in accordance with the
applicable provisions of Section 3.01 of the Indenture and Section 2.06 of the
Security Trust Agreement.
(B) Replacement Account. If at any time the Security Trustee
Accounts are no longer to be maintained by the then Operating Bank under the
Security Trust Agreement, the Administrative Agent shall cause the successor
Operating Bank to establish and maintain the Accounts previously maintained by
its predecessor (in each case with the same name and purposes as it had so been
maintained) and those to be established and maintained thereafter. In addition,
if, at any time, any Account ceases to be an Eligible Account, the
Administrative Agent shall, within 10 Business Days after notice thereof, cause
the Operating Bank to establish and maintain as an Eligible Account a new
Account having the same name and purpose in accordance with the requirements of
the Indenture.
(C) Rental Account. With respect to any Rental Account, the
Administrative Agent shall determine, as provided in Section 3.01(f) of the
Indenture, whether or not such Account is required to be established and
maintained as a Non-Trustee Account.
(D) Lessee Payment Instructions. The Administrative Agent
shall take all necessary steps to ensure that all funds on deposit in each
Rental Account (including any Non-Trustee Account) are, to the extent required
by the Indenture, transferred from such Rental Account to the Collections
Account 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).
(E) Bank Account Statements. The Administrative Agent shall
take all necessary steps to ensure that the Operating Bank and each other bank
at which a Non-Trustee 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 it as well as the Security Trustee, the Issuer,
the Trustee, and the Servicer.
(F) Maintaining the Non-Trustee Accounts. The Administrative
Agent shall exercise all rights of the Issuer Group Members to instruct or
otherwise communicate with the Eligible Institutions at which the Non-Trustee
Accounts are maintained and otherwise to administer the Non-Trustee Accounts.
<PAGE> 17
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(ii) Calculations. Pursuant to Section 3.06 of the Indenture,
the Administrative Agent shall, at the times and in the manner set forth
therein, determine or calculate each of the amounts and provide the reports
required to be determined, calculated or prepared by it pursuant to Sections
3.06(a) through (e) of the Indenture.
(iii) Withdrawals and Transfers. The Administrative Agent
shall direct the Operating Bank to make the following withdrawals and transfers
in accordance with the terms of the Indenture:
(A) Closing Date Deposits, Withdrawals and Transfers. On each
Closing Date, the Administrative Agent shall direct each of the transfers
described in Section 3.03 of the Indenture in accordance with such Section.
(B) Interim Deposits and Withdrawals. From time to time, the
Administrative Agent shall direct the Operating Bank to make the withdrawals and
transfers, and the Administrative Agent shall give the notices, provided for in
Section 3.04 of the Indenture in accordance with such Section.
(C) Interim Deposits and Withdrawals for Modification Payments
or Dispositions of Aircraft. From time to time, the Administrative Agent shall
direct the Operating Bank to make the withdrawals and transfers provided for in
Section 3.05 of the Indenture in accordance with such Section.
(D) Payment Date First Step Withdrawals and Transfers. On each
Payment Date, the Administrative Agent shall direct the Operating Bank to make
the withdrawals and transfers provided for in Section 3.07 of the Indenture in
accordance with such Section.
(E) Payment Date Second Step Withdrawals. On each Payment
Date, after the withdrawals and transfers provided for in Section 3.07 of the
Indenture have been made at the direction of the Administrative Agent (except as
permitted in clause (F) below) the Administrative Agent shall direct the
Operating Bank to distribute funds on deposit in the Collections Account as
provided in Section 3.08(a) of the Indenture and shall make such certifications
to the Trustee as may be required hereunder in connection therewith.
(F) Event of Default and Default Notice Withdrawals and
Transfers. Notwithstanding anything to the contrary contained in Section 3.07 or
3.08(a) of the Indenture, following the delivery of a Default Notice to the
Administrative Agent or the Issuer pursuant to the Indenture or during the
continuance of an Acceleration Default, after the withdrawals and transfers
provided for in Section 3.07 of the Indenture have been made, the Administrative
Agent shall direct the Operating Bank to distribute funds on deposit in the
Collections Account and the Expense Account in the amounts and in the order of
priority provided for in Section 3.08(b) of the Indenture.
(G) Defeasance/Redemption and Refinancing Transfers. The
Administrative Agent shall direct the Operating Bank to transfer from time to
time amounts on
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14
deposit in the Defeasance/Redemption Account or, in the case of a Refinancing,
the Refinancing Account to the applicable Note Account in connection with either
the redemption of any class or 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 and shall give the notices provided for in Section
3.10 of the Indenture.
(H) Currency Conversions. If and to the extent that the Issuer
incurs any payment obligation or other cost in a currency other than U.S.
dollars, the Administrative Agent shall, to the extent practicable, convert U.S.
dollars into such other currency at the then prevailing market rate as necessary
to discharge such payment obligations or costs, at the expense of the Issuer in
accordance with Section 12.07 of the Indenture.
(I) Investments of Cash. The Administrative Agent shall at the
direction of the Controlling Trustees (or, following the giving of a Default
Notice or during the continuance of an Acceleration Default at the direction of
the Security Trustee) invest and reinvest the funds on deposit in the Accounts
as permitted by and in accordance with Section 3.02 of the Indenture.
(b) Reports. The Administrative Agent shall timely prepare the
reports required by Section 2.15 of the Indenture and provide such reports to
the Trustee and the other Persons indicated in that section.
(c) Records. The Administrative Agent shall provide such information
relating to the Accounts to the Security Trustee, the Trustee, the Capital
Markets Advisor or the Rating Agencies as any of them may reasonably request
from time to time and as required under the Indenture.
Section 2.05 Accounting Services. The Administrative Agent hereby agrees
to perform and provide the following accounting services:
(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 Administrative Agent and information provided by
the Service Providers and the Issuer Group:
(i) in respect of each Year during the term of the Servicing
Agreement (other than with respect to the fiscal year commencing on the Initial
Closing Date), and on behalf of the Issuer Group, prepare and deliver to the
Servicer, no later than the September 30 immediately preceding the commencement
of such Year a proposed Lease Operating Budget and a proposed Aircraft Asset
Expenses Budget for such Year together with reasonably detailed supporting
information and the assumptions underlying such proposed Lease Operating Budget
and Aircraft Asset Expenses Budget, such proposed Lease Operating Budget and
Aircraft Asset Expenses Budget to be based, in part, on the information provided
by the Servicer pursuant to Section 7.03(c) of the Servicing Agreement;
<PAGE> 19
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(ii) on behalf of the Issuer Group, review, discuss and
negotiate with the Servicer such proposed Lease Operating Budgets and Aircraft
Asset Expenses Budgets, and make such adjustments proposed by the Servicer as
the Administrative Agent, in consultation with the Controlling Trustees and with
due regard for current market conditions, may deem appropriate; and
(iii) submit to the Servicer no later than the November 10
immediately preceding the commencement of such Year the Approved Budgets
together with reasonably detailed information regarding the Issuer's underlying
assumptions.
(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 the Issuer Group:
(i) establish an accounting system and maintain the accounting
ledgers of and for each Issuer Group Member in accordance with U.S. GAAP unless
otherwise required by Applicable Law and specified by the Controlling Trustees
(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 the Issuer
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 the Issuer Group on a combined basis and such of the
Issuer and the other Issuer Group Members as specified by the Controlling
Trustees in a written schedule provided to the Administrative Agent (which
schedule may be updated by the Controlling Trustees 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 Issuer Group Member
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 Controlling
Trustees 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) as required by the Controlling Trustees, arrange and
manage the quarterly review of the Draft Accounts by the Issuer Group's
auditors;
(v) arrange for, coordinate with and assist the Issuer Group's
auditors in preparing annual audits;
<PAGE> 20
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(vi) prepare or arrange for the preparation of and arrange for
the filing of the Issuer Group's tax returns in conjunction with the Issuer
Group's tax advisers after submission to the Controlling Trustees to the extent
required by the Controlling Trustees or Applicable Law;
(vii) liaise with the Servicer for the purpose of preparing
the monthly and quarterly reports in accordance with Section 9 of Schedule
2.02(a); and
(viii) compare the expected cash flows of the Issuer Group and
the budgets to actual results.
(c) Other Reports. The Administrative Agent shall prepare the Draft
Accounts in accordance with U.S. GAAP unless otherwise required by Applicable
Law and specified by the Controlling Trustees. In connection with the
preparation of the Consolidated Quarterly Draft Accounts, the Administrative
Agent will, provide to the Controlling Trustees, at such times as the
Controlling Trustees may require, a review report (as defined by the Statements
on Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants) of the Issuer Group's independent public
accountants with respect to the financial statements of such Issuer Group
Members for, or as of the end of, such Quarter, including in such report such
accountants' statement that, based on its review of such financial statements,
it is not aware of any material modifications that should be made to such
financial statements in order for them to be in conformity with U.S. GAAP or
other applicable accounting principles; provided, however, that, with respect to
such financial statements for, or as of the end of, any Quarter (other than the
last Quarter of any Year), in the event that the Issuer Group does not include
(or cause to be included) any material disclosure required by U.S. GAAP or other
applicable accounting principles to be included within footnotes to such
financial statements, such review report may be qualified solely by stating that
the only modification that should be made to such financial statements in order
for them to be in conformity with U.S. GAAP or other applicable accounting
principles is the inclusion of such disclosure; provided further, however, that
such qualification may not relate to any footnote to such financial statements.
(d) Instructions. The Administrative Agent shall be entitled to
request instructions from the Controlling Trustees as to general guidelines or
principles to be followed in preparing Draft Accounts and as to amending or
supplementing any such guidelines or principles.
Section 2.06 Additional Administrative Services. The Administrative Agent
will provide additional Administrative Services, including (a) providing
assistance to the Capital Markets Advisor in (i) arranging one or more
Refinancings of all or a portion of the Notes, and (ii) arranging for the
payment of any purchase price adjustment necessary to be paid pursuant to the
Asset Purchase Agreement and (b) undertaking efforts to avoid any adverse change
in the tax status of any Issuer Group Member. In addition, upon a request by any
Issuer Group Member, the Administrative Agent will take such other actions as
may be appropriate to facilitate such Issuer Group Member's business operations
and assist the Controlling 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
such
<PAGE> 21
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Issuer Group Member ceasing to be separate and readily identifiable from, and
independent of, the Administrative Agent, and any of its Affiliates.
Section 2.07 Additional Aircraft. In the event that the Issuer Group shall
acquire any Additional Aircraft, the Administrative Agent hereby agrees to
provide the same Administrative Services with respect to all such Additional
Aircraft.
Section 2.08 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 the
Issuer Group, including identifying such outside advisers, a potential company
secretary and candidates for trustee to the extent necessary, and shall be
permitted to incur expenses in respect of such Subsidiaries without the Issuer
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 the Issuer Group to carry on its business, the
Administrative Agent shall have the authority to assist in the formation of new
Subsidiaries of the Issuer and to appoint any director to any such Subsidiary
without the consent of the Issuer Group; provided, that such directors are the
same directors of the Issuer then in office unless otherwise required by
applicable local law mandating a particular citizenship for directors. The
Administrative Agent and its personnel may act as company secretary for any
Subsidiary.
Section 2.09 The Issuer 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, each Issuer Group Member 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 any Issuer
Group Member, or pledge the credit of, incur any indebtedness on behalf of or
expend any funds of any Issuer Group Member other than as expressly permitted in
accordance with the terms of this Agreement, all such authority and power being
reserved to the appropriate Issuer Group Member or the Security Trustee, as the
case may be.
ARTICLE III
STANDARD OF PERFORMANCE; LIABILITY AND INDEMNITY
Section 3.01 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
<PAGE> 22
18
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 3.02 Liability and Indemnity. (a) The Administrative Agent shall
not be liable for any Losses or Taxes to or of, or payable by any Issuer Group
Member 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 gross negligence, willful misconduct,
deceit or fraud 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 Issuer Group Member is a party, the Issuer and the other
Issuer Group Members, do hereby assume liability for and do hereby jointly and
severally agree to indemnify, reimburse and hold harmless on an After-Tax Basis
the Administrative 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 8.01 hereof, 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, willful misconduct, deceit or fraud 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
the State of California or the United States of America in respect of any
payment by any Issuer Group Member 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 the revenue authorities of the State of
California or the United States of America 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, reimburse and hold
harmless on an After-Tax Basis each Issuer Group Member and its respective
trustees, directors 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
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
willful misconduct, gross negligence, deceit or fraud of the Administrative
Agent or any of its
<PAGE> 23
19
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
willful misconduct, deceit or fraud of any Issuer Group Members or their
respective 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 the Issuer
Group or a failure by the Issuer Group to comply with its obligations under this
Agreement, (iii) any action that the Issuer Group requires the Administrative
Agent to take pursuant to a 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 the Issuer Group to
take action upon a recommendation made in good faith by the Administrative Agent
in accordance with the terms hereof.
(d) The Administrative Agent agrees to indemnify, reimburse and hold
harmless on an After-Tax Basis each of the Trustee, the Security Trustee and the
Operating Bank and their respective trustees, directors 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 Bank Account Management 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 willful misconduct, gross negligence,
deceit 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 willful misconduct, deceit or fraud
of the Trustee or Security Trustee, or their respective directors, trustees or
agents, (ii) any breach by the Administrative Agent of its obligations under
this Agreement to the extent such breach is solely a result of a Service
Provider's failure to perform its obligations to the Issuer Group or a failure
solely by the Issuer Group to comply with its obligations under this Agreement,
(iii) any action that the Trustee or the Security Trustee requires the
Administrative Agent to take pursuant to a 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 the Trustee or the
Security Trustee to take action upon a recommendation made in good faith and
consistent with the provisions relating to the Trustee or the Security Trustee
under the Related Documents by the Administrative Agent in accordance with the
terms hereof.
(e) The Administrative Agent, the Issuer and the other Issuer Group
Members, the Trustee and the Security Trustee acknowledge and agree that the
terms of this Agreement contemplate that the Administrative Agent shall receive
the Relevant Information in order for the Administrative Agent to make required
credit and debit entries and to make the calculations and supply the information
and reports required herein, and that the Administrative Agent 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.
ARTICLE IV
ADMINISTRATIVE AGENT UNDERTAKINGS
<PAGE> 24
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Section 4.01 Administrative Agent Undertakings. The Administrative Agent
hereby covenants with the Issuer Group that it will conduct its business such
that it is a separate and readily identifiable business from, and independent
of, each Issuer Group Member and further covenants as follows:
(a) if the Administrative Agent receives any money whatsoever, which
money belongs to any Issuer Group Member, the Trustee or the Security Trustee or
is to be paid to any Issuer Group Member, the Trustee or the Security Trustee or
into any account pursuant to any Related Document or otherwise, it will hold
such money in trust for such Issuer Group Member, the Trustee or the Security
Trustee, as the case may be, 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 it may have;
(b) it will comply with any proper directions, orders and
instructions which any Issuer Group Member (with respect to the Issuer Group
Services) or the Security Trustee or the Trustee (with respect to the Bank
Account Management Services) may from time to time give to it in accordance with
the provisions of this Agreement and the Indenture; provided, that during the
continuance of any Event of Default, the Administrative Agent shall comply only
with the instructions of the Security Trustee as to all Administrative Services;
(c) it will not knowingly fail to comply with any legal requirements
in the performance of the Administrative Services;
(d) it will 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,
the Issuer, any other Issuer Group Member or the Trustee without set-off or
counterclaim;
(e) 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 Issuer Group Member or in respect
of any of their respective liabilities, including, without limitation, as a
result of any claim or interest of the Administrative Agent or any of its
Affiliates;
(f) it will cooperate with each Issuer Group Member and its
respective trustees, directors and agents (with respect to the Issuer Group
Services when no Event of Default has occurred and is continuing) and the
Security Trustee and the Trustee (with respect to the Bank Account Management
Services, or, following the giving of a Default Notice or during the continuance
of an Acceleration, all Administrative Services), including by providing such
information as may reasonably be requested, to permit such Persons to monitor
the Administrative Agent's compliance with its obligations under this Agreement;
<PAGE> 25
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(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 Issuer Group Member;
(h) during the term of this Agreement, it will maintain its assets
and liabilities separate and distinct from each Issuer Group Member;
(i) during the term of this Agreement, it will maintain records,
books, accounts and minutes separate from those of each Issuer Group Member;
(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
Issuer Group Member;
(k) during the term of this Agreement, it will keep its funds
separate and distinct from the funds of each Issuer Group Member, and it will
receive, deposit, withdraw and disburse such funds separately from the funds of
each Issuer Group Member;
(l) during the term of this Agreement, it will conduct its business
in its own name, and not in the name of any Issuer Group Member;
(m) during the term of this Agreement, it will not pay or become
liable for any debt of any Issuer Group Member, 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 Issuer Group Member or that any Issuer Group Member 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 Issuer Group Member 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 Issuer 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 Related Documents 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
(q) during the term of this Agreement, it will (i) forward promptly
to the Servicer and the Additional 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 or the
Additional Servicer to perform its obligations in respect of any Lease or
Aircraft under the Servicing Agreement or the Additional Servicing Agreement, as
applicable; 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
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documents and do such acts and things as the Servicer or the Additional
Servicing may reasonably request in order to effect the purposes of the
Servicing Agreement.
ARTICLE V
UNDERTAKINGS OF THE ISSUER GROUP
Section 5.01 Cooperation. The Issuer and the other Issuer Group Members
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 Issuer Group 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 Issuer Group Services
in accordance with this Agreement. In addition, as and to the extent requested
by the Administrative Agent, the Trustee and the Security Trustee, the Issuer
and the other Issuer Group Members 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 Bank Account Management
Services. The Trustee and the Security Trustee shall provide the Administrative
Agent with such powers of attorney as may be reasonably necessary or appropriate
for the Administrative Agent to perform the Bank Account Management Services in
accordance with this Agreement.
Section 5.02 Information. The Issuer will provide the Administrative Agent
with the following information in respect of itself and each other Issuer Group
Member:
(a) copies of all Related Documents, including the articles of
incorporation, by-laws, trust agreements (or equivalent documents) of each
Issuer Group Member, and copies of all books and records maintained on behalf of
each such Issuer Group Member;
(b) details of all bank accounts and bank mandates maintained by any
Issuer Group Member;
(c) names of and contact information with respect to the Controlling
Trustees or board for each Issuer Group Member;
(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 the Issuer Group pursuant
to the Servicing Agreement; provided, that such information as is referred to in
this Section 5.02 (with the exception of paragraphs (d) and (e)) shall be
provided to the Administrative Agent after the execution of this Agreement and,
in respect of any amendment or changes to the information provided to the
Administrative Agent after the execution of this Agreement, promptly following
the effectiveness of such amendments or changes.
Section 5.03 Scope of Services. (a) In the event that any Issuer Group
Member shall enter into any agreement, amendment or other modification of any
Lease or shall take any other action that has the effect of increasing in any
material respect the scope, nature or level of the
<PAGE> 27
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Issuer Group Services to be provided under this Agreement without the
Administrative Agent's express prior written consent, the Issuer 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 the Issuer 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 Issuer Group
Member 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) the Issuer 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 or the Administrative Agent requires
payment of more than reasonable additional compensation for such additional
Administrative Service).
(b) In the event that the Issuer Group shall acquire Additional
Aircraft, the Issuer Group shall so notify the Administrative Agent and the
Administrative Agent shall be obligated to provide the Issuer Group Services
with respect to such Additional Aircraft in accordance with Section 2.07 hereof.
Section 5.04 Ratification. The Issuer and the other Issuer Group Members
hereby ratify and confirm and agree to ratify and confirm (and shall furnish
written evidence thereof upon request of the Administrative Agent) any act or
omission by the Administrative Agent with respect to any Issuer Group Services
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 any Issuer Group Member under Article III
hereof.
Section 5.05 Covenants. Each of the Issuer and the other Issuer Group
Members 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 and any of its Affiliates and further
covenants as follows:
(a) during the term of this Agreement, it will observe all corporate
formalities necessary to remain legal entities separate and distinct from, and
independent of, the Administrative Agent, and any of its Affiliates;
(b) during the term of this Agreement, it will maintain its assets
and liabilities separate and distinct from those of the Administrative Agent;
(c) during the term of this Agreement, it will maintain records,
books, accounts, and minutes separate from those of the Administrative Agent;
<PAGE> 28
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(d) during the term of this Agreement, it will pay its obligations
in the ordinary course of business as a legal entity separate from the
Administrative Agent;
(e) during the term of this Agreement, it will keep its 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 its business
in its own name, and not in the name of the Administrative Agent;
(g) during the term of this Agreement, it will not 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 that it
is a division of the Administrative Agent, or that the Administrative Agent is a
division of it;
(i) during the term of this Agreement, it will not 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 any
transaction between it 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 all material
corporate or other procedures required under Applicable Law and under its
constitutive documents.
Section 5.06 Ratification by Subsidiaries. The Issuer hereby undertakes to
procure that, if so requested by the Administrative Agent, any subsidiary of the
Issuer 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 on the terms of Section 5.04.
ARTICLE VI
ADMINISTRATION FEES AND EXPENSES
Section 6.01 Administration Fees. In consideration of the Administrative
Agent's performance of the Administrative Services, the Issuer agrees to pay to
the Administrative Agent a per annum amount equal to $475,000 plus $11,000 for
each Aircraft in excess of 34 owned by the Issuer Group (the "Administrative
Fee") payable in arrears in equal monthly installments (each monthly payment, an
"Administrative Fee") on each Payment Date (until the resignation or removal of
the Administrative Agent) for each period commencing on and including the
Initial
<PAGE> 29
25
Closing Date (or, thereafter, the last of day of the immediately preceding
period) and ending on but excluding the Calculation Date immediately preceding
such Payment Date (each such period, a "Fee Period").
Section 6.02 Expenses. (a) The Administrative Agent shall be responsible
for (i) 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 $20,000 and (ii)
all fees and expenses owed to aviation consultants hired to assist the
Administrative Agent with the Administrative Services up to an annual amount of
$25,000.
(b) Subject to the provisions of Section 6.02(a), the Issuer 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 $20,000 and annual fees and expenses to
aviation consultants hired to assist the Administrative Agent with the
Administrative Services in excess of $25,000;
(iii) expenses expressly authorized by (i) the Controlling
Trustees 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 6.03 Payment of Expenses. No later than each Calculation Date, the
Administrative Agent shall deliver a notice to the Issuer Group, setting forth
the amounts of Reimbursable Expenses owed to the Administrative Agent pursuant
to Section 6.02 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). The Issuer Group agrees to
pay to the Administrative Agent an amount equal to all such Reimbursable
Expenses on the next Payment Date following such Calculation Date.
ARTICLE VII
TERM; REPLACEMENT OF OR RESIGNATION BY THE ADMINISTRATIVE AGENT
Section 7.01 Term. This Agreement shall have a term commencing on the
Initial Closing Date and expiring on the date of payment in full of all amounts
outstanding to be paid on the Securities.
<PAGE> 30
26
Section 7.02 Replacement or Resignation. (a) At any time during the term
of this Agreement (i) the Issuer Group by a Controlling Trustees' Resolution,
shall be entitled to replace the then existing Administrative Agent performing
the Issuer Group Services with a new Administrative Agent appointed by it (with
the prior written consent of the Servicer, such consent not to be unreasonably
withheld or delayed (it being understood that the Servicer may consider, among
other factors, whether the proposed Administrative Agent is a "Competitor" as
defined in the Servicing Agreement)) on 120 days' Written Notice to the
Administrative Agent, the Trustee and the Security Trustee, except following the
delivery of a Default Notice or during the continuance of an Acceleration
Default (in which case all such powers shall be vested in the Security Trustee
as provided in clause (ii) below) and (ii) the Security Trustee shall be
entitled to replace the then existing Administrative Agent performing the Bank
Account Management Services and, following the delivery of a Default Notice or
during the continuance of an Acceleration Default, all of the Administrative
Services with a new Administrative Agent appointed by it on 120 days' written
notice.
(b) At any time during the term of this Agreement, the Administrative
Agent shall be entitled to resign as the Administrative Agent performing the
Issuer Group Services, the Bank Account Management Services or both such
Administrative Services on 120 days' Written Notice to the Issuer, the Security
Trustee and the Trustee if:
(i) any Issuer Group Member shall fail to pay in full when due (A)
any Administrative Fee or any Reimbursable Expenses in an aggregate amount in
excess of $50,000 and such failure continues for a period of 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, and such failure continues for a period of 60 days after Written
Notice from the Administrative Agent of such failure;
(ii) any Issuer 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 and
such failure continues for a period of 30 days after the Issuer Group shall have
received notice of such failure (other than with respect to payment obligations
referred to in clause (b)(i) of this Section 7.02);
(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 the Issuer or any Issuer Group Member, or of a substantial part of
the property or assets of the Issuer or any other Issuer Group Member, under
Title 11 of the United States Code, as now constituted or hereafter amended (the
"U.S. Bankruptcy Code"), 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 120 days or an order or decree approving
or ordering any of the foregoing shall be entered or the Issuer or any other
Issuer 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 120 days; or
<PAGE> 31
27
(iv) the Issuer or any other Issuer Group Member shall (A)
voluntarily commence any proceeding or file any petition seeking relief under
the U.S. Bankruptcy Code, 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 (b)(iii) of this Section 7.02, (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 replacement of the Administrative Agent pursuant to Section 7.02(a)
and no resignation by the Administrative Agent pursuant to Section 7.02(b) shall
become effective prior to the date on which a successor Administrative Agent
shall have become a party to this Agreement and accepted appointment as 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 resignation, the Administrative Agent may petition any court of
competent jurisdiction for the appointment of a successor Administrative Agent.
Upon any such replacement or resignation, 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 6 hereof, and for so
long as the Administrative Agent is continuing to perform any of the
Administrative Services, the Administrative Agent 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
Administrative Agent to the Issuer 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.
Section 7.03 Consequences of Replacement or Resignation. (a) Notices. (i)
Following the replacement or resignation of the Administrative Agent pursuant to
Section 7.01 or 7.02, the Administrative Agent will promptly forward to the
Issuer Group any notices in respect of the Issuer Group Services and to the
Trustee and the Security Trustee any notices in respect of the Bank Account
Management Services received by it during the year immediately following the
replacement and resignation of the Administrative Agent pursuant to this
Agreement.
(ii) The Issuer Group will notify promptly any relevant third
party, including each Rating Agency, the Security Trustee, the Trustee, and the
Servicer, of the replacement and resignation of the Administrative Agent
pursuant to the Agreement 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 the other parties hereto.
(b) Accrued Rights. The replacement and resignation of the
Administrative Agent pursuant to this Agreement 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 the Administrative Agent is replaced or resigns,
the Administrative Agent will cooperate with any person appointed to perform the
relevant
<PAGE> 32
28
Administrative Services, including providing such person with all information
and documents reasonably requested.
Section 7.04 Survival. Notwithstanding any replacement or resignation of
the Administrative Agent or the expiration of this Agreement, the obligations of
the Issuer Group and the Administrative Agent under Section 3.02 shall survive
such replacement or resignation of the Administrative Agent or expiration, as
the case may be.
ARTICLE VIII
ASSIGNMENT AND DELEGATION
Section 8.01 Assignment and Delegation. (a) Except as provided in
subsection (b) below, 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) and, except with
respect to the Bank Account Management Services, assign or delegate or otherwise
subcontract to a "Competitor" of the Servicer (as defined in the Servicing
Agreement), without the prior written consent of the Servicer; provided that the
Issuer Group Members may assign their rights hereunder to the Security Trustee
for the benefit of the Secured Parties under the terms of the Security Trust
Agreement
(b) The Administrative Agent may assign its right to receive
compensation for the performance of all or any part of the services set forth in
Article II, including without limitation, the establishment and maintenance of
the Ledgers and the preparation of the Draft Accounts.
(c) 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 IX
MISCELLANEOUS
Section 9.01 Notices. 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 ten (10) 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 the Issuer and the other Issuer Group Members, to:
Aircraft Finance Trust
<PAGE> 33
29
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
Fax: (302) 651-8882
with copies to:
ReSource/Phoenix, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901
Fax: (415) 485-4522
Attention: Financial Services Division
and
UniCapital Air Group, Inc.
9420 S.W. 77th Avenue
Miami, Florida 33156
Fax: (305) 271-1339
Attention: Wayne D. Lippman
and
David H. Treitel
Simat, Helliesen & Eichner, Inc.
90 Park Avenue
27th Floor
New York, NY 10016
Fax: (212) 986-1825
and
Richard E. Cavanagh
The Conference Board, Inc.
845 Third Avenue
New York, NY 10022
Fax: (212) 339-0333
<PAGE> 34
30
if to the Administrative Agent, to:
ReSource/Phoenix, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901
Fax: (415) 485-4522
Attention: Financial Services Division
if to the Trustee or the Security Trustee, to:
Bankers Trust Company
Four Albany Street, 10th Floor
New York, NY 10006
Attention: Corporate Trust and Agency Services-Structured Finance
Fax: (212) 250-6439
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 9.02 Governing Law. 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.
Section 9.03 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 9.01 shall be deemed
effective service of process on such party.
Section 9.04 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 RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.05 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
<PAGE> 35
31
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 9.06 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 9.07 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 9.08 Amendments. This Agreement may not be amended, supplemented
of otherwise modified except in a writing executed by all parties hereto,
provided that the Administrative Agent, the Security Trustee and the Trustee may
amend, supplement of otherwise modify this Agreement to alter the Bank Account
Management Services without the consent of, or the execution of any writing by,
the Issuer or any other Issuer Group Member. To the extent that so doing would,
directly or indirectly, affect the Servicer's rights, obligations or liabilities
(or potential liabilities) under the Servicing Agreement, this Agreement may not
be amended to alter the scope of Issuer Group Services in any material respect
without the consent of the Servicer (such consent not to be unreasonably
withheld or delayed). Prior to the execution of any such amendment, supplement
or modification, the Security Trustee and the Trustee shall be entitled to
receive an Officer's Certificate to the effect that all conditions precedent to
such amendment, modification or supplement, if any, have been satisfied.
Section 9.09 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 Issuer 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 Issuer Group Member
by the Administrative Agent shall be taken as agent for such Issuer Group
Member, either naming the relevant Issuer Group Member, or naming the
Administrative Agent as agent for an undisclosed principal. No Issuer 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 Issuer Group
Member.
(b) The Administrative Agent shall not have any fiduciary duty or
other implied obligations or duties to any Issuer Group Member, any Lessee or
any other Person arising out of this Agreement.
Section 9.10 Concerning the Security Trustee and the Trustee. In respect
of the Security Trustee's and Trustee's performance of appointing the
Administrative Agent to provide the Bank Account Management Services, the
Security Trustee and the Trustee shall be afforded all of the rights,
protections, immunities and indemnities contained in the Security Trust
<PAGE> 36
32
Agreement and the Indenture, respectively, as if such rights, protections,
immunities and indemnities were specifically set forth herein. It is expressly
understood and agreed that neither the Security Trustee nor the Trustee shall
have any liability in respect of the appointment, performance or nonperformance
of the Administrative Agent, all such liability, if any, being expressly waived
by the parties hereto and by any Person claiming by, through or under such
parties.
Section 9.11 Restrictions on Disclosure. The Administrative Agent agrees
that it shall not, prior to the termination or expiration of this Agreement or
within the three (3) years after such termination or expiration, disclose to any
Person any information stated in writing by an Issuer Group Member or the
Servicer to be confidential or proprietary, whether of a technical, financial,
commercial or other nature, received directly or indirectly from the Issuer
Group or the Servicer regarding the Issuer Group or the Servicer or their
respective businesses or the Aircraft.
Notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known, or information obtained by the Administrative
Agent from sources other than an Issuer Group Member or the Servicer, (ii)
disclosure of any and all information (A) if required to do so by any Applicable
Law, (B) to any government agency or regulatory body having or claiming
authority to regulate or oversee any respects of the Administrative Agent's
business or that of its affiliates, (C) 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 or an officer, director, employer or shareholder thereof is a party,
(D) in any preliminary or final offering circular, registration statement or
contract or other document pertaining to the transactions contemplated by this
Agreement approved in advance by any Issuer Group Member or (E) to any
affiliate, independent or internal auditor, agent, employee or attorney of the
Administrative Agent having a need to know the same, provided that the
Administrative Agent advises such recipient of the confidential nature of the
information being disclosed, or (iii) any other disclosure authorized by any
Issuer Group Member or the Servicer.
<PAGE> 37
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date first written above.
AIRCRAFT FINANCE TRUST,
By Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By: /s/ James D. Neeci
----------------------------
Name: James D. Neeci
Title: Authorized Signer
AFT TRUST - SUB I,
By Wilmington Trust Company,
not in its individual capacity but
solely as the owner trustee
By: /s/ James D. Neeci
----------------------------
Name: James D. Neeci
Title: Authorized Signer
Given under the Common Seal of
AIRCRAFT FINANCE TRUST
IRELAND LIMITED in the presence of:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as the Security Trustee
and the Trustee
By: /s/ [ILLEGIBLE]
----------------------------
Name:
Title:
<PAGE> 38
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date first written above.
AIRCRAFT FINANCE TRUST,
By Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By:____________________________
Name:
Title:
AFT TRUST - SUB I,
By Wilmington Trust Company,
not in its individual capacity but
solely as the owner trustee
By:____________________________
Name:
Title:
Given under the Common Seal of
AIRCRAFT FINANCE TRUST
IRELAND LIMITED in the presence of:
/s/ [ILLEGIBLE]
/s/ [ILLEGIBLE]
DIRECTOR
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as the Security Trustee
and the Trustee
By:____________________________
Name:
Title:
<PAGE> 39
RESOURCE/PHOENIX, INC.
By: /s/ Bryant Tong
----------------------------
Name: Bryant Tong
Title: Executive Vice President and
Chief Operating Officer
<PAGE> 1
Exhibit 10.5
EXECUTION COPY
REFERENCE AGENCY AGREEMENT
dated as of May 5, 1999
between
AIRCRAFT FINANCE TRUST, a Delaware statutory business trust,
as the Issuer,
BANKERS TRUST COMPANY,
as the Reference Agent
and
RESOURCE/PHOENIX, INC.,
as the Administrative Agent
<PAGE> 2
This REFERENCE AGENCY AGREEMENT, dated as of May 5, 1999, is between
AIRCRAFT FINANCE TRUST, a business trust organized under the laws of Delaware
(the "Issuer"), BANKERS TRUST COMPANY, a New York banking corporation ("Bankers
Trust"), and RESOURCE/PHOENIX, INC., a California corporation, in its capacity
as administrative agent (the "Administrative Agent").
R E C I T A L S:
A. On the date hereof, pursuant to the terms of the Trust Indenture
dated the date hereof between Aircraft Finance Trust, Bankers Trust and
Resource/Phoenix, Inc. (the "Indenture"), the Issuer is issuing and selling,
inter alia, the Subclass A-1 Notes, the Subclass A-2 Notes and the Subclass B-1
Notes.
B. From time to time, the Issuer may issue Exchange Notes or
Refinancing Notes in replacement of the Initial Notes, and/or Additional Notes
under the Indenture;
C. The Subclass A-1 Notes, the Subclass A-2 Notes and the Subclass
B-1 Notes are, and certain subclasses of Refinancing Notes and Additional Notes
may be, entitled to receive interest at floating rates, in respect of which
LIBOR will be determined in accordance with Section 6 hereof;
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 (including Section 1.02
thereof) are incorporated by reference herein.
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 hereof.
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 LIBOR for 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)
2
<PAGE> 3
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 gross negligence or willful
misconduct.
SECTION 5. Rights and Liabilities of Reference Agent. In the absence
of negligence or willful 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 the
Owner Trustee on behalf 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 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
for each Interest Accrual Period on the Reference Date with respect to such
Interest Accrual Period and will notify the Administrative Agent of LIBOR on
such date. 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).
3
<PAGE> 4
(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. LIBOR for such Interest Accrual Period with respect
to each subclass of Floating Rate Notes shall be the aggregate of the arithmetic
mean (taken to five decimal places) of such quotations (or of such of them,
being at least two, as are so provided), as determined by the Reference Agent
and notified by it to the Administrative Agent.
(iii) If, on any Reference Date, only one or none of the Reference
Banks provides such quotation, LIBOR for the next Interest Accrual Period shall
be the rate per annum that the Reference Agent determines to be the aggregate of
the arithmetic mean of the U.S. dollar lending rates that 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,
except that, if the banks so selected by the Reference Agent are not quoting as
mentioned above, LIBOR for such Interest Accrual Period with respect to each
subclass of Floating Rate Notes shall be the LIBOR in effect for the last
preceding Interest Accrual Period.
(c) Once having obtained LIBOR from the Reference Agent, as soon as
practicable after 11:00 A.M. London time on each Reference Date, the
Administrative Agent will calculate the interest rate for each subclass of
Floating Rate Notes as provided in the Indenture.
(d) If the Reference Agent does not determine the applicable LIBOR
in accordance with the provisions of Section 6(b) hereof, the Administrative
Agent will determine such applicable LIBOR in accordance with the provisions
described above.
SECTION 7. Amendment of the Floating Rate Notes. The Administrative
Agent 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 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 Securities. The Reference Agent, its
officers, directors, employees and shareholders may become the owners of or
acquire any interest in any Securities, 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.
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<PAGE> 5
SECTION 9. Term; Termination, Resignation or Removal of Reference
Agent. (a) This Agreement shall have a term commencing on May 5, 1999 and
expiring on May 15, 2024. 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 such
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 Securities 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 Securities. 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 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 gross negligence or willful
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
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<PAGE> 6
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 corporate 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.
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 Delaware 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, or the applicable LIBOR, 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 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. The
Issuer may assign its rights hereunder to the Security Trustee for the benefit
of the Secured Parties under the terms of the Security Trust Agreement, and the
Reference Agent and the Administrative Agent hereby consent thereto.
(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.
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<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been entered into on the 5th
day of May, 1999.
AIRCRAFT FINANCE TRUST, as the Issuer By
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as the Owner Trustee
By /s/ Donald G. MacKelcan
----------------------------------------------
Name: Donald G. MacKelcan
Title: Vice President
BANKERS TRUST COMPANY, as the Reference Agent
By
----------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC., as the Administrative Agent
By
----------------------------------------------
Name:
Title:
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been entered into on the 5th
day of May, 1999.
AIRCRAFT FINANCE TRUST, as the Issuer By
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as the Owner Trustee
By
----------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as the Reference Agent
By /s/ [ILLEGIBLE]
----------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC., as the Administrative Agent
By
----------------------------------------------
Name:
Title:
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been entered into on the 5th
day of May, 1999.
AIRCRAFT FINANCE TRUST, as the Issuer By
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as the Owner Trustee
By
----------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as the Reference Agent
By
----------------------------------------------
Name:
Title:
RESOURCE/PHOENIX, INC., as the Administrative Agent
By /s/ Michael K. [ILLEGIBLE]
----------------------------------------------
Name: Michael K. [ILLEGIBLE]
Title: AVP
<PAGE> 1
Exhibit 10.6
(Multicurrency-Cross Border)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of May 5, 1999
LEHMAN BROTHERS FINANCIAL AND AIRCRAFT FINANCE TRUST
PRODUCTS INC.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:-
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purposes of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
<PAGE> 2
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that
such deduction or withholding is required or receiving notice that
such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes,
whether assessed against X or Y) will equal the full amount Y would
have received had no such deduction or withholding been required.
However, X will not be required to pay any additional amount to Y to
the extent that it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would
not have occurred but for (I) any action taken by a taxing
authority, or brought in a court of competent jurisdiction, on
or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (II) a Change in Tax
Law.
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<PAGE> 3
(ii) Liability. If:-
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any
deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all necessary
action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision of
its constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding
in equity or at law)).
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<PAGE> 4
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or, may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) Furnish Specified Information. It will deliver to the other party or. in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of such
demand), with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be executed and
to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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<PAGE> 5
organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which
such Credit Support Document relates without the written consent of
the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however
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<PAGE> 6
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule) which
has resulted in such Specified Indebtedness becoming, or becoming capable
at such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant
to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter; (8) causes or
is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any
of the events specified in clauses (1) to (7) (inclusive); or (9)
takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
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<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:-
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action is
taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is
required to be paid in respect of such Tax under Section 2(d)(i)(4) (other
than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the
Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and obligations
under this Agreement in respect of the Affected Transactions to another of
its Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event
of Default:-
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party. If
that amount is a positive number, the Defaulting Party will pay it
to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to
the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:-
(1) One Affected Party. If there is one Affected Party. the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
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to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
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reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:-
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
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"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
totai losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
16
<PAGE> 17
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or an applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
<PAGE> 18
18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
LEHMAN BROTHERS FINANCIAL AIRCRAFT FINANCE TRUST
PRODUCTS INC.
(Name of Party) (Name of Party)
By /s/ Florence D. Nolan By: /s/ James D. Nesci
- -------------------------- -----------------------------
Name: FLORENCE D. NOLAN Name: James D. Nesci
Title: VICE PRESIDENT Title: Authorized Signer
Date: Date: May 5, 1999
<PAGE> 19
SCHEDULE
to the
Master Agreement
dated as of May 5, 1999
between
LEHMAN BROTHERS FINANCIAL PRODUCTS INC. ("Party A"),
a corporation organized under the laws of
the state of Delaware
and
AIRCRAFT FINANCE TRUST ("Party B"),
a business trust organized under the laws of the
state of Delaware
Part 1: Termination Provisions
In this Agreement:-
(a)"Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v), Not applicable.
-----------------
Section 5(a)(vi), Not applicable.
-----------------
Section 5(a)(vii), Not applicable.
-----------------
Section 5(b)(iv), Not applicable.
-----------------
and in relation to Party B for the purpose of:-
Section 5(a)(v), Not applicable.
-----------------
Section 5(a)(vi), Not applicable.
-----------------
Section 5(a)(vii), Not applicable.
-----------------
Section 5(b)(iv), Not applicable.
---------------
(b) "Specified Transaction" will have the meaning specified in Section 14 of
this Agreement.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A
and will apply to Party B.
The following provisions apply:-
<PAGE> 20
20
"Specified Indebtedness" will have the meaning specified in Section 14,
except that with respect to Party B, Specified Indebtedness as of any date
of determination thereof shall mean the then most Senior Class of the
Notes Outstanding under (and as each such term is defined in) the
Indenture.
"Threshold Amount" means, in the case of Party A, USD 20,000,000 (or its
equivalent in any other currency), and, in the case of Party B USD
20,000,000 (or its equivalent in any other currency).
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply
to Party A and will apply to Party B.
(e) The "Automatic Early Termination" provisions of Section 6(a) will not
apply to Party A and Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement, Market Quotation and the Second Method will apply.
(g) "Termination Currency" means United States Dollars ("USD").
(h) Additional Termination Event will not apply.
Part 2: Tax Representations
(a) Payer Tax Representations. For the purpose of Section 3(e) of this
Agreement, Party A and Party B will each make the following
representation:-
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Sections 2(e), 6(d)(ii) and 6(e) of
this Agreement) to be made by it to the other party under this Agreement.
In making this representation, it may rely on (i) the accuracy of any
representation made by the other party pursuant to Section 3(f) of this
Agreement, (ii) the satisfaction of the agreement contained in Section
4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness
of any document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement, and (iii) the satisfaction of the agreement
of the other party contained in Section 4(d) of this Agreement, provided
that it shall not be a breach of this representation where reliance is
placed on clause (ii) and the other party does not deliver a form or
document under Section 4(a)(iii) by reason of material prejudice to its
legal or commercial position.
(b) Payee Representations. For the purposes of Section 3(f) of the Agreement,
each party represents that it is duly organized and validly existing under
the laws of the state of Delaware.
<PAGE> 21
21
Part 3: Agreement to Deliver Documents
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:-
(a) Tax forms, documents or certificates to be delivered are:-
<TABLE>
<CAPTION>
Party required
to deliver Date by which
document Form/Document/Certificate to be delivered
- -------- ------------------------- ---------------
<S> <C> <C>
Party A Tax Forms Promptly upon the
earlier of (i)
reasonable demand by
Party B or (ii) learning
that the form or
document is required.
Party B Tax Forms Promptly upon the
earlier of (i)
reasonable demand by
Party A or (ii)
learning that the
form or document is
required.
</TABLE>
(b) Other documents to be delivered are:-
<TABLE>
<CAPTION>
Party required Covered
to deliver Form/Document/ Date by which by Section
document Certificate to be Delivered 3(d)
- -------- ----------- --------------- ----
<S> <C> <C> <C>
Party A An opinion of counsel for Promptly after Yes
Party A substantially in execution of this
the form of Exhibit A Agreement.
to this Schedule.
Party A A guarantee of Lehman Upon substitution of Yes
Brothers Holdings Inc. Lehman Brothers
("Holdings") in the form of Special Financing Inc.
Exhibit B to this Schedule ("LBSF") for Party A
pursuant to paragraph
(a) of Part 5 of this
Schedule
Party A An incumbency certificate Upon execution of Yes
with respect to the this Agreement.
signatory of this
agreement
</TABLE>
<PAGE> 22
22
<TABLE>
<S> <C> <C> <C>
Party A Audited annual financial Within 60 days after Yes
Statements of Party A, and each fiscal year end
upon substitution of LBSF of Party A
for Party A, Holdings
Party B Audited financial Within 60 days after Yes
statements of Party B each fiscal year
end of Party B
Party B An opinion of counsel for Promptly after execution Yes
Party B substantially in of this Agreement.
the form of Exhibit C to
this Schedule.
Party B An incumbency certificate Upon Execution of Yes
with respect to the this Agreement.
signatory of this
Agreement.
Party B A copy of the Trust Upon execution of this Yes
Agreement authorizing Agreement and thereafter
Party B to enter into this upon request.
Agreement and each
Transaction entered into
under this Agreement.
</TABLE>
Part 4: Miscellaneous
(a) Addresses for Notices. For the purpose of Section 12(a):-
Address for notices or communications to Party A:-
Address: Lehman Brothers Financial Products Inc.
3 World Financial Center, 12th floor
New York, New York 10285-1200 USA
Attention: Documentation Group
Telephone No. (212) 526-1877
Facsimile No: (212) 528-7097
For all purposes.
<PAGE> 23
23
Address for notices or communications to Party B:-
Address: Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention:
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
For all purposes.
(b) Process Agent. For the purpose of Section 13(c):-
Party A appoints as its Process Agent Not applicable.
Party B appoints as its Process Agent Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:-
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document, each of
which is incorporated by reference in, constitutes part of, and is in
connection with, this Agreement and each Confirmation (unless provided
otherwise in a Confirmation) as if set forth in full in this Agreement or
such Confirmation:-
In the case of Party A: Not applicable, but only from and after the
substitution of LBSF for Party A hereunder pursuant to paragraph (a) of
Part 5 of this Schedule, the Guarantee of Holdings in the form of Exhibit
B to this Schedule.
In the case of Party B: Security Trust Agreement as defined in the
Indenture and is supplemented by a Supplement between the Security Trustee
and Party A.
(g) Credit Support Provider.
<PAGE> 24
24
In relation to Party A: Not applicable, but only from and after the
substitution of LBSF for Party A hereunder pursuant to paragraph (a) of
Part 5 of this Schedule, Holdings.
In relation to Party B: Not applicable.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to
choice of law doctrine).
(i) Jurisdiction. Section 13(b) is hereby amended by: (i) deleting in the
second line of Subparagraph (i) thereof the word "non-"; and (ii) deleting
the final paragraph thereof.
(j) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement
will not apply to any of the Transactions from the date of this Agreement.
(k) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
Part 5: Other Provisions
(a) Credit Assignment Event.
(i) If at any time during the term of this Agreement, the rating of the
Specified Indebtedness of Party B falls below the Assignment
Threshold Rating (as defined below) the rights and obligations of
Party A under this Agreement and all Transactions hereunder shall
without any further action by any party, but subject always to
receipt by both parties of a Rating Agency Confirmation (as defined
in the Indenture) be deemed to have been assigned and delegated to
LBSF, effective on the third Business Day following receipt by Party
A and Party B of such Rating Agency Confirmation (which Party B
undertakes to request) and Party B expressly and irrevocably
consents to such assignment and assumption, except that no such
assignment and assumption shall occur at any time after the
occurrence of any event of default under any master agreement
between Party A and LBSF. As of and from the effective date of such
assignment, LBSF shall succeed to all rights and obligations of
Party A under this Agreement and all Transactions hereunder.
Notwithstanding the above, if at the time of such assignment LBSF
and Party B are parties to a master agreement that sets forth
general terms and conditions applicable to swap and related
transactions between LBSF and Party B, the Transactions hereunder
transferred to LBSF pursuant to the above provision will be governed
by such master agreement.
<PAGE> 25
25
"Assignment Threshold Rating" means (A) with respect to a Moody's
Investors Service Inc.: (1) long-term senior unsecured debt rating,
counterparty rating or long-term deposit-paying rating, Baa3, (2)
financial strength rating, Baa2 or (3) if (A)(1) and (A)(2) are not
available, commercial paper or short-term rating, P-3, and (B) with
respect to a Standard & Poor's Rating Group: (1) long-term unsecured
debt rating, financial programs rating or certificate of deposit
rating, BBB-, (2) claims-paying ability rating, BBB or (3) if (B)(1)
and (B)(2) are not available, commercial paper rating or short-term
rating, A-2.
(ii) Party A represents that it has provided separate consideration to
LBSF for the right to assign this Agreement and the Transactions
hereunder to LBSF pursuant to clause (i), and Party B shall not owe
Party A any termination or other payment upon any such assignment.
(iii) Notwithstanding clause (i) above, no assignment of any Transaction
to LBSF shall occur if, prior to the effective date of the
assignment described in such clause (i), Party B notifies Party A
that Party B agrees to (A) terminate all Transactions as if a
Termination Event has occurred with Party B as the Affected Party or
(B) assign all Transactions to a third party on terms acceptable to
Party A and Party B.
(iv) Notwithstanding clauses (i) through (iii) above, no transfer or
assignment payment shall be due to or owing from either Party A or
Party B other than its obligations under the Transactions.
(v) Notwithstanding the foregoing, the assignment provisions of this
paragraph shall not take effect if, at the time such assignment
would be required, Party B shall have satisfied in full all of its
payment obligations under Section 2(a) of this Agreement and shall
at such time have no future payment obligations, whether absolute or
contingent, under such Section.
Miscellaneous:
(b) Country of Domicile. The country of domicile of Party A is the United
States of America. The county of domicile of Party B is United States of
America.
(c) Confirmation. Each Confirmation supplements, forms part of, and will be
read and construed as one with, this Agreement. A form of Confirmation is
set forth as Exhibit D hereto.
(d) Transfer. (i) Section 7 of the Agreement is hereby modified as follows by
inserting the following after the word "party" but before the comma in the
third line thereof: ", provided, however, that such consent shall not be
unreasonably withheld"; and (ii) Party A consents to the assignment by
Party B of its rights under this Agreement under the Security Trust
Agreement provided, however it is expressly understood that this provision
does not alter Party A's termination rights under this Agreement.
<PAGE> 26
26
(e) For purposes of Sections 2(d)(i)(4) and 3(f), any payee tax representation
specified in a Confirmation under this Agreement shall be deemed to be
specified in this Schedule.
(f) Trial By Jury. Each party irrevocably waives any and all rights to trial
by jury in any legal proceeding in connection with this Agreement or any
Transaction.
(g) Accuracy of Specified Information. Section 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before the
period the words "or, in the case of audited or unaudited financial
statements or balance sheets, a fair presentation of the financial
condition of the relevant person".
(h) The terms and provisions of that certain Secured Party Supplement between
Party A as Secured Party and Bankers Trust Company, as Security Trustee
relating to that certain Security Trust Agreement as so supplemented, the
"Security Trust Agreement" are hereby incorporated by reference and which
constitute a Credit Support Document under this Agreement are hereby
incorporated herein by reference as fully and with the same force and
effect as if written in full and the Transactions shall be subject
thereto. Subject to the enforcement of its rights under the Security Trust
Agreement Party A shall not take steps for the purpose of procuring the
appointment of an administrator receiver or the making 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 similar proceeding under the
laws of any jurisdiction with respect to Party B.
(i) Definitions. This Agreement, each Confirmation, and each Transaction are
subject to the 1991 ISDA Definitions as published by the International
Swaps and Derivatives Association, Inc. as amended, supplemented, updated,
restated, and superseded from time to time (the "Definitions"), and will
be governed in all respects by the Definitions (except that references to
"Swap Transactions" in the Definitions will be deemed to be references to
"Transactions"). The Definitions as so modified, are incorporated by
reference in, and made part of, this Agreement and each Confirmation as if
set forth in full in this Agreement and such Confirmations. Subject to
Section 1(b), in the event of any inconsistency between the provisions of
this Agreement and the Definitions, this Agreement will prevail. Also,
subject to Section 1(b), in the event of any inconsistency between the
provisions of any Confirmation and this Agreement, or the Definitions,
such Confirmation will prevail for the purpose of the relevant
Transaction.
(j) Representations. Section 3 is hereby amended by adding the following
additional Subsections:
(g) No Agency. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
<PAGE> 27
27
(h) Eligible Swap Participant. It is an "eligible swap participant"
as defined in the Part 35 Regulations of the U.S. Commodity Futures
Trading Commission.
(i) No Reliance. Party B acknowledges and agrees that (i)
Party A is acting solely in the capacity of an arm's length contractual
counterparty, with respect to this Agreement and any Transaction
hereunder, and (ii) Party A is not acting as a financial advisor or
fiduciary of Party B (or in any similar capacity) with respect to this
Agreement and any Transaction hereunder regardless of whether Party A
provides Party B with market information or its views. Party B
represents to Party A (which representation shall be deemed to be
repeated by Party B on each date on which Transaction is entered into)
that it understands the risks of the Transactions it enters and any
legal, regulatory, tax, accounting and economic consequences arising
therefrom and that its decision to enter into each Transaction has been
based solely on the independent evaluation of Party B and its
representatives in light of Party B's financial capabilities and
objectives.
(k) Tax Forms means any form or document that may be required or reasonably
requested in order to allow the other party to make a payment under the
Transaction without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate.
(l) "Incorporation of ISDA EMU Protocol. Annexes 1 through 5 and, for the
purpose of construing such Annexes, Section 6 (Definitions) of the ISDA
EMU Protocol published on May 6, 1998 by ISDA (the "Protocol") shall be
incorporated into this Agreement provided that such purpose, the term "the
parties", as used in the Annexes of the Protocol, shall be construed as
referring to Party A and Party B."
(m) It is agreed and understood by both parties to this Agreement that the
payment obligations under this Agreement constitute Senior Swap Payments
under and defined in the Indenture, entitled to the priority of payments
specified in Section 3.08(a)(ii) and 3.08(b)(iii) of the Indenture.
(n) Additional Definition.
"Indenture" means that certain Trust Indenture dated as of May 5, 1999
between Party B as Issuer, Bankers Trust Company as Trustee and
Resources/Phoenix, Inc. as Administrative Agent.
(o) Outstanding Specified Transactions.
Upon the effectiveness of this Agreement, unless otherwise agreed to in
writing by the parties to this Agreement with respect to specific
Specified Transactions, all Specified Transactions then outstanding
between shall be subject to the terms hereof.
<PAGE> 28
28
The parties executing this Schedule have executed the Master Agreement and have
agreed as to the contents of this Schedule.
LEHMAN BROTHERS FINANCIAL PRODUCTS INC.
By: /s/ Florence D. Nolan
-------------------------------------
Title: FLORENCE D. NOLAN
VICE PRESIDENT
----------------------------------
AIRCRAFT FINANCE TRUST
By: /s/ James D. Nesci
-------------------------------------
Title: James D. Nesci
Authorized Signer
----------------------------------
<PAGE> 29
May 5, 1999
Aircraft Finance Trust
1100 North Market Street
c/o Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
Attention: Treasurer
Ladies and Gentlemen:
I have acted as counsel to Lehman Brothers Financial Products Inc., a
Delaware corporation ("Party A"), and am familiar with matters pertaining to the
execution and delivery of the Master Agreement (the "Master Agreement") dated as
of May 5, 1999 between Party A and Aircraft Finance Trust ("Party B").
In connection with this opinion, I have examined, or have had examined on
my behalf, an executed copy of the Master Agreement, certificates and statements
of public officials and officers of Party A and such other agreements,
instruments, documents and records as I have deemed necessary or appropriate for
the purposes of this opinion.
Based on the foregoing but subject to the assumptions, exceptions,
qualifications and limitations hereinafter expressed, I am of the opinion that:
1. Party A is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of Delaware.
2. The execution, delivery and performance of the Master Agreement, are
within Party A's corporate power, have been duly authorized by all
corporate action and do not conflict with any provision of its
certificate of incorporation or by-laws.
3 The Master Agreement, has been duly executed and delivered and
constitutes a legal, valid and binding obligation, enforceable
against it in accordance with its terms.
4. To the best of my knowledge no consent, authorization, license or
approval of or registration or declaration with, any U.S. federal or
New York State governmental authority is required in connection with
the execution, delivery and performance of the Master Agreement, in
the case of Party A.
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
<PAGE> 30
-2-
A. My opinion in paragraph 3 above is subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent or other similar
transfers) and general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
B. I am a member of the Bar of the state of New York and render no opinion
on the laws of any jurisdiction other than the laws of the state of New York,
the federal laws of the United States of America and the General Corporation Law
of the state of Delaware.
C. My opinions are limited to the present laws and to the facts as they
presently exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph B above be
changed by legislative action, judicial decision or otherwise.
D. This letter is rendered to you in connection with the Master Agreement
and the transactions related thereto and may not be relied upon by any other
person or by you in any other context or for any other purpose. This letter may
not be quoted in whole or in part, nor may copies thereof be furnished or
delivered to any other person, without the prior written consent of Lehman
Brothers Financial Products Inc., except that you may furnish copies hereof (i)
to your independent auditors and attorneys, (ii) to any United States, state or
local authority having jurisdiction over you or over Party A, (iii) pursuant to
the order of any legal process of any court of competent jurisdiction or any
governmental agency, and (iv) in connection with any legal action arising out of
the Master Agreement.
F. I have assumed with your permission (i) the genuineness of all
signatures by each party other than Party A, (ii) the authenticity of documents
submitted to me as originals and the conformity to authentic original documents
of all documents submitted to me as copies, and (iii) the due execution and
delivery, pursuant to due authorization, of the Master Agreement by each party
other than Party A.
Very truly yours,
<PAGE> 31
EXHIBIT B to Schedule
GUARANTEE OF LEHMAN BROTHERS HOLDINGS INC.
LEHMAN BROTHERS SPECIAL FINANCING INC. ("Party A") and AIRCRAFT FINANCE
TRUST ("Party B") have entered into a Master Agreement dated as of May 5, 1999,
pursuant to which Party A and Party B have entered and/or anticipate entering
into one or more transactions (each a "Transaction"), the Confirmation of each
of which supplements, forms part of, and will be read and construed as one with,
the Master Agreement (collectively referred to as the "Agreement"). This
Guarantee is a Credit Support Document as contemplated in the Agreement. For
value received, and in consideration of the financial accommodation accorded to
Party A by Party B under the Agreement, LEHMAN BROTHERS HOLDINGS INC., a
corporation organized and existing under the laws of the State of Delaware
("Guarantor"), hereby agrees to the following:
(a) Guarantor hereby unconditionally guarantees to Party B the due and
punctual payment of all amounts payable by Party A under each Transaction when
and as Party A's obligations thereunder shall become due and payable in
accordance with the terms of the Agreement. In case of the failure of Party A to
pay punctually any such amounts, Guarantor hereby agrees, upon written demand by
Party B, to pay or cause to be paid any such amounts punctually when and as the
same shall become due and payable.
(b) Guarantor hereby agrees that its obligations under this Guarantee
constitute a guarantee of payment when due and not of collection.
(c) Guarantor hereby agrees that its obligations under this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Agreement against Party A (other than as a result of the
unenforceability thereof against Party B), the absence of any action to enforce
Party A's obligations under the Agreement, any waiver or consent by Party B with
respect to any provisions thereof, the entry by Party A and Party B into
additional Transactions under the Agreement or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor (excluding the defense of payment or statute of limitations, neither
of which are waived); provided, however, that Guarantor shall be entitled to
exercise any right that Party A could have exercised under the Agreement to cure
any default in respect of its obligations under the Agreement or to setoff,
counterclaim or withhold payment in respect of any Event of Default or potential
Event of Default in respect of Party B or any Affiliate, but only to the extent
such right is provided to Party A under the Agreement. The Guarantor
acknowledges that Party A and Party B may from time to time enter into one or
more Transactions pursuant to the Agreement and agrees that the obligations of
the Guarantor under this Guarantee will upon the execution of any such
Transaction by Party A and Party B extend to all such Transactions without the
taking of further action by the Guarantor.
<PAGE> 32
-2-
(d) This Guarantee shall remain in full force and effect until such time
as Party B shall receive written notice of termination. Termination of this
Guarantee shall not affect Guarantor's liability hereunder as to obligations
incurred or arising out of Transactions entered into prior to the termination
hereof.
(e) Guarantor further 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 obligation or interest thereon is rescinded or must
otherwise be restored by Party B upon an Event of Default as set forth in
Section 5(a)(vii) of the Agreement affecting Party A or Guarantor.
(f) Guarantor hereby waives (i) promptness, diligence, presentment, demand
of payment, protest, order and, except as set forth in paragraph (a) hereof,
notice of any kind in connection with the Agreement and this Guarantee, or (ii)
any requirement that Party B exhaust any right to take any action against Party
A or any other person prior to or contemporaneously with proceeding to exercise
any right against Guarantor under this Guarantee.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York, without reference to choice of law doctrine. All
capitalized terms not defined in this Guarantee are defined in the Agreement.
Any notice hereunder will be sufficiently given if given in accordance
with the provisions for notices under the Agreement and will be effective as set
forth therein. All notices hereunder shall be delivered to Lehman Brothers
Holdings Inc., Attention: Treasurer, at 3 World Financial Center, 28th Floor,
New York, New York 10285 (Facsimile No. (212) 526-1467) with a copy to Lehman
Brothers Special Financing Inc., Attention: Notice Generation at 3 World
Financial Center, 12th Floor, New York, New York 10285-1200 (Facsimile No. (212)
528-6927).
IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed in
its corporate name by its duly authorized officer as of the date of the
Agreement.
LEHMAN BROTHERS HOLDINGS INC.
By: ____________________________________
Title: _________________________________
<PAGE> 33
EXHIBIT C to Schedule
[Form of Opinion of Counsel for Party B]
[Date]
Lehman Brothers
Financial Products Inc.
3 World Financial Center
New York, New York 10285 USA
Attention: Treasurer
Ladies and Gentlemen:
I have acted as counsel to Aircraft Finance Trust, a Delaware business
trust ("Party B"), and am familiar with matters pertaining to the execution and
delivery of the Master Agreement (the "Master Agreement") dated as of May 5,
1999 between Party B and Lehman Brothers Financial Products, Inc. ("Party A").
In connection with this opinion, I have examined, or have had examined on
my behalf, an executed copy of the Master Agreement, certificates and statements
of public officials and officers of Party B and such other agreements,
instruments, documents and records as I have deemed necessary or appropriate for
the purposes of this opinion.
Based on the foregoing but subject to the assumptions, exceptions,
qualifications and limitations hereinafter expressed, I am of the opinion that:
1. Assuming the Master Agreement is within the trust power of Party B
and has been duly executed and delivered by Party B, as to which we
understand you are relying on the attached opinion of
Messrs._______, the Master Agreement constitutes a legal, valid and
binding obligation, enforceable against Party B in accordance with
its terms.
2. To the best of my knowledge no consent, authorization, license or
approval of or registration or declaration with, any U.S. federal or
State governmental authority is required in connection with the
execution, delivery and performance of the Master Agreement, by
Party B.
<PAGE> 34
-2-
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
A. My opinion in paragraph 3 above is subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent or other similar
transfers) and general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
B. I am a member of the Bar of the state of the federal laws of New York
and render no opinion on the laws of any jurisdiction other than the laws of the
state of New York and the federal laws of the United States of America. As to
all matters of law of the state of Delaware referred to in the above opinion, we
have, with your permission, relied on the attached opinion of Messrs.________,
without independent investigation of the matters covered thereby.*
C. My opinions are limited to the present laws and to the facts as they
presently exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph B above be
changed by legislative action, judicial decision or otherwise.
D. I have assumed with your permission (i) the genuineness of all
signatures by each party other than Party B, (ii) the authenticity of documents
submitted to me as originals and the conformity to authentic original documents
of all documents submitted to me as copies, and (iii) the due execution and
delivery, pursuant to due authorization, of the Master Agreement by each party
other than Party B.
Very truly yours,
* To be covered by the opinion of Delaware counsel along with the
following:
1. Party B is a Delaware business trust, validly existing and in good
standing under the laws of the State of Delaware.
2. The execution, delivery and performance of the Master Agreement, in
the case of Party B are within its trust power, have been duly
authorized by all appropriate action and do not conflict with any
provision of its authorization documents.
<PAGE> 35
EXHIBIT D to Schedule
Form of Confirmation
TO: <<counterparty>>
<<cp_street>>
<<cp_city>>, <<cp_state>>
<<cp_zip>>
Attention: <<attention>>
Telephone: <<cp_telephone>>
Facsimile: <<cp_fax>>
FROM: Lehman Brothers Financial Products Inc.
3 World Financial Center
7th Floor
New York, New York 10285-0700
Attention: Notice Generation
Telephone: (212) 526-8586
Facsimile: (212) 528-6927
SUBJECT: TRANSACTION (Ref: )
DATE: [date]
Dear ___________
SUBJECT: SWAP TRANSACTION (REF: )
The purpose of this communication is to set forth the terms and conditions of
the interest rate swap transaction entered into on the Trade Date referred to
below (the "Swap Transaction"), between Lehman Brothers Financial Products Inc.
("Party A") and <<counterparty>> ("Party B"). This communication constitutes a
"Confirmation" as referred to in the Swap Agreement specified below.
1. This confirmation supplements or will supplement, forms or will form a
part of, and is or will be subject to, the Master Agreement, which the parties
have entered into, dated as of <<as_of_date>> (the "Master Agreement"), between
Lehman Brothers Financial Products Inc. and <<counterparty>>. All provisions
contained in, or incorporated by
<PAGE> 36
18
reference to, the Master Agreement shall or will govern this Confirmation except
as expressly modified below.
2. This communication incorporates the definitions and provisions
contained in the 1991 ISDA Definitions (as published by the International Swaps
and Derivatives Association, Inc.) (the "Definitions").
3. The terms of the particular Swap Transaction to which this
communication relates are as follows:
Trade Date:
Effective Date:
Termination Date:
[Notional Amount:]
FIXED AMOUNTS:
Fixed Rate Payer: [Party A/B]
[Fixed Rate Payer
Calculation Amount:]
Fixed Rate Payer Payment Dates [or, [ ], subject to adjustment in
Period End Dates, if Delayed Payment accordance with the [Following/Modified
or Early Payment applies]: Following/Preceding] Business Day
Convention, with respect to a __________
Business Day and a ____________ Business
Day [,with No Adjustment of Period
End Dates]
[Fixed Amount:]
Fixed Rate:
Fixed Rate Day
Count Fraction:
FLOATING AMOUNTS:
Floating Rate Payer: [Party B/A]
[Floating Rate Payer
Calculation Amount:]
<PAGE> 37
18
Floating Rate Payer Payment Dates [or, [ ], subject to adjustment in
Period End Dates, if Delayed Payment accordance with the [Following/Modified
or Early Payment applies]: Following/Preceding] Business Day
Convention, with respect to a _________
Business Day and a ________________
Business Day [,with No Adjustment of
Period End Dates]
Floating Rate for initial
Calculation Period:
Floating Rate Option:
Designated Maturity:
Floating Rate Spread: [plus/minus] ____% p.a.
Floating Rate Day
Count Fraction:
Reset Dates:
[Rate Cut-off Dates:]
[Method of Averaging: Unweighted/Weighted Average]
Compounding: Applicable/Inapplicable
[Compounding Dates:]
[Initial Exchanges:
Initial Exchange Date:
Initial Exchange Amount to Party A:
Initial Exchange Amount to Party B:
Final Exchanges:
Final Exchange Date:
Final Exchange Amount to Party A:
Final Exchange Amount to Party B:]
Calculation Agent:
<PAGE> 38
18
3. Account Details
Payments to Party A
Account for payments in [first currency]: [ ]
Account for payments in [second currency]: [ ]
Payments to Party B
Account for payments in [first currency]: [ ]
Account for payments in [second currency]: [ ]
4. Offices
The Office of Party B for the Transaction is [ ].
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
LEHMAN BROTHERS FINANCIAL PRODUCTS INC.
By: ____________________________________
Name:
Title:
Date:
Confirmed as of the date first written:
AIRCRAFT FINANCE TRUST
By: ____________________________________
Name:
Title:
Date:
<PAGE> 1
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Aircraft Finance Trust (the "Registrant") significantly began its
operations on May 5, 1999. Accordingly, there are no historical earnings or
fixed charges as of that date that can be used to determine the ratio of
earnings to fixed charges for the Registrant for the purposes of this filing.
<PAGE> 1
Exhibit 21
Subsidiaries of Aircraft Finance Trust
<TABLE>
<CAPTION>
Entity Jurisdiction
------ ------------
<S> <C>
1. AFT Trust-Sub I Delaware
2. Aircraft Finance Trust Ireland
Ireland Limited
</TABLE>
<PAGE> 1
Exhibit 23.3
[LETTERHEAD OF AIRCRAFT INFORMATION SERVICES, INC.]
June , 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (as
amended, the "Registration Statement") of Aircraft Finance Trust (the
"Company"), to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to the Company's Exchange Offer
with respect to its Class A-1, Class A-2, Class B, Class C and Class D notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement, (ii) the references to our firm in such prospectus,
including the reference under the caption "Experts," (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus and (iv) the filing of this letter as an exhibit to the Registration
Statement.
Aircraft Information Services, Inc.
By: /s/ John D. McNicol
-----------------------
Name: John D. McNicol
Title: Vice President
-- Appraisals & Forecasts
<PAGE> 1
Exhibit 23.4
[LETTERHEAD OF BK ASSOCIATES, INC.]
June , 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies & Gentlemen:
Reference is made to the Registration Statement on Form S-4 (as amended, the
"Registration Statement") of Aircraft Finance Trust (the "Company"), to be filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to the Company's Exchange Offer with respect to its Class A-1,
Class A-2, Class B, Class C and Class D Notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement; (ii) the references to our firm in such prospectus,
including the reference under the caption "Experts"; (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus; and (iv) the filing of this letter as an exhibit to the Registration
Statement.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ R. L. Britton
R. L. Britton
Vice President
ISTAT Certified Appraiser
RLB/kf
<PAGE> 1
Exhibit 23.5
[LETTERHEAD OF MORTEN BEYER & AGNEW]
June 8, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (as amended,
the "Registration Statement") of Aircraft Finance Trust (the "Company"), to be
filed with the Securities and Exchange Commission under the Securities Act of
1993, as amended, relating to the Company's Exchange Offer with respect to its
Class A-1, Class A-2, Class B, Class C and Class D Notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement, (ii) the references to our firm in such prospectus,
including the reference under caption "Experts," (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus and (iv) the filing of this letter as an exhibit to the Registration
Statement.
MORTEN BEYER & AGNEW, INC.
/s/ Bryson P. Monteleone
Bryson P. Monteleone
Director of Operations
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Aircraft Finance Trust and subsidiaries of our report dated June 22, 1999
relating to the balance sheet of Aircraft Finance Trust and subsidiaries, which
appears in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
______________________________
PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
July 1, 1999
<PAGE> 1
Exhibit 23.7
[Weil Gotshal & Manges Letterhead]
July 2, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Aircraft Finance Trust, a Delaware business trust
(the "Company"), relating to the Company's Exchange Offer with respect to its
Class A-1 Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating
Rate Asset Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed
Notes, Series 1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1.
We hereby consent to (i) the reference to our firm in the "Risk
Factors-Risks Relating to the Terms of the Notes-Bankruptcy considerations
relating to "true sale" and "consolidation" issues" and "Taxation-U.S. Federal
Income Tax Consequences-Tax Characterization of Aircraft Finance as a
Partnership" sections of the prospectus which forms a part of the Registration
Statement, and (ii) the filing of this letter as an exhibit to the Registration
Statement.
Sincerely,
/s/ Weil, Gotshal & Manges LLP
<PAGE> 1
Exhibit 23.8
[LETTERHEAD OF SIMAT, HELLIESEN & EICHNER, INC.]
June 8, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (as
amended, the "Registration Statement") of Aircraft Finance Trust (the
"Company"), to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to the Company's Exchange Offer
with respect to its Class A-1, Class A-2, Class B, Class C and Class D Notes.
We hereby consent to (i) the inclusion of "The Commercial Aircraft
Industry" section in the prospectus contained in the Registration Statement,
(ii) the references to our firm in such prospectus, including the reference
under the caption "Experts" and (iii) the filing of this letter as an exhibit to
the Registration Statement.
SIMAT, HELLIESEN & EICHNER, INC.
By: /s/ Clive G. Medland
------------------------
Clive G. Medland
Vice President
<PAGE> 1
EXHIBIT 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___________
---------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
AIRCRAFT FINANCE TRUST
(Exact name of Registrant as specified in its charter)
DELAWARE 51-6512392
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
AIRCRAFT FINANCE TRUST
C/O WILMINGTON TRUST COMPANY
1100 NORTH MARKET STREET
RODNEY SQUARE NORTH
WILMINGTON, DE 19890
(302) 651-1000
(Address, including zip code of principal executive offices)
$512,500,000 CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
<PAGE> 2
$400,000,000 CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
$126,500,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
$106,000,000 CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1
(Title of the indenture securities)
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C> <C>
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
</TABLE>
(b) Whether it is authorized to exercise corporate trust
powers. Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3. -15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of
Bankers Trust Company dated August 7, 1990,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate
of Amendment of the Organization Certificate
of Bankers Trust Company dated June 19,
1997, copy attached.
EXHIBIT 2 - Certificate of Authority to commence
business - Incorporated herein by reference
to Exhibit 2 filed with Form T-1 Statement,
Registration No. 333-12199.
EXHIBIT 3 - Authorization of the Trustee to exercise
corporate trust powers Incorporated herein
by reference to Exhibit 2 filed with Form
T-1 Statement, Registration No. 333-12199.
EXHIBIT 4 - Existing By-Laws of Bankers Trust
Company, as amended on November 18, 1997.
Copy attached.
<PAGE> 3
-2-
<PAGE> 4
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust
Company dated as of September 30, 1998. Copy
attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 21st day
of June, 1999.
BANKERS TRUST COMPANY
By: /s/ Peter Becker
-----------------
Peter Becker
Assistant Vice President
-4-
<PAGE> 6
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 27TH day of June in the Year of our Lord one thousand nine hundred
and Ninety-Seven.
Manuel Kursky
-------------
Deputy Superintendent of Banks
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into
One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 8
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
James T. Byrne, Jr.
-------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
------------
Lea Lahtinen
Sworn to before me this 19th day of June, 1997.
Sandra L. West
--------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 2003
<PAGE> 9
BY-LAWS
NOVEMBER 18, 1997
BANKERS TRUST COMPANY
NEW YORK
<PAGE> 10
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who
<PAGE> 11
shall have attained age 72 shall be eligible to be elected or re-elected a
director. Such director may, however, remain a director of the Company until the
next annual meeting of the stockholders of Bankers Trust New York Corporation
(the Company's parent) so that such director's retirement will coincide with the
retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of
Directors may be filled by the affirmative vote of a majority of the directors
then in office, and the directors so elected shall hold office for the balance
of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time to
time on the third Tuesday of the month. If the day appointed for holding such
regular meetings shall be a legal holiday, the regular meeting to be held on
such day shall be held on the next business day thereafter. Special meetings of
the Board of Directors may be called upon at least two day's notice whenever it
may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE> 12
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
<PAGE> 13
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a Chairman
of the Board and a Chief Executive Officer; and shall also elect a President,
and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Managing Directors, one or
more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer of
the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General
<PAGE> 14
Auditor shall have the duty of reporting independently of all officers of the
Company to the Audit Committee at least quarterly on any matters concerning the
internal audit program and the adequacy of the system of internal controls of
the Company that should be brought to the attention of the directors except
those matters responsibility for which has been vested in the General Credit
Auditor. Should the General Auditor deem any matter to be of special immediate
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE> 15
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of
the New York Banking Law, indemnify any person who is or was made, or threatened
to be made, a party to an action or proceeding, whether civil or criminal,
whether involving any actual or alleged breach of duty, neglect or error, any
accountability, or any actual or alleged misstatement, misleading statement or
other act or omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Company is servicing or served
in any capacity at the request of the Company by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or is
serving or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement, and costs, charges and expenses, including
attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate
<PAGE> 16
in the circumstances, such person shall be unable to obtain indemnification from
such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement of
expense pursuant to this Article V (i) is a contract right pursuant to which the
person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
<PAGE> 17
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE> 18
I, Peter Becker, Assistant Vice President of Bankers Trust Company, New York,
New York, hereby certify that the foregoing is a complete, true and correct copy
of the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
--------------------------
ASSISTANT VICE PRESIDENT
DATED: June 21, 1999
<PAGE> 19
Legal Title of Bank: Bankers Trust Company Call Date: 09/30/98
Address: 130 Liberty Street Vendor ID: D
City, State ZIP: New York, NY 10006
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
ST-BK: 36-4840 FFIEC 031
CERT: 00623 Page RC-1
11
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1) ...................
b. Interest-bearing balances (2) ............................................
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) ...............
b. Available-for-sale securities (from Schedule RC-B, column D)..............
3. Federal funds sold and securities purchased under agreements to resell...........
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 20,227,000
b. LESS: Allowance for loan and lease losses........................RCFD 3123 619,000
c. LESS: Allocated transfer risk reserve ...........................RCFD 3128 0
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c) .......................
5. Trading Assets (from schedule RC-D) ............................................
6. Premises and fixed assets (including capitalized leases) ........................
7. Other real estate owned (from Schedule RC-M) ....................................
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)
9. Customers' liability to this bank on acceptances outstanding ....................
10. Intangible assets (from Schedule RC-M) ..........................................
11. Other assets (from Schedule RC-F) ...............................................
12. Total assets (sum of items 1 through 11) ........................................
<CAPTION>
---------------
| C400 |
------------------------------------------
| RCFD Bil Mil Thou |
------------------------------------------
<S> <C> <C> <C>
| |
1. Cash and balances due from depository institutions (from Schedule RC-A): |
a. Noninterest-bearing balances and currency and coin (1) .......... 0081 2,291,000 | 1.a.
b. Interest-bearing balances (2) ................................... | 0071 2,636,000 | 1.b.
2. Securities: | / / / / / / / / / / / / / / / / / / |
a. Held-to-maturity securities (from Schedule RC-B, column A) ...... | 1754 0 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)..... | 1773 6,617,000 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell.. | 1350 32,734,000 | 3.
4. Loans and lease financing receivables: | / / / / / / / / / / / / / / / / / / |
a. Loans and leases, net of unearned income (from Schedule RC-C) | / / / / / / / / / / / / / / / / / / | 4.a.
b. LESS: Allowance for loan and lease losses....................... | / / / / / / / / / / / / / / / / / / | 4.b.
c. LESS: Allocated transfer risk reserve .......................... | / / / / / / / / / / / / / / / / / / | 4.c.
d. Loans and leases, net of unearned income, | / / / / / / / / / / / / / / / / / / |
allowance, and reserve (item 4.a minus 4.b and 4.c) .............. | 2125 19,608,000 | 4.d.
5. Trading Assets (from schedule RC-D) ................................... | 3545 49,545,000 | 5.
6. Premises and fixed assets (including capitalized leases) ............... | 2145 885,000 | 6.
7. Other real estate owned (from Schedule RC-M) ........................... | 2150 115,000 | 7.
8. Investments in unconsolidated subsidiaries and associated companies | 2130 391,000 | 8.
(from Schedule RC-M)
9. Customers' liability to this bank on acceptances outstanding ........... | 2155 392,000 | 9.
10. Intangible assets (from Schedule RC-M) ................................. | 2143 266,000 | 10.
11. Other assets (from Schedule RC-F) ...................................... | 2160 5,884,000 | 11.
12. Total assets (sum of items 1 through 11) ............................... | 2170 121,364,000 | 12.
-----------------------------------------
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE> 20
Legal Title of Bank: Bankers Trust Company
Address: 130 Liberty Street
City, State Zip: New York, NY 10006
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Vendor ID: D CERT: 00623 Page RC-2
12
<TABLE>
<CAPTION>
SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)
(1) Noninterest-bearing(1) .................................RCON 6631 3,040,000........
(2) Interest-bearing .................................. .....RCON 6636 19,191,000.......
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E
part II)
(1) Noninterest-bearing ....................................RCFN 6631 2,423,000
(2) Interest-bearing .......................................RCFN 6636 19,509,000
14. Federal funds purchased and securities sold under agreements to repurchase
15. a. Demand notes issued to the U.S. Treasury ...................................................
b. Trading liabilities (from Schedule RC-D)....................................................
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):
a. With a remaining maturity of one year or less ..............................................
b. With a remaining maturity of more than one year through three years.........................
c. With a remaining maturity of more than three years...........................................
17. Not Applicable.
18. Bank's liability on acceptances executed and outstanding ..........................................
19. Subordinated notes and debentures (2)..............................................................
20. Other liabilities (from Schedule RC-G) ............................................................
21. Total liabilities (sum of items 13 through 20) ....................................................
22. Not Applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus .....................................................
24. Common stock ......................................................................................
25. Surplus (exclude all surplus related to preferred stock) ..........................................
26. a. Undivided profits and capital reserves .....................................................
b. Net unrealized holding gains (losses) on available-for-sale securities .....................
27. Cumulative foreign currency translation adjustments ...............................................
28. Total equity capital (sum of items 23 through 27) .................................................
29. Total liabilities and equity capital (sum of items 21 and 28)......................................
</TABLE>
<TABLE>
<CAPTION>
//////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES ////////////////////////
13. Deposits: ////////////////////////
a. In domestic offices (sum of totals of columns
A and C from Schedule RC-E, part I)............................. RCON 2200 22,231,000 13.a.
(1) Noninterest-bearing(1).....................................//////////////////////// 13.a(1)
(2) Interest-bearing ...........................................//////////////////////// 13.a(2)
b. In foreign offices, Edge and Agreement subsidiaries, ////////////////////////
and IBFs (from Schedule RC-E part II) RCFN 2200 21,932,000 13.b
(1) Noninterest-bearing .......................................//////////////////////// 13.b(1)
(2) Interest-bearing ..........................................//////////////////////// 13.b(2)
14. Federal funds purchased and securities sold under
agreements to repurchase RCFD 2800 14,360,000 14.
15. a. Demand notes issued to the U.S. Treasury ....................RCON 2840 0 15.a
b. Trading liabilities (from Schedule RC-D).....................RCFD 3548 32,890,000 15.b
16. Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases): ////////////////////////
a. With a remaining maturity of one year or less ..............RCFD2332 7,653,000 16.a
b. With a remaining maturity of more than
one year through three years................................A547 3,707,000 16.b
c. With a remaining maturity of more than
three years..................................................A548 3,034,000 16.c
17. Not Applicable ////////////////////////
18. Bank's liability on acceptances executed
and outstanding .................................................RCFD 2920 392,000 18.
19. Subordinated notes and debentures (2)............................RCFD 3200 1,533,000 19.
20. Other liabilities (from Schedule RC-G) ..........................RCFD 2930 6,595,000 20.
21. Total liabilities (sum of items 13 through 20) ..................RCFD 2948 114,327,000 21.
22. Not Applicable ////////////////////////
//////////////////////// 22.
EQUITY CAPITAL ////////////////////////
23. Perpetual preferred stock and related surplus ...................RCFD 3838 1,500,000 23.
24. Common stock ....................................................RCFD 3230 2,002,000 24.
25. Surplus (exclude all surplus related to
preferred stock) ................................................RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves .....................RCFD 3632 3,421,000 26.a.
b. Net unrealized holding gains (losses)
on available-for-sale securities ...........................RCFD 8434 ( 46,000) 26.b.
27. Cumulative foreign currency translation adjustments .............RCFD 3284 ( 380,000) 27.
28. Total equity capital (sum of items 23 through 27) ...............RCFD 3210 7,037,000 28.
29. Total liabilities and equity capital
(sum of items 21 and 28).........................................RCFD 3300 121,364,000 29
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C> <C>
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external _________________ Number
auditors as of any date during 1997................................ RCFD 6724 N/A | M.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This table should be read in conjunction with the consolidated balance sheet and
the notes thereto included elsewhere in this filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAY-05-1999
<CASH> 79,126
<SECURITIES> 0
<RECEIVABLES> 2,590
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,196,087
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,278,268
<CURRENT-LIABILITIES> 0
<BONDS> 1,209,000
0
0
<COMMON> 0
<OTHER-SE> 39,087
<TOTAL-LIABILITY-AND-EQUITY> 1,278,268
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF UP TO:
$512,500,000 CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AL2) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-1
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AA9),
$400,000,000 CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AM0) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-2
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AB7),
$126,500,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AN8) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS B
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AC5),
$106,000,000 CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AP3) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS C FIXED
RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AD3).
AIRCRAFT FINANCE TRUST
- --------------------------------------------------------------------------------
THE 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.
- --------------------------------------------------------------------------------
For questions regarding the Exchange Offer:
BANKERS TRUST COMPANY
BT Services Tennessee Incorporated By Facsimile:
Corporate Trust and Agency Group (615) 835-3701
648 Grassmere Park Road By Telephone:
Nashville, Tennessee 37211 (800) 735-7777
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS BY ELIGIBLE INSTITUTIONS VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus, dated 1999
(the "Prospectus"), of Aircraft Finance Trust (the "Company"), and this Letter
of Transmittal (the "Letter"), which together constitute the Company's offer
(the "Exchange Offer") to exchange an aggregate principal amount of up to
$1,145,000,000 of its Class A-1 Floating Rate Asset Backed Notes, Series
1999-1, Class A-2 Floating Rate Asset Backed Notes, Series 1999-1, Class B
Floating Rate Asset Backed Notes, Series 1999-1 and Class C Fixed Rate Asset
Backed Notes, Series 1999-1 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for an equal aggregate principal amount of its issued and outstanding Class A-1
Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset
Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed Notes, Series
1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1 (the "Restricted
Notes"). Capitalized terms used but not defined herein have the respective
meanings given to them in the Prospectus.
For each Restricted Note accepted for exchange, you will receive an
Exchange Note having a principal amount equal to that of the surrendered
Restricted Note. Holders whose Restricted Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
such Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes. Interest on the Exchange Notes will accrue from their
respective dates of issuance. Holders of Restricted Notes accepted for exchange
will be deemed to have waived the right to receive any other payments or
interest on the Restricted Notes. The Company reserves the right, at any time or
from time to time, to extend the Exchange Offer at its discretion, in which
event the term "Expiration Date" shall mean the latest time and date in which
the Exchange Offer is extended. The Company shall notify the holders of the
Restricted Notes of any extension by oral or written notice prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
A holder of Restricted Notes must complete this Letter (except those
holders delivering an Agent's Message in lieu thereof) either if certificates
are to be forwarded herewith or if a tender of certificates for Restricted
Notes, if available, is to be made by book-entry transfer to the account
maintained by Bankers Trust Company (the "Exchange Agent") at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus. Holders of Restricted Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Restricted Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and
all other documents required by this Letter to the Exchange Agent on or prior to
the Expiration Date, must tender their Restricted Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. See Instruction 1. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
In lieu of delivering this Letter, an Agent's Message will
constitute valid delivery. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgement from a
participant tendering Restricted Notes that are the subject of such Book-Entry
Confirmation that
<PAGE> 3
such participant has received and agrees to be bound by this Letter and that the
Company may enforce such agreement against such participant.
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Restricted Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made on the Exchange Date. For
the purposes of the Exchange Offer, the Company shall be deemed to have accepted
for exchange validly tendered Restricted Notes when, as and if the Company has
given oral or written notice thereof to the Exchange Agent.
The instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above.
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 Restricted Notes to which this Letter
relates. If the space provided below is inadequate, the certificate numbers and
principal amount at maturity of Restricted Notes should be listed on a separate
signed schedule affixed hereto.
<TABLE>
<CAPTION>
- ------------------------------------------------ ----------------- ---------------------------- ----------------------
<S> <C> <C> <C>
DESCRIPTION OF RESTRICTED NOTES 1 2 3
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) AGGREGATE PRINCIPAL
(PLEASE FILL IN, IF BLANK) CERTIFICATE PRINCIPAL AMOUNT AT MATURITY AMOUNT AT MATURITY
NUMBER(S) OF RESTRICTED NOTE(S) TENDERED**
----------------- ---------------------------- ---------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
----------------- ---------------------------- ----------------------
TOTAL
- ------------------------------------------------ ----------------- ---------------------------- ----------------------
</TABLE>
* Need not be completed if Restricted Notes are being tendered by
book-entry transfer.
** Restricted Notes tendered hereby must be in denominations of principal
amount of $1,000 and any integral multiple thereof. See Instruction 1.
/ / CHECK HERE IF TENDERED RESTRICTED 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 _____________________________________________
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
<PAGE> 4
/ / CHECK HERE IF TENDERED RESTRICTED NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ___________________________________________
Window Ticket No. (if any)_________________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution which Guaranteed Delivery______________________________
If delivered by Book-Entry Transfer, complete the following:
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_________________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Restricted Notes, it acknowledges that
the Restricted Notes were acquired as a result of market-making activities or
other trading activities and that it will deliver a Prospectus in connection
with any resale of such Exchange 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.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
1. Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the aggregate principal amount of
Restricted Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Restricted Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Restricted Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
as agent and attorney-in-fact of the undersigned (with full knowledge that the
Exchange Agent also acts as the agent of the Company in connection with the
Exchange Offer) with respect to the tendered Restricted Notes with full power of
substitution to (i) deliver such Restricted Notes, or transfer
<PAGE> 5
ownership of such Restricted Notes on the account books maintained by the
Book-Entry Transfer Facility, to the Company and deliver all accompanying
evidences of transfer and authenticity, and (ii) present such Restricted Notes
for transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Restricted Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
2. The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Restricted
Notes tendered hereby and that the Company 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 Restricted Notes are
accepted by the Company. The undersigned hereby further represents that: (i) any
Exchange Notes acquired in exchange for Restricted Notes tendered hereby will
have been acquired in the ordinary course of business of the person receiving
such Exchange Notes, whether or not such person is the undersigned, (ii) that
neither the holder of such Restricted Notes nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Notes, (iii)
that neither the holder of such Restricted Notes nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and (iv) that neither the holder of such
Restricted Notes nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act of 1933, as amended (the "Securities Act"), of the
Company.
3. The undersigned also acknowledges that the Exchange Offer is being made
in reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") set forth in no-action letters issued to third parties,
that the Exchange Notes issued in exchange for the Restricted Notes pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by holders thereof (other than any such holder that is the Company's "affiliate"
within the meaning of Rule 405 under the Securities Act or is an Initial
Purchaser who acquired the Restricted Notes directly from the Company in the
initial offering to resell pursuant to Rule 144A, Regulation S or any other
available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that (i) such Exchange Notes are acquired in the ordinary course of such
holders' business, (ii) such holders are not engaging in and do not intend to
engage in the distribution of such Exchange Notes and (iii) such holders have no
arrangements or understandings with any person to participate in the
distribution of such Exchange Notes. If the undersigned is not a broker-dealer,
the undersigned represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Restricted Notes that were acquired as a result of market-making activities
or other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resales of
such Exchange 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 if the undersigned is participating in the Exchange Offer for
the purpose of distributing the Exchange Notes (i) the undersigned cannot rely
on the position of the staff of the Commission in certain no-action letters and,
in the absence of an exemption therefrom, must comply with the registration and
Prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes, in which case, such
registration statement must contain the selling security
<PAGE> 6
holder information required by Item 507 of Regulation S-K of the Commission, and
(ii) failure to comply with such requirements in such instance could result in
the undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.
If the undersigned or the person receiving the Exchange Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company or
is an Initial Purchaser, the undersigned represents to the Company that the
undersigned understands and acknowledges that the Exchange Notes may not be
offered for resale, resold or otherwise transferred by the undersigned or such
other person without registration under the Securities Act or an exemption
therefrom.
4. The undersigned may, if, and only if, it would not receive freely
tradeable Exchange Notes in the Exchange Offer or is not eligible to participate
in the Exchange Offer pursuant to Section 4(a) of the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of May 5, 1999, among
the Company and Lehman Brothers Inc., Merrill, Lynch, Pierce, Fenner & Smith
Incorporated and Credit Suisse First Boston Corporation (the "Initial
Purchasers") in the form filed as Exhibit 4.4 to the Registration Statement of
the Company, Registration No. 333-_____, elect to have its Restricted Notes
registered in the shelf registration described in the Registration Rights
Agreement. Capitalized terms used in this paragraph 4 and not otherwise defined
herein shall have the meanings given them in the Registration Rights Agreement.
Such election may be made by checking the box under "Special Registration
Instructions" below. By making such election, the undersigned agrees, as a
holder of Restricted Notes participating in a Shelf Registration, to comply with
the Registration Rights Agreement and to indemnify and hold harmless the
Company, its officers and employees, each of its directors, and each person, if
any, who controls the Company within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, preliminary prospectus or
Prospectus (in each case as amended or supplemented) or (ii) the omission or
alleged omission to state in any Registration Statement, preliminary prospectus
or Prospectus (in each case as amended or supplemented) any material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such Holder furnished
to the Company by or on behalf of that Holder specifically for inclusion
therein, and shall reimburse the Company and any such director, officer or
controlling person for any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. Any such
indemnification shall be governed by the terms and subject to the conditions set
forth in the Registration Rights Agreement, including, without limitation, the
provisions regarding notice, retention of counsel, contribution and payment of
expenses set forth therein. The above summary of the indemnification provisions
of the Registration Rights Agreement is not intended to be exhaustive and is
qualified in its entirety by the Registration Rights Agreement.
5. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and
<PAGE> 7
transfer of the Restricted 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 undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders"
section of the Prospectus. See Instruction 8.
6. For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange properly tendered Restricted Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Restricted Notes that are not accepted for exchange pursuant to the Exchange
Offer for any reason will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
expiration or termination of the Exchange Offer.
7. The undersigned acknowledges that the Company's acceptance of properly
tendered Restricted Notes pursuant to the procedures described under the caption
"The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
8. Unless otherwise indicated in the box entitled "Special Issuance
Instructions" below, please issue the Exchange Notes (and, if applicable,
substitute certificates representing Restricted Notes for any Restricted Notes
not exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Restricted Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the Exchange Notes (and, if applicable, substitute certificates
representing Restricted Notes for any Restricted Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of
Restricted Notes." The undersigned recognizes that the Company has no obligation
pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Restricted Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the
Restricted Notes so tendered for exchange.
THE UNDERSIGNED ACKNOWLEDGES THAT THE EXCHANGE OFFER IS SUBJECT TO THE MORE
DETAILED TERMS SET FORTH IN THE PROSPECTUS AND, IN CASE OF ANY CONFLICT BETWEEN
THE TERMS OF THE PROSPECTUS AND THIS LETTER, THE PROSPECTUS SHALL PREVAIL.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF RESTRICTED
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
RESTRICTED NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 8
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 2 AND 3)
To be completed ONLY IF certificates for Restricted Notes not exchanged
and/or Exchange Notes are to be issued in the name of someone other than the
person or persons whose signature(s) appear(s) on this Letter below, or if
Restricted Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above.
Issue: / / Exchange Notes and/or / / Restricted Notes to:
Name(s):____________________________________
(PLEASE TYPE OR PRINT)
_____________________________________
(PLEASE TYPE OR PRINT)
Address:
______________________________________
______________________________________
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Restricted Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below:
____________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2 AND 3)
To be completed ONLY IF certificates for Restricted Notes exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter below, or to person or persons at an
address other than shown in the box entitled "Description of Restricted Notes"
above.
Mail: / / Exchange Notes and/or / / Restricted Notes
to:
Name(s):_________________________________
(PLEASE TYPE OR PRINT)
__________________________________
(PLEASE TYPE OR PRINT)
Address:
_________________________________________
_________________________________________
(ZIP CODE)
<PAGE> 9
SPECIAL REGISTRATION INSTRUCTIONS
(SEE PARAGRAPH 4 ABOVE)
To be completed ONLY IF (i) the undersigned satisfies the conditions set forth
in paragraph 4 above, (ii) the undersigned elects to register its Restricted
Notes in the shelf registration described in the Registration Rights Agreement,
and (iii) the undersigned agrees to comply with the Registration Rights
Agreement and to indemnify certain entities and individuals as set forth in
paragraph 4 above.
/ / By checking this box the undersigned hereby (i) represents that it is
entitled to have its Restricted Notes registered in a shelf registration in
accordance with the Registration Rights Agreement, (ii) elects to have its
Restricted Notes registered pursuant to the shelf registration described in the
Registration Rights Agreement, and (iii) agrees to comply with the Registration
Rights Agreement and to indemnify certain entities and individuals identified
in, and to the extent provided in, paragraph 4 above.
<PAGE> 10
IMPORTANT: THIS LETTER (OR AN AGENT'S MESSAGE IN LIEU THEREOF) OR A FACSIMILE
HEREOF (TOGETHER WITH THE CERTIFICATES FOR RESTRICTED NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL 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 THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
______________________________________________________________________________
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
x_____________________________________________________________ ____________1999
x_____________________________________________________________ ____________1999
x_____________________________________________________________ ____________1999
SIGNATURE(S) OF OWNER DATE
Area Code and Telephone Number_________________________________________________
If a holder is tendering any Restricted Notes, this Letter must be signed by the
registered holder(s) exactly as the name(s) appear(s) on the certificate(s) for
the Restricted Notes or, if tendered by a participant in the Book-Entry Transfer
Facility, exactly as such name appears on a security position listing as the
owner of the Restricted Notes, or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith. If
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 2.
Name(s): ______________________________________________________________________
_______________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: _____________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
(INCLUDING ZIP CODE)
<PAGE> 11
Employer Identification or Social Security Number ______________________________
(PLEASE COMPLETE SUBSTITUTE
FORM W-9, IF APPLICABLE. SEE
"IMPORTANT TAX INFORMATION"
BELOW)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 2)
Signature(s) Guaranteed by
an Eligible Institution:________________________________________________________
(AUTHORIZED SIGNATURE)
_______________________________________________________________________________
(TITLE)
_______________________________________________________________________________
(NAME AND FIRM)
<PAGE> 12
INSTRUCTIONS
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
Holders of Restricted Notes must complete this Letter (except those
holders delivering an Agent's Message in lieu thereof) either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Restricted Notes, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter (or manually
signed facsimile thereof), with any required signature guarantees (unless an
Agent's Message is transmitted in lieu thereof), and any other documents
required by this Letter, must be received by the Exchange Agent at the address
set forth herein on or prior to the Expiration Date, or the tendering holder
must comply with the guaranteed delivery procedures set forth below. Restricted
Notes tendered hereby must be in denominations of principal amount at maturity
of $1,000 or any integral multiple thereof.
Noteholders whose certificates for Restricted Notes are not immediately
available or who cannot deliver their certificates and all other 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 Restricted Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below); (ii) on or prior to 5:00 p.m., New York
City time, on the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Letter (or a
facsimile thereof or an Agent's Message in lieu thereof) and Notice of
Guaranteed Delivery (or an Agent's Message with respect to guaranteed delivery
in lieu thereof), substantially in the form provided by the Company (by
facsimile transmission (if available to such holder), mail or hand delivery).
The Notice of Guaranteed Delivery must set forth the name and address of the
holder of Restricted Notes and the amount of Restricted Notes tendered, state
that the tender is being made thereby and guarantee that within three New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Restricted
Notes, in proper form for transfer, or a Book-Entry Confirmation (including by
means of an Agent's Message), as the case may be, together with this Letter (or
a facsimile hereof or an Agent's Message in lieu thereof) and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) the certificates for all physically tendered
Restricted Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, and all other documents required by this Letter, must be
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE RESTRICTED NOTES AND ALL
OTHER REQUIRED DOCUMENTS 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. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE
<PAGE> 13
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR RESTRICTED NOTES
SHOULD BE SENT TO THE COMPANY.
See "The Exchange Offer" section in the Prospectus.
2. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter is signed by the registered holder of the Restricted
Notes tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates without any change whatsoever.
If any tendered Restricted Notes are owned of record by two or more
joint owners, all such owners must sign this Letter.
If any tendered Restricted Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Restricted Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Restricted Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) or bond powers must be guaranteed by an Eligible
Institution.
If this Letter is signed by a person other than the registered holder
or holders of any certificate(s) specified herein, such certificates must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by
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. Unless the Company waives the
condition, in such an instance you must submit with this Letter evidence
satisfactory to the Company of their authority to so act.
Endorsements on certificates for Restricted Notes or signatures on bond
powers required by this Instruction 2 must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (each an "Eligible Institution" and collectively, "Eligible
Institutions").
<PAGE> 14
Signatures on the Letter need not be guaranteed by an Eligible
Institution if (A) the Restricted Notes are tendered (i) by a registered holder
of Restricted 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 Restricted Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible Institution
and (B) the box entitled "Special Registration Instructions" on this Letter has
not been completed.
3. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Restricted Notes should indicate in the applicable
box the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Restricted Notes not exchanged
are to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Noteholders tendering Restricted Notes by book-entry transfer may
request that Restricted Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such noteholder may designate
hereon. If no such instructions are given, such Restricted Notes not exchanged
will be returned to the name and address of the person signing this Letter.
4. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Restricted Notes to it or its order pursuant to the Exchange Offer.
If, however, Exchange Notes and/or substitute Restricted Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Restricted Notes tendered hereby, or if
tendered Restricted Notes are registered in the name of any person other than
the person signing this Letter, or if a transfer tax is imposed for any reason
other than the exchange of Restricted Notes pursuant to the Exchange Offer, the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons) 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.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Restricted Notes specified in this
Letter.
5. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
<PAGE> 15
6. NO CONDITIONAL TENDERS.
The Company will not accept any alternative, conditional, irregular or
contingent tenders. All tendering holders of Restricted Notes, by execution of
this Letter, shall waive any right to receive notice of the acceptance of their
Restricted Notes for exchange.
Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Restricted Notes, neither the Company,
the Exchange Agent nor any other person shall incur any liability for failure to
give any such notice.
7. MUTILATED, LOST, STOLEN OR DESTROYED RESTRICTED NOTES.
Any holder whose Restricted Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
8. WITHDRAWAL OF TENDERS.
Tenders may be withdrawn only pursuant to the limited withdrawal rights
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders."
The Company will determine all questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Restricted Notes in its sole discretion, and its determination will be final and
binding on all parties. The Company reserves the absolute right to reject any
and all Restricted Notes not properly tendered or any Restricted Notes its
acceptance of which would, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any defects, irregularities, or
conditions of tender as to particular Restricted Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions of this Letter) will be final and binding on all parties.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus, this Letter and other related documents may
be directed to the Exchange Agent, at the address and telephone number indicated
above. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
<PAGE> 16
IMPORTANT TAX INFORMATION
Under current federal income tax law to prevent backup withholding on
any Exchange Notes delivered pursuant to the Exchange Offer and any payments
made in respect of the Exchange Notes, a holder of Exchange Notes generally is
required to provide the Company (as payor) with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 or otherwise to establish a
basis for exemption from backup withholding. If a holder of Exchange Notes is an
individual, the TIN is such holder's social security number. If a holder
required to do so fails to provide the Company with the correct taxpayer
identification number, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. Accordingly, each prospective holder of Exchange Notes
to be issued pursuant to Special Issuance Instructions should complete the
attached Substitute Form W-9. The Substitute Form W-9 need not be completed if
the box entitled Special Issuance Instructions has not been completed.
Certain holders of Exchange Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt prospective holders of Exchange
Notes should indicate their exempt status on Substitute Form W-9. A foreign
individual may qualify as an exempt recipient by submitting to us, through the
Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalty of perjury,
attesting to the holder's exempt status. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of Exchange Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any Exchange Notes delivered pursuant
to the Exchange Offer and any payments received in respect of the Exchange
Notes, each prospective holder of Exchange Notes to be issued pursuant to
Special Issuance Instructions should provide the Company, through the Exchange
Agent, with either: (i) such prospective holder's correct TIN by completing the
form below, certifying that the TIN provided on Substitute Form W-9 is correct
(or that such prospective holder is awaiting a TIN) and that (A) such
prospective holder has not been notified by the Internal Revenue Service that he
or she is subject to backup withholding as a result of a failure to report all
interest or dividends or (B) the Internal Revenue Service has notified such
prospective holder that he or she is no longer subject to backup withholding; or
(ii) an adequate basis for exemption.
<PAGE> 17
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective holder of Exchange Notes to be issued pursuant to
Special Issuance Instructions is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the
prospective record owner of the Exchange Notes. If the Exchange Notes will be
held in more than one name or are not held in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance regarding which number to
report.
<PAGE> 18
<TABLE>
<CAPTION>
PAYOR'S NAME: BANKERS TRUST COMPANY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY Social Security No. or
INTERNAL REVENUE SERVICE PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Employee Identification
PAYOR'S REQUEST FOR TAXPAYER AND CERTIFY BY SIGNING AND DATING BELOW Number(s)
IDENTIFICATION NUMBER ("TIN")
------------------------------------------------------ --------------------------
Part 2 - CERTIFICATION - Under penalties of PART 3
perjury, I certify that: Awaiting TIN
(1) The number shown on this form is my
current taxpayer identification
number (or I am waiting for a
number to be issued to me) , and
(2) I am not subject to backup
withholding because: (a) I am an
exempt holder, (b) I have not been
notified by the Internal Revenue
Service (the "IRS") that I am
subject to backup withholding as a
result of a failure to report all
interest or dividends, or (c) the
IRS has notified me that I am no
longer subject to backup
withholding.
CERTIFICATE INSTRUCTIONS - You must cross
out item (2) in Part 2 above if you have
been notified by the IRS that you are
subject to backup withholding because of
underreported interest or dividends on your
tax return. However, if after being notified
by the IRS that you are subject to backup
withholding you receive another notification
from the IRS that you are no longer subject
to backup withholding, do not cross out such
item (2)
</TABLE>
SIGNATURE _______________________________________________ DATE ____________
NAME: ______________________
(Please Print)
________________________________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN.
________________________________________________________________________________
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
SIGNATURE: __________________ DATE: _____________________________
________________________________________________________________________________
<PAGE> 19
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
______________________________________________________________________
FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY
NUMBER OF--
______________________________________________________________________
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor
is the only contributor,
the minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor or
incompetent person
7. a. The usual revocable The grantor trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
8. Sole proprietorship account The actual owner(4)
<CAPTION>
__________________________________________________________________________
FOR THIS TYPE OF ACCOUNT GIVE THE EMPLOYER
IDENTIFICATION NUMBER OF--
__________________________________________________________________________
<C> <C>
9. A valid trust, estate, The legal entity (Do not
or pension trust furnish the identification
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
or educational organization account
12. Partnership account held The partnership
in the name of the business
13. Association, club or other tax- The organization
exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school, district, or
prison) that receives
agricultural program
payments
- -----------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 20
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- - The United States or any agency or instrumentality
thereof.
- - A State, the District of Columbia, a possession of
the United States, or any subdivision or
instrumentality thereof.
- - A foreign government, a political subdivision of a
foreign government, or any agency or
instrumentality thereof.
- - An international organization or any agency or
instrumentality thereof.
- - A registered dealer in securities or commodities
registered in the United States or a possession of
the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under
section 584(a) of the Code.
- - An exempt charitable remainder trust, or a
nonexempt trust described in section 4947(a)(1) of
the Code.
- - An entity registered at all times under the
Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to
withholding under section 1441 of the Code.
- - Payments to partnerships not engaged in a trade or
business in the United States and which have at
least one nonresident partner.
- - Payments of patronage dividends where the amount
received is not paid in money.
- - Payments made by certain foreign organizations.
Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by
individuals. Note: You may be subject to backup
withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you
have not provided your correct taxpayer identification
number to the payer.
- - Payments of tax-exempt interest (including
exempt-interest dividends under section 852 of the Code).
- - Payments described in section 6049(b)(5) of the
Code to nonresident aliens.
- - Payments on tax-free covenant bonds under section
1451 of the Code.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF UP TO:
$512,500,000 CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AL2) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-1
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AA9),
$400,000,000 CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AM0) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-2
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AB7),
$126,500,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AN8) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS B
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AC5),
$106,000,000 CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AP3) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS C FIXED
RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AD3).
AIRCRAFT FINANCE TRUST
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Aircraft Finance Trust (the "Company") relating to the
exchange of an aggregate principal amount up to $1,145,000,000 of its Class A-1
Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset
Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed Notes, Series
1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for an equal aggregate principal amount of its issued
and outstanding Class A-1 Floating Rate Asset Backed Notes, Series 1999-1, Class
A-2 Floating Rate Asset Backed Notes, Series 1999-1, Class B Floating Rate Asset
Backed Notes, Series 1999-1 and Class C Fixed Rate Asset Backed Notes, Series
1999-1 (the "Restricted Notes") made pursuant to the Prospectus, dated _______,
1999 (the "Prospectus"), if certificates for Restricted Notes of the Company are
not immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Exchange Agent prior to 5:00 p.m., New York City time, on _______,
1999 (the "Expiration Date"). Such form may be delivered or transmitted by
facsimile transmission (if available to such holder), mail or hand delivery to
Bankers Trust Company (the "Exchange Agent") as set forth below. In addition, in
order to utilize the guaranteed delivery procedure to tender Restricted Notes
pursuant to the Exchange Offer, the Exchange Agent must receive from an Eligible
Institution prior to 5:00 p.m., New York City time, on the Expiration Date, a
completed, signed and dated Letter of Transmittal relating to the Restricted
Notes (or facsimile thereof or an Agent's Message in lieu thereof). Capitalized
terms used herein and not defined herein are used as so defined in the
Prospectus.
<PAGE> 2
BANKERS TRUST COMPANY
BT Services Tennessee Incorporated By Facsimile:
Corporate Trust and Agency Group (615) 835-3701
648 Grassmere Park Road By Telephone:
Nashville, Tennessee 37211 (800) 735-7777
DELIVERY OF THIS NOTICE TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS NOTICE VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Aircraft Finance Trust, a Delaware
business trust (the "Company"), in accordance with the Company's offer, upon the
terms and subject to the conditions set forth in the Prospectus dated ,
1999 (the "Prospectus"), and in the accompanying Letter of Transmittal, receipt
of which is hereby acknowledged, $ in aggregate principal amount of
Restricted Notes pursuant to the guaranteed delivery procedures described in
the Prospectus.
Name(s) of Record Holder(s)____________________________________________________
(Please Type or Print)
Address_________________________________________________________________________
_________________________________________________________________________
Area Code & Telephone No.__________________________________
Certificate Number(s) for Restricted Notes (if available)______________________
Total Principal Amount Represented by Certificate(s): $_________________________
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE
THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
________________________________________________________________________________
PLEASE SIGN HERE
x________________________________________________________ _______________1999
x________________________________________________________ _______________1999
Signature(s) of Holder(s) Date
Must be signed by the holder(s) of Restricted Notes as their name(s)
appear(s) on certificates for Restricted Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and 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
representative capacity, such person must set forth his or her full title below.
3
<PAGE> 4
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Capacity:_______________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________
________________________________________________________________________
/ / The Depository Trust Company
(Check if Restricted Notes will be tendered by book-entry transfer)
Account Number____________________________
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED
4
<PAGE> 5
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Restricted Notes being tendered hereby, in proper
form for transfer, or confirmation of book-entry transfer of such Restricted
Notes into the Exchange Agent's account at The Depository Trust Company, in
proper form for transfer, together with the Letter of Transmittal (or a
facsimile thereof or an Agent's Message in lieu thereof) and any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the date of execution hereof.
____________________ ___________________________
Name of Firm Authorized Signature
____________________ ___________________________
Address Title
____________________ ___________________________
Zip Code (Please Type or Print)
____________________ Dated:_____________________
Area Code and Tel. No.
NOTE: DO NOT SEND CERTIFICATES OF RESTRICTED NOTES WITH THIS FORM.
CERTIFICATES OF RESTRICTED NOTES SHOULD BE SENT ONLY WITH A COPY OF THE
PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
5
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY
PARTICIPANT FROM AIRCRAFT FINANCE TRUST
FOR
TENDER OF UP TO:
$512,500,000 CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AL2) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-1
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AA9),
$400,000,000 CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AM0) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-2
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AB7),
$126,500,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AN8) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS B
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AC5),
$106,000,000 CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AP3) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS C FIXED
RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AD3).
AIRCRAFT FINANCE TRUST
_______________________________________________________________________________
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
UNLESS EXTENDED (THE "EXPIRATION DATE"). RESTRICTED NOTES (AS DEFINED BELOW)
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
_______________________________________________________________________________
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Aircraft Finance Trust (the "Company"), to exchange an aggregate
principal amount of up to $1,145,000,000 of its Class A-1 Floating Rate Asset
Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series
1999-1, Class B Floating Rate Asset Backed Notes, Series 1999-1, Class C Fixed
Rate Asset Backed Notes, Series 1999-1, (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for an equal aggregate principal amount of its issued and outstanding Class A-1
Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset
Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed Notes, Series
1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1 (the "Restricted
Notes") upon the terms and subject to the conditions set forth in the Company's
Prospectus, dated , and the related Letter of Transmittal (which
together set forth the "Exchange Offer"). Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
<PAGE> 2
Enclosed herewith are copies of the following documents:
1. Prospectus dated ;
2. Letter of Transmittal (together with accompanying Substitute Form W-9
and Guidelines); and
3. Letter which may be sent to your clients for whose account you hold
Restricted Notes in your name or in the name of your nominee, with
space provided 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 on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of
Restricted Notes being tendered.
Pursuant to the Letter of Transmittal, each Holder of Restricted Notes
will represent to the Company that (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being acquired in the ordinary course of business of the
Holder, (ii) the Holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes within the meaning of the
Securities Act, (iii) if the Holder is not a broker-dealer, or is a
broker-dealer but will not receive Exchange Notes for its own account in
exchange for Restricted Notes, the Holder is not engaged in and does not intend
to participate in the distribution of such Exchange Notes and (iv) the Holder is
not an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or if the Holder is such an "affiliate," that the Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, and (v) the Holder is not an "Initial
Purchaser" who acquired the Restricted Notes directly from the Company in the
initial offering to resell pursuant to Rule 144A, Regulation S or any other
available exemption under the Securities Act, or if the Holder is such an
Initial Purchaser, that the Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the Holder is a broker-dealer (whether or not it is also an "affiliate") that
will receive Exchange Notes for its own account in exchange for Restricted
Notes, it represents that such Restricted 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 Exchange 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 Exchange Notes, the Holder
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Restricted Notes for you to make the foregoing
representations.
The Company 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 Restricted Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Restricted Notes to it, except as otherwise provided in Instruction 6 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from Bankers
Trust Company, as Exchange Agent, 4 Albany Street, 7th Floor, New York, NY
10006, Attention: Anthony Nista, Telephone: 212-250-4730.
Very truly yours,
AIRCRAFT FINANCE TRUST
BY: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
<PAGE> 3
LETTER TO CLIENTS
FOR
TENDER OF UP TO:
$512,500,000 CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AL2) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-1
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AA9),
$400,000,000 CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AM0) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS A-2
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AB7),
$126,500,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AN8) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS B
FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AC5),
$106,000,000 CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP:
009341AP3) IN EXCHANGE FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF CLASS C FIXED
RATE ASSET BACKED NOTES, SERIES 1999-1 (CUSIP: U01002AD3).
AIRCRAFT FINANCE TRUST
_______________________________________________________________________________
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
UNLESS EXTENDED (THE "EXPIRATION DATE"). RESTRICTED NOTES (AS DEFINED BELOW)
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
_______________________________________________________________________________
To our Clients:
The undersigned hereby acknowledges receipt of the Prospectus dated
(the "Prospectus") of Aircraft Finance Trust (the "Company") and the
accompanying Letter of Transmittal (the "Letter of Transmittal") that together
set forth the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $1,145,000,000 of its Class A-1 Floating Rate Asset
Backed Notes, Series 1999-1, Class A-2 Floating Rate Asset Backed Notes, Series
1999-1, Class B Floating Rate Asset Backed Notes, Series 1999-1 and Class C
Fixed Rate Asset Backed Notes, Series 1999-1, (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for an equal aggregate principal amount of its issued and outstanding
Class A-1 Floating Rate Asset Backed Notes, Series 1999-1, Class A-2 Floating
Rate Asset Backed Notes, Series 1999-1, Class B Floating Rate Asset Backed
Notes, Series 1999-1 and Class C Fixed Rate Asset Backed Notes, Series 1999-1
(the "Restricted Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you as to the action to be taken by you relating to
the Exchange Offer with respect to the Restricted Notes held by for the account
of the undersigned.
We request instructions as to whether you wish to tender any or all of
the Restricted 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.
<PAGE> 4
The aggregate face amount of the Restricted Notes held by us for the
account of the undersigned is (FILL IN AMOUNT):
$__________ of the Class A-1 Floating Rate Asset Backed Notes, Series
1999-1.
$___________ of the Class A-2 Floating Rate Asset Backed Notes, Series
1999-1.
$___________ of the Class B Floating Rate Asset Backed Notes, Series
1999-1.
$____________ of the Class C Fixed Rate Asset Backed Notes, Series
1999-1.
With respect to the Exchange Offer, the undersigned hereby instructs us
(CHECK APPROPRIATE BOX):
[ ] To TENDER the following Restricted Notes held by us for
the account of the undersigned (INSERT PRINCIPAL AMOUNT OF EXISTING
NOTES TO BE TENDERED (IF ANY): $____________.
[ ] NOT to TENDER any Restricted Notes held by us for the
account of the undersigned.
If the undersigned instructs us to tender the Restricted Notes held by
us for the account of the undersigned, it is understood that we are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation 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
Exchange Notes acquired pursuant to the Exchange Offer are being acquired 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 Exchange Notes within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), (iii) if the undersigned is not a broker-dealer,
or is a broker-dealer but will not receive Exchange Notes for its own account in
exchange for Restricted Notes, the undersigned is not engaged in and does not
intend to participate in the distribution of such Exchange Notes, (iv) the
undersigned is not an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, and (v) the Holder
is not an "Initial Purchaser" who acquired the Restricted Notes directly from
the Company in the initial offering to resell pursuant to Rule 144A, Regulation
S or any other available exemption under the Securities Act, or if the Holder is
such an Initial Purchaser, that the Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is a broker-dealer (whether or not it is also an "affiliate")
that will receive Exchange Notes for its own account in exchange for Restricted
Notes, it represents that such Restricted 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 Exchange 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 Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE> 5
_______________________________________________________________________________
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 99.4
[LOGO] AIRCRAFT
INFORMATION
SERVICES, INC.
31 December 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Subject: Half Life and Adjusted Base Value Appraisal for Fleet of 36 Aircraft
The Aircraft Finance Trust ("AFT") Portfolio
AISI File number: A9S006BVO
Ref: Data packages -- 08/09 October 1998, 26 October 1998
Ladies and Gentlemen:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to provide our opinion of the half life and adjusted base values of the
Aircraft Finance Trust ("AFT") Portfolio (36 Aircraft) as identified in Table I
and as described in the above referenced data package.
1. Methodology and Definitions
The standard terms of reference for commercial aircraft value are 'half-life
base market value' and 'half-life current market value' of an 'average'
aircraft. Base value is a theoretical value that assumes a balanced market while
current market value is the value in the real market; both assume a hypothetical
average aircraft condition. AISI value definitions are consistent with the
current definitions of the International Society of Transport Aircraft Trading
(ISTAT), those of 01 January 1994. AISI is a member of that organization and
employs an ISTAT Certified and Senior Certified 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
Headquarters, 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: [email protected]
<PAGE> 2
[LOGO]
31 December 1998
AISI File No. A9S006BVO
Page - 2 -
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', which is synonymous with the older term
'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.
2. Valuation
No physical inspection of the Aircraft or their essential records was made by
AISI for the purposes of this report, nor has any attempt been made to verify
information provided to us, which is assumed to be correct and applicable to the
Aircraft.
Our opinion of the adjusted base value of the Aircraft is derived from
information and specifications supplied by GE Capital Aviation Services
("GECAS") (for 34 Aircraft) and UniCapital, Inc. ("UniCapital") (for 2
Aircraft). Adjustments are calculated 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
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 is typical of newer aircraft. If no
information was provided and if the TSO could not be calculated, then half life
was assumed.
<PAGE> 3
[LOGO]
31 December 1998
AISI File No. A9S006BVO
Page - 3 -
With regard to the engines, on aircraft where all engines total cycles equal the
total cycles of the airframe, the engine's life limit TSOs and overhaul TSOs are
assumed to be the same as the total cycles of the airframe. This is typical of
newer aircraft. Where this assumption can not be made, the 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 specification sheet dates to a
common date based on a daily utilization factor calculated for each aircraft.
The half life and adjusted base values of the AFT portfolio are presented 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.
AISI has no past, present, or anticipated future interest in the subject
aircraft. 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 of reliance or alleged reliance on
this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ John D. McNicol
John D. McNicol
Vice President
Appraisals &
<PAGE> 4
[LOGO]
Table I - AISI File A9S006BVO-A
December 31, 1998
Fleet Valuation - The AFT Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Half Life Base Value Adjusted Base Value
Type MSN DOM YOB Engine MTOW 1998 USDollars 1998 USDollars
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A310-300 448 Feb-88 1988 CF6-80C2A2 305,500 31,430,000 31,510,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 210 Jul-91 1991 CFM56-5A1 166,500 29,080,000 29,160,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 221 Sep-91 1991 CFM56-5A3 169,700 29,610,000 29,790,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 222 Oct-91 1991 CFM56-5A3 169,700 29,610,000 29,780,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 231 Sep-91 1991 CFM56-5A1 166,500 29,080,000 29,230,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 373 Jan-93 1993 V2500-A1 166,500 30,980,000 30,970,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 737 Sep-97 1997 CFM56-5B4 169,700 41,610,000 43,190,000
- ------------------------------------------------------------------------------------------------------------------------------
A320-200 749 Sep-97 1997 CFM56-5B4 169,700 41,810,000 43,350,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28333 Aug-96 1996 CFM56-3C1 135,000 33,090,000 33,970,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28548 Dec-97 1997 CFM56-3C1 130,000 35,520,000 37,240,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28554 Dec-96 1996 CFM56-3C1 139,500 33,270,000 34,290,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28557 Mar-97 1997 CFM56-3C1 139,500 35,900,000 37,050,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28558 Apr-97 1997 CFM56-3C1 139,500 35,900,000 36,990,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28559 May-97 1997 CFM56-3C1 138,500 35,860,000 37,210,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28561 Jun-97 1997 CFM56-3C1 135,000 35,720,000 36,430,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28562 Jul-97 1997 CFM56-3C1 135,000 35,720,000 36,460,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28563 Aug-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28564 Nov-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-300 28740 Jun-98 1998 CFM56-3C1 139,500 37,300,000 39,300,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-400 25663 Nov-92 1992 CFM56-3C1 138,500 27,400,000 27,230,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-400 25664 Nov-92 1992 CFM56-3C1 138,500 27,400,000 26,910,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-400 28489 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,740,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-400 28490 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,630,000
- ------------------------------------------------------------------------------------------------------------------------------
B737-400 28491 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,680,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-200ER 23805 Jul-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-200ER 23806 Aug-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-300ER 25221 Aug-91 1991 CF680C2B6F 407,000 66,750,000 67,310,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-300ER 25403 Jan-92 1992 PW4060 407,000 70,620,000 70,440,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-300ER 29617 Mar-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
- ------------------------------------------------------------------------------------------------------------------------------
B767-300ER 30008 May-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
- ------------------------------------------------------------------------------------------------------------------------------
DC-10-30 46584 Feb-80 1980 CF6-50C2 572,000 17,760,000 17,670,000
- ------------------------------------------------------------------------------------------------------------------------------
DC-10-30 48292 Feb-82 1982 CF6-50C2 580,000 20,090,000 20,120,000
- ------------------------------------------------------------------------------------------------------------------------------
MD83 49398 Nov-86 1986 JT8D-219 160,000 20,190,000 20,640,000
- ------------------------------------------------------------------------------------------------------------------------------
MD83 49791 Sep-89 1989 JT8D-219 160,000 22,700,000 22,250,000
- ------------------------------------------------------------------------------------------------------------------------------
MD83 53198 Apr-91 1991 JT8D-219 160,000 24,240,000 23,830,000
- ------------------------------------------------------------------------------------------------------------------------------
MD83 53199 Mar-92 1992 JT8D-219 160,000 25,100,000 24,830,000
- ------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------
Total $1,353,570,000 $1,379,900,000
----------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 99.5
BK Associates, Inc.
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 o Fax (516) 365-6287
December 31, 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion of the current Base Value on each of 36 aircraft, the Aircraft Finance
Trust (AFT) Portfolio (Aircraft). The Aircraft are further identified in the
attached Figure 1 by type, serial number, year of manufacture and engine model.
Set forth below is a summary of the methodology, considerations and assumptions
utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of FMV, to which BK Associates subscribes, the quoted FMV 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. The FMV assumes that the aircraft is valued for its highest
and best use, that the parties to the hypothetical sale transaction are willing,
able, prudent and knowledgeable, and under no unusual pressure for a prompt
sale, and that the transaction would be negotiated in an open and unrestricted
market on an arm's length basis, for cash or equivalent consideration, and given
an adequate amount of time for effective exposure to prospective buyers, which
BK Associates considers to be 12 to 18 months.
BASE VALUE
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 future 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.
<PAGE> 2
[LOGO] BK Associates, Inc.
Aircraft Finance Trust
December 31, 1998
Page 2
VALUE METHODOLOGY
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. BK
Associates has determined from analysis of historic data, a relationship between
aircraft age and its value as a percentage of original value for the average
aircraft. These data form the basis for base value and forecast value
determinations but must be adjusted to reflect the value of engine and gross
weight options and other features of the aircraft. Our maintenance adjusted base
values include appropriate financial adjustments based on our interpretation of
the maintenance status data which GE Capital Aviation Services (GECAS) provided,
except for Aircraft Serial Numbers 25221 and 373 for which UniCapital, Inc.
(UniCapital) provided maintenance status data.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but relied
upon information supplied by GECAS and UniCapital and from BK's own database. In
determining the base value of an aircraft, the following assumptions apply to
the aircraft:
1. When adequate maintenance status data was not available, we considered the
aircraft has half-time remaining to its next major overhauls or scheduled
shop visit on its airframe, engines, landing gear and auxiliary power
unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3 The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the types
and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The Aircraft is in average or better condition.
7. There is no accident damage.
<PAGE> 3
[LOGO] BK Associates, Inc.
Aircraft Finance Trust
December 31, 1998
Page 3
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current base value and the current maintenance adjusted base
value of each aircraft as of today is as shown in Figure 1 attached hereto.
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.
/s/ R.L. Britton
R.L. Britton
Vice President
ISTAT Certified Appraiser
RLB/kf
Attachment
<PAGE> 4
FIGURE 1
AFT PORTFOLIO CURRENT BASE VALUES
<TABLE>
<CAPTION>
BASE VALUE
AIRCRAFT SERIAL 1/2 TIME MTC ADJ'D
ITEM TYPE NUMBER YEAR ENGINE ($ MIL) ($ MIL)
- ---- ---- ------ ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
1 A310-300 448 Feb-88 CF6-80C2A2 37.45 37.63
2 A320-200 210 Jul-91 CFM56-5A1 27.40 27.45
3 A320-200 221 Sep-91 CFM56-5A3 29.40 29.40
4 A320-200 222 Oct-91 CFM56-5A3 29.40 29.40
5 A320-200 231 Sep-91 CFM56-5A1 27.40 27.40
6 A320-200 737 Sep-97 CFM56-5B4 37.20 37.99
7 A320-200 749 Sep-97 CFM56-5B4 37.20 37.64
8 A320-200 373 Jan-93 V2500-A1 30.20 30.17
9 B737-300 28559 May-97 CFM56-3C1 34.00 34.23
10 B737-300 28554 Dec-96 CFM56-3C1 32.75 33.24
11 B737-300 28557 Mar-97 CFM56-3C1 34.00 34.64
12 B737-300 28558 Apr-97 CFM56-3C1 34.00 34.63
13 B737-300 28561 Jun-97 CFM56-3C1 34.00 34.48
14 B737-300 28562 Jul-97 CFM56-3C1 34.00 34.54
15 B737-300 28563 Aug-97 CFM56-3C1 34.00 34.57
16 B737-300 28564 Nov-97 CFM56-3C1 34.00 34.84
17 B737-300 28740 Jun-98 CFM56-3C1 35.25 36.35
18 B737-300 28548 Dec-97 CFM56-3C1 34.00 34.78
19 B737-300 28333 Aug-96 CFM56-3C1 32.75 33.08
20 B737-400 28489 Nov-96 CFM56-3C1 33.60 34.10
21 B737-400 28490 Nov-96 CFM56-3C1 33.60 34.01
22 B737-400 28491 Nov-96 CFM56-3C1 33.60 34.03
23 B737-400 25663 Nov-92 CFM56-3C1 27.70 27.34
24 B737-400 25664 Nov-92 CFM56-3C1 27.70 27.36
25 B767-200ER 23805 Jul-87 CF6-80C2-B2 32.85 31.65
26 B767-200ER 23806 Aug-87 CF6-80C2-B2 32.85 31.65
27 B767-300ER 29617 Mar-99 CF6-80C2B7F 83.30 85.84
28 B767-300ER 25403 Jan-92 PW4060 63.70 63.49
29 B767-300ER 30008 May-99 CF6-80C2B7F 83.30 85.84
30 B767-300ER 25221 Aug-91 CF6-80C2B6F 60.55 60.37
31 MD83 53199 Mar-92 JT8D-219 26.00 26.00
32 MD83 49398 Nov-86 JT8D-219 17.75 18.41
33 MD83 49791 Sep-89 JT8D-219 21.65 21.65
34 MD83 53198 Apr-91 JT8D-219 24.70 24.70
35 DC10-30 48292 Feb-82 CF6-50C2 24.30 24.30
36 DC10-30 46584 Feb-80 CF6-50C2 21.40 21.40
TOTAL... 1276.95 1288.60
</TABLE>
<PAGE> 1
Exhibit 99.6
MORTEN BEYER & AGNEW
--------------------
AVIATION CONSULTING FIRM
Appraisal of 36 Aircraft
Values as of December 31, 1998
PREPARED FOR:
Aircraft Finance Trust (AFT)
MARCH 25, 1999
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 847 1911 Fax +44 1342 718967
<PAGE> 2
- --------------------------------------------------------------------------------
I. INTRODUCTION AND EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Morten Beyer and Agnew, Inc. (MBA), has been retained by Aircraft Finance Trust
(AFT) to determine the Current Base Values (CBV) and future lease rates of a
portfolio consisting of the following passenger aircraft:
o (1) Airbus A310,
o (7) Airbus A320-200 aircraft,
o (11) Boeing B737-300s,
o (5) Boeing B737-400s,
o (2) Boeing B767-200ERs,
o (4) Boeing B767-300ER's
o (2) DC10-30's and
o (4) MD83's
o TOTAL 36 AIRCRAFT
We have been asked to provide the future lease rates per year for 20
(incremental) years based on a five year operating lease for each increment. The
aircraft values of this portfolio are identified at the end of this section.
Base values are calculated as of December 31, 1998.
In performing this valuation we did not inspect the aircraft or their historical
maintenance documentation, but relied solely on information provided to us by GE
Capital Aviation Services (GECAS), with the exception of one A320-200 (s/n 373)
and one B767-300ER (s/n 25221) as that information was provided by UniCapital,
Inc. Their respective individual values, along with the lease rates for each
aircraft, are noted in Section IV.
MBA uses the definition of certain terms, such as CMV and Base Value (BV), as
promulgated by the International Society of Transport Aircraft Trading (ISTAT),
a non-profit association of management personnel from banks, leasing companies,
airlines, manufacturers, appraisers, brokers, and others who have a vested
interest in the commercial aviation industry.
ISTAT defines CMV as the appraiser's opinion of the most likely trading price
that may be generated for an aircraft under market conditions that are perceived
to exist at the time in question. Market Value (MV) assumes that the aircraft is
valued for its highest, best use; that the parties to the hypothetical sale
transaction are willing, able, prudent and knowledgeable and under no unusual
pressure for a prompt sale; and that the transaction would be negotiated in an
open and unrestricted market on an arm's-length basis, for cash or equivalent
consideration, and given an adequate amount of time for effective exposure to
prospective buyers.
<PAGE> 3
The ISTAT definition of Base Value (BV) has, essentially, the same elements of
MV except that the market circumstances are assumed to be in a reasonable state
of equilibrium. Thus, BV pertains to an idealized aircraft and market
combination, but will not necessarily reflect the actual CMV of the aircraft in
question. BV is founded in the historical trend of values and is generally used
to analyze historical values or to project future values.
<TABLE>
<CAPTION>
Aircraft Serial Date of Registration
Type Number MFG. Number CBV
<S> <C> <C> <C> <C> <C>
1 A310-300 448 Feb-88 C-GYRA 35.18
2 A320-200 210 Jul-91 C-GQCA 29.27
3 A320-200 221 Sep-91 OY CNB 30.91
4 A320-200 222 Oct-91 OY-CNC 30.98
5 A320-200 231 Sep-91 C-FPWD 29.72
6 A320-300 373 Oct-92 N304ML 33.03
5 A320-200 737 Nov-97 F-GRSG 41.50
7 A320-200 749 Sep-97 F-GRSH 41.19
9 B-767-200ER 23805 Jul-87 PP-VNR 32.73
10 B-767-200ER 23806 Jul-87 PP-VNS 32.72
11 B-767-300ER 25221 Jul-91 G-BXOP 63.01
12 B-767-300ER 25403 Jan-92 CC-CEU 66.50
13 B-767-300ER 29617 Mar-99 G-OOAL 87.39
14 B-767-300ER 30008 May-99 TBD 87.75
15 B-737-400 25663 Nov-92 VT-JAP 27.34
16 B-737-400 25664 Nov-92 VT-JAQ 27.12
17 B-737-300 28333 Aug-96 OO-VEB 33.97
18 B-737-400 28489 Nov-96 B-18671 34.43
19 B-737-400 28490 Nov-96 B-18672 34.36
20 B-737-400 28491 Nov-96 B-18673 34.37
21 B-737-300 28548 Dec-97 G-OAMS 33.81
22 B-737-300 28554 Dec-96 G-ECAS 32.38
23 B-737-300 28557 Mar-97 G-SMDB 32.99
24 B-737-300 28558 Apr-97 G-OJTW 33.11
25 B-737-300 28559 May-97 PH-OZC 33.42
26 B-737-300 28561 Jun-97 B-2978 33.77
27 B-737-300 28562 Jul-97 B-2979 34.03
28 B-737-300 28563 Aug-97 N306FL 33.84
29 B-737-300 28564 Nov-97 PT-TEP 34.31
30 B-737-300 28740 Jun-98 N1790B 33.74
31 DC10-30 48292 Feb-82 N87070 21.20
32 DC10-30 46584 Feb-80 N15069 19.03
33 MD83 49398 Nov-86 EC-245 20.16
34 MD83 49791 Oct-89 EC-GGV 22.36
35 MD83 53198 Mar-91 SE-DLS 24.02
36 MD83 53199 Mar-92 SE-DLU 23.79
</TABLE>
[LOGO] 2
<PAGE> 4
- --------------------------------------------------------------------------------
II. AIRCRAFT
- --------------------------------------------------------------------------------
The specifications of the aircraft in this portfolio are as follows:
Organized by type of aircraft -- sample seating arrangements are provided
(although may not reflect the characteristics of each respective aircraft)
<TABLE>
<S> <C>
Aircraft Type A310-300
Serial Number 448
Registration C-GYRA
Build Year Feb-88
Engine Type CF6-80C2
Hours Since New 29494
Cycles Since New 9560
Max Taxi Weight (lbs.) 308,992
MGTOW (lbs.) 306,999
MLW (lbs.) 272,445
MZFW (lbs.) 174,850
OEW (lbs.) NG
Fuel Capacity (US gals.) 107,516
Seating:
Coach 265
Galleys 3
Lavatories 5
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 3
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Aircraft Type A320-200 A320-200 A320-200
Serial Number 210 221 222
Registration C-GQCA OY CNB OY-CNC
Build Year Jul-91 Sep-91 Oct-91
Engine Type CFM56-5A1 CFM56-5A1 CFM56-5A3
Hours Since New 25219 19898 19557
Cycles Since New 9278 10764 10456
Max Taxi Weight (lbs.) 167,328 170,635 170,635
MGTOW (lbs.) 166,446 169,753 169,753
MLW (lbs.) 142,198 142,196 142,196
MZFW (lbs.) 133,377 133,377 133,377
OEW (lbs.) 97,162 95,972 91,629
Fuel Capacity (US gals.) 41,473 41,473 41,473
Seating:
Coach 108 177 177
Business 24
Galleys 3 3 3
Lavatories 3 3 3
Aircraft Type A320-200 A320-200 A320-200
Serial Number 231 373 737
Registration C-FPWD N304ML F-GRSG
Build Year Sep-91 Jan-93 Nov-97
Engine Type CFM56-5A1 V2500-A1 CFM56-5B4
Hours Since New 24744 11349 1860
Cycles Since New 9048 6768 922
Max Taxi Weight (lbs.) 167,328 167,329 170,767
MGTOW (lbs.) 166,446 166,447 169,753
MLW (lbs.) 142,198 142,197 141,093
MZFW (lbs.) 133,377 133,378 134,480
OEW (lbs.) 97,073 90,865 92,152
Fuel Capacity (US gals.) 42,223 42,223 42,946
Seating:
Coach 108 138 156
Business 24 10 8
Galleys 3 2 2
Lavatories 3 3 3
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 4
<PAGE> 6
<TABLE>
<S> <C>
Aircraft Type A320-200
Serial Number 749
Registration F-GRSG
Build Year Nov-97
Engine Type CFM56-5B4
Hours Since New 14
Cycles Since New 9
Max Taxi Weight (lbs.) 171,573
MGTOW (lbs.) 170,555
MLW (lbs.) 141,760
MZFW (lbs.) NG
OEW (lbs.) NG
Fuel Capacity (US gals.) 42,946
Seating:
Coach 156
Business 8
Galleys 2
Lavatories 3
</TABLE>
<TABLE>
<S> <C> <C> <C>
Aircraft Type B737-300 B737-300 B737-300
Serial Number 28333 28548 28554
Registration OO-VEB G-OAMS G-ECAS
Build Year Aug-96 Dec-97 Dec-96
Engine Type CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New 5236 2116 4108
Cycles Since New 3824 1810 4388
Max Taxi Weight (lbs.) 135,500 130,500 140,000
MGTOW (lbs.) 135,000 130,000 139,500
MLW (lbs.) 116,600 114,000 114,000
MZFW (lbs.) 106,500 68,983 105,000
OEW (lbs.) 70,760 NG 70,932
Fuel Capacity (US gals.) 35,584 5,311(kg) 35,584
Seating:
Coach 149 148 148
Galleys 3 2 2
Lavatories 2 3 3
</TABLE>
[LOGO] 5
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
Aircraft Type B737-300 B737-300 B737-300
Serial Number 28557 28558 28559
Registration G-SMDB G-OJTW PH-OZC
Build Year Mar-97 Apr-97 May-97
Engine Type CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New 2925 2997 4931
Cycles Since New 3245 3386 1901
Max Taxi Weight (lbs.) 140,000 140,000 139,000
MGTOW (lbs.) 139,500 139,500 138,500
MLW (lbs.) 114,000 114,000 114,000
MZFW (lbs.) 105,000 105,000 105,000
OEW (lbs.) 70,667 71,070 71,760
Fuel Capacity (US gals.) 35,584 35,584 35,584
Seating:
Coach 148 148 148
Galleys 2 2 3
Lavatories 3 3 3
Aircraft Type B737-300 B737-300
Serial Number 28561 28562
Registration B-2978 B-2979
Build Year Jun-97 Jul-97
Engine Type CFM56-3C1 CFM56-3C1
Hours Since New 455 175
Cycles Since New 636 102
Max Taxi Weight (lbs.) 135,500 135,500
MGTOW (lbs.) 135,000 135,000
MLW (lbs.) 114,000 114,000
MZFW (lbs.) 105,000 105,000
OEW(lbs.) 71,018 71,132
Fuel Capacity (US gals.) 35,584 35,584
Seating:
Coach 148 148
Galleys 2 2
Lavatories 3 3
</TABLE>
[LOGO] 6
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
Aircraft Type B737-300 B737-300 B737-300
Serial Number 28563 28564 28740
Registration N306FL PT-TEP N1790B
Build Year Aug-97 Nov-97 Jun-98
Engine Type CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New 3266 1882 880
Cycles Since New 1377 1581 177
Max Taxi Weight (lbs.) 135,500 135,500 140,000
MGTOW (lbs.) 135,000 135,000 139,500
MLW (lbs.) 114,000 116,000 116,600
MZFW (lbs.) 105,000 106,500 109,600
OEW (lbs.) 70,662 68,833 71,921
Fuel Capacity (US gals.) 35,584 35,584 35,584
Seating:
Coach 136 148 88
Business 20
Galleys 4 2 3
Lavatories 3 3 3
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 7
<PAGE> 9
<TABLE>
<S> <C> <C>
Aircraft Type B737-400 B737-400
Serial Number 25663 25664
Registration VT-JAP VT-JAQ
Build Year 11-92 11-92
Engine Type CFM56-3C1 CFM56-3C1
Hours Since New 13312 12989
Cycles Since New 19413 19241
Max Taxi Weight (lbs.) 138,991 138,997
MGTOW (lbs.) 138,496 138,496
MLW (lbs.) 120,996 120,996
MZFW (lbs.) 112,996 112,996
OEW (lbs.)
Fuel Capacity (US gals.) 35,584 35,584
Seating:
Coach 112 112
Business 24 24
Galleys 3 3
Lavatories 3 3
</TABLE>
<TABLE>
<S> <C> <C> <C>
Aircraft Type B737-400 B737-400 B737-400
Serial Number 28489 28490 28491
Registration B-18671 B-18672 B-18673
Build Year 11-96 Nov-96 Nov-96
Engine Type CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New 4347 5405 5291
Cycles Since New 4050 4795 4078
Max Taxi Weight (lbs.) 150,500 150,500 150,500
MGTOW (lbs.) 150,000 150,000 150,000
MLW (lbs.) 124,000 124,000 124,000
MZFW (lbs.) 117,000 117,000 117,000
OEW (lbs.) 76,384 76,294 76,294
Fuel Capacity (US gals.) 35,584 35,584 35,584
Seating:
Coach 138 138 138
Business 8 8 8
Galleys 3 3 3
Lavatories 3 3 3
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 8
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
Aircraft Type B767-200ER B767-200ER B767-300ER
Serial Number 23805 23806 25221
Registration PP-VNR PP-VNS B-BXOP
Build Year Jul-87 Jul-87 Aug-91
Engine Type CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B6
Hours Since New 41019 40925 24056
Cycles Since New 17664 17474 7348
Max Taxi Weight (lbs.) 336,993 336,993 409,000
MGTOW (lbs.) 334,993 334,993 407,000
MLW (lbs.) 277,994 277,994 320,000
MZFW (lbs.) 252,994 252,994 288,000
OEW (lbs.) 182,319 182,319 189,100
Fuel Capacity (US gals.) 137,015 137,015 172,000
Seating:
Coach 190 172 287
Business 18 18
Galleys 6 6 6
Lavatories 6 6 6
Aircraft Type B767-300ER B767-300ER B767-300ER
Serial Number 25403 29617 30008
Registration CC-CEU G-OOAL TBD
Build Year Jan-92 Mar-99 May-99
Engine Type CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B2
Hours Since New 25067 N/A N/A
Cycles Since New 6322 N/A N/A
Max Taxi Weight (lbs.) 409,000 413,000 413,000
MGTOW (lbs.) 407,000 412,000 412,000
MLW (lbs.) 320,000 300,000 300,000
MZFW (lbs.) 189,390 278,000 278,000
OEW (lbs.) NG NG NG
Fuel Capacity (US gals.) 171,394 24,184 24,184
Seating:
Coach 147 325 NG
Business 30
First 13
Galleys 7 5 5
Lavatories 8 6 6
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 9
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Aircraft Type MD83 MD83 MD83
Serial Number 49398 49791 53198
Registration EC-245 EC-GGV SE-DLS
Build Year Nov-86 Oct-89 Mar-91
Engine Type JT8D-219 JT8D-219 JT8D-219
Hours Since New 32396 24676 23598
Cycles Since New 15638 11903 10483
Max Taxi Weight (lbs) 161,000 161,000 161,000
MGTOW (lbs.) 160,000 160,000 160,000
MLW (lbs.) 139,500 139,500 139,500
MZFW (lbs.) 122,000 122,000 122,000
OEW (lbs.) NG NG NG
Fuel Capacity (US gals.) 46,773 47,081 46,773
Seating:
Coach 170 170 170
Galleys 4 4 4
Lavatories 3 3 3
Aircraft Type MD83 DC10-30 DC10-30
Serial Number 53199 48292 46584
Registration SE-DLU N87070 N15069
Build Year Mar-92 Feb-82 Feb-80
Engine Type JT8D-219 CF6-50C2 CF6-50C2
Hours Since New 19823 69453 74448
Cycles Since New 7905 15034 16838
Max Taxi Weight (lbs.) 161,000 583,000 575,000
MGTOW (lbs.) 160,000 580,000 572,000
MLW (lbs.) 139,500 411,000 411,000
MZFW (lbs.) 122,000 NG NG
OEW (lbs.) NG NG NG
Fuel Capacity (US gals.) 46,773 251,400 251,400
Seating:
Coach 165 185 185
Business 44 44
Galleys 3 5 5
Lavatories 3 8 8
</TABLE>
[GRAPHIC OMITTED]
[LOGO] 10
<PAGE> 12
- --------------------------------------------------------------------------------
III. CURRENT MARKET CONDITIONS
- --------------------------------------------------------------------------------
General
The market for narrowbody used jet aircraft continues to be strong, with
offerings of all but the earlier models being generally snapped-up in short
order. The most recent count shows 122 older narrowbodies (DC-9, B-737-200,
B-727 aircraft) and 26 new models (A319/320/321, B-737-300/-400/-500/-600/-
700/-800, B-757 and MD-80) on the market. This represents about 2.4 percent of
the older types and 0.08 percent of the new types of aircraft currently
available For Sale or Lease. Orders for new models continue to be strong, with
258 new A-319/ 320/ 321's, and 189 B-737 NGs being ordered in the first six
months of 1998. Concerns over the Asian financial crisis do not extend to the
narrowbodied aircraft, and order curtailments apply to the widebodies only.
The widebody sector is currently holding-up, despite the Asian traffic downturn.
All of the late model widebodies which have been made available by the
Asian-Pacific carriers have been placed. Some of the new aircraft on-order have
been deferred, and those aircraft displaced by the Far East slump, primarily
747-200s, are the ones showing-up on the For Sale / For Lease listings.
-----------
[PHOTO] Airbus A310
-----------
These are the truncated, longer range models of the A300 series. The aircraft is
now ending its production life, with no new orders coming and only six
outstanding. A total of 261 of all variants have been produced, and following
the chaotic market activity when Pan Am went under, the used market has been
small as few have been offered. FedEx purchased 34 used aircraft and modified
them to cargo, but this has been the only major conversion program. The A310 has
been particularly popular with European and Middle East/Asian carriers where it
has outsold its rival B-767-200.
[LOGO] 11
<PAGE> 13
---------------
[PHOTO] Airbus A320-200
---------------
Six hundred and forty-two A-320s have been built to date, and new production is
now averaging seven per month, along with ten more sister ships, the A-319 and
A-321. The backlog for the three types totals 841 aircraft. There are currently
76 operators of one or more of the type. AIRFAX, a current listing of aircraft
for sale or lease shows only two A320's available. Both are brand new deliveries
being offered by ORIX. The market for the A320 is extremely strong and any
available aircraft will sell at or above Base Value.
----------------
[PHOTO] Boeing B-737-300
----------------
The B-737-300 was launched in 1981 as the Stage 3 successor in the B-737 line.
With 18 more seats (three rows), higher gross weight and more range than the
- -200, the -300 has become one of the most popular aircraft in the world. The
aircraft is only offered with the CFM56-3 series engines. Production of the -300
is slowing as more and more customers opt for the new -600/-700/-800/-900 series
of upgraded B-737's, which offer a combination of greater range and capacity,
along with more powerful engines.
-----------------
[PHOTO] Boeing 767-200/ER
-----------------
The Boeing 767 family has been in production since 1982, and has gone through
several iterations and two stretches. Once ETOPS operations were approved for
this semi-widebody twin, it has continuously gained market share in
intercontinental markets. The ERs, or Extended Range models, have taken over
markets once the province of B-747 Combis, DC-10-30s and L-1011s. The standard
configuration is twin-aisle, seven-abreast seating, but European charter
operators squeeze in an eight-abreast configuration, greatly improving the ASM
economics of the aircraft. At seven abreast the aircraft is significantly less
efficient than the old tri-jets, or the B-757. The first of the B-767-200
passenger aircraft are beginning to move into cargo service, with All Nippon
selling its 25 to Airborne, who will operate them without adding a large cargo
door.
[LOGO] 12
<PAGE> 14
With a total of 667 B-767s of all models in passenger service, and UPS operating
22 new B-767-300ERs in all-cargo configuration, the B-767 has won a significant
share of the market, and is considered to be the banker's favorite for lease
investments. Trying to hold all sectors of its market share, Boeing agreed to
build the -400 stretched version of the B-767 for Delta, but has yet to win any
other orders. The B-777 is the major competitor to the B-767.
---------------------------
[PHOTO] McDonnell Douglas MD-82/-83
---------------------------
The obvious concern with the MD-82/-83 series aircraft is the effect of Boeing's
decision to shut down the line. The only surviving Douglas product is the
renamed MD-95 (B-717). The MD-80 series had been replaced by the V-2500 powered
MD-90, and at the end of 1997 there were only ten MD-80's still on order, so the
line was effectively closed anyway. MBA does not believe the Boeing decision
will have a material effect on the value of the MD-80's, which is principally a
function of the fleet size and efficiency of the aircraft. A total of 1,167
MD-80's of all series will ultimately be built, with the high gross MD-83 the
last model of the series. The MD-82 and 83 have the same configuration, except
that the MGTOW of the -83 is 12,000 pounds greater, giving it some 1,000 miles
additional non-stop range -- a capability not often utilized. The MD-80 series
aircraft got a four-year head start on the B-737-300 entering service in 1980 as
opposed to 1984, and gaining a lead of some 300 orders over the B-737. With a
maximum of 172 seats, demand for used models has always been strong, with
offerings bought up quickly.
-------------------------
[PHOTO] McDonnell Douglas DC10-30
-------------------------
The DC-10-10 is rapidly being retired by its two major US operators, American
and United, but is being picked up by FedEx for conversion to cargo.
MBA has reduced its estimation of Base Value by 20 percent, and continues an
additional 25 percent reduction in Current Market Price to reflect market
softness. While the majors withdraw, Hawaiian Airlines is having good results
with the ones it acquired from American for its West Coast market. New charter
operator OMNI joins Sun Jet in acquiring several.
[LOGO] 13
<PAGE> 15
In the last two to three years Continental and Northwest leased or bought some
40 DC-10-30s on the open market to supplement their wide body capacity as they
retired B-747's and waited for new deliveries when they could afford them.
Gemini Air Cargo and AOM French Airlines have also been on the acquisition side,
but it now appears the strong demand is decreasing, and continued price erosion
is expected.
The DC-10-40 continues to be an orphan aircraft with only two operators, JAL and
NWA. JAL is planning to retire theirs in the near future. Future values will
depend on whether these aircraft are continued in service, or perhaps converted
for cargo or charter.
[LOGO] 14
<PAGE> 16
- --------------------------------------------------------------------------------
IV. VALUATION
- --------------------------------------------------------------------------------
In developing the valuations of these aircraft, MBA did not inspect the aircraft
or their respective historical maintenance documentation. Therefore, we used
certain assumptions that are generally accepted industry practice to calculate
the value of an aircraft when more detailed information is not available. The
principal assumptions are as follows (for each aircraft):
1. The aircraft is in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for an
aircraft of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and
Service Bulletins.
7. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting was made for lease obligations or terms of ownership.
The aircraft subject to this appraisal were adjusted from our Base Value by
applying a 'newness factor' which accounts for month of delivery. Additional
adjustments were made to account for the current maintenance status of each
aircraft using the information provided by Lehman Brothers. The lease rates for
the next 20 years assume a five-year term in dollars per month.
[LOGO] 15
<PAGE> 17
[LOGO]
<TABLE>
<CAPTION>
Air Holland Air Madagascar Air Tours/Preimair Air Tours/Preimair
B737-300 B-767-300ER A320-200 A320-200
28559 25403 221 222
5/1/97 1/15/92 9/1/91 10/1/91
PH-OZC CC-CEU OY CNB OY-CNC
=====================================================================================================
<S> <C> <C> <C> <C>
Base Value ($000,000) 31.47 62.67 29.92 29.92
Newness 0.62 0.00 0.95 1.07
Gross Wt ADJ 0.83 3.66 0.46 0.46
Airframe Adjustment 0.22 0.08 0.53 0.48
Engine Adjustment 0.41 0.09 (0.83) (0.83)
Landing Gear 0.00 0.00 0.00 0.00
TCAS 0.00 0.00 0.00 0.00
Windshear (0.13) 0.00 (0.13) (0.13)
Total Adjustments 0.51 0.17 (0.42) (0.47)
Adjusted Base Value 33.42 66.50 30.91 30.98
- -----------------------------------------------------------------------------------------------------
Maintenance Data as of 07/31/98 09/30/98 07/31/98 07/31/98
- -----------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 330,000 665,000 315,000 315,000
1999 325,000 660,000 310,000 310,000
2000 320,000 655,000 305,000 305,000
2001 315,000 650,000 300,000 300,000
2002 315,000 645,000 300,000 300,000
2003 310,000 640,000 295,000 295,000
2004 305,000 635,000 290,000 290,000
2005 305,000 630,000 290,000 290,000
2006 300,000 625,000 285,000 285,000
2007 295,000 620,000 280,000 280,000
2008 290,000 615,000 275,000 275,000
2009 290,000 610,000 275,000 275,000
2010 285,000 605,000 270,000 270,000
2011 280,000 600,000 265,000 265,000
2012 275,000 595,000 260,000 260,000
2013 270,000 590,000 255,000 255,000
2014 270,000 585,000 250,000 250,000
2015 265,000 575,000 250,000 250,000
2016 260,000 570,000 245,000 245,000
2017 255,000 560,000 240,000 240,000
2018 250,000 550,000 235,000 235,000
2019 245,000 545,000 230,000 230,000
2020 245,000 540,000 230,000 230,000
2021 240,000 535,000 225,000 225,000
2022 235,000 530,000 220,000 220,000
2023 230,000 525,000 215,000 215,000
<CAPTION>
Air2000 Alitalia America West
B-767-300ER B-767-300ER B737-300
29617 30008 28740
3/15/99 5/1/99 6/24/98
G-OOAL TBD N1790B
============================================================================
<S> <C> <C> <C>
Base Value ($000,000) 86.85 86.85 33.32
Newness 0.54 0.90 0.41
Gross Wt ADJ 0.00 0.00 0.00
Airframe Adjustment 0.00 0.00 0.00
Engine Adjustment 0.00 0.00 0.00
Landing Gear 0.00 0.00 0.00
TCAS 0.00 0.00 0.00
Windshear 0.00 0.00 0.00
Total Adjustments 0.00 0.00 0.00
Adjusted Base Value 87.39 87.75 33.74
- ----------------------------------------------------------------------------
Maintenance Data as of N/A N/A 12/01/98
- ----------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 865,000 865,000 335,000
1999 860,000 860,000 330,000
2000 855,000 855,000 330,000
2001 850,000 850,000 325,000
2002 845,000 845,000 320,000
2003 840,000 840,000 320,000
2004 835,000 835,000 315,000
2005 830,000 830,000 310,000
2006 825,000 825,000 305,000
2007 820,000 820,000 305,000
2008 815,000 815,000 300,000
2009 810,000 810,000 295,000
2010 805,000 805,000 295,000
2011 800,000 800,000 290,000
2012 795,000 795,000 285,000
2013 790,000 790,000 280,000
2014 785,000 785,000 275,000
2015 775,000 775,000 275,000
2016 770,000 770,000 270,000
2017 760,000 760,000 265,000
2018 750,000 750,000 260,000
2019 745,000 745,000 255,000
2020 740,000 740,000 250,000
2021 735,000 735,000 250,000
2022 730,000 730,000 245,000
2023 725,000 725,000 240,000
</TABLE>
<PAGE> 18
[LOGO]
<TABLE>
<CAPTION>
Britannia British Airways British Midland British Midland
B-767-300ER B737-300 B737-300 B737-300
25221 28548 28554 28557
7/1/91 12/10/97 12/1/96 3/1/97
G-BXOP G-OAMS G-ECAS G-SMDB
==================================================================================================
<S> <C> <C> <C> <C>
Base Value ($000,000) 59.59 31.47 29.73 31.47
Newness 1.54 1.85 1.60 0.31
Gross Wt ADJ 1.18 0.30 0.89 0.89
Airframe Adjustment 0.65 0.32 0.28 0.30
Engine Adjustment 0.00 0.00 0.01 0.15
Landing Gear 0.04 0.00 0.00 0.00
TCAS 0.00 0.00 0.00 0.00
Windshear 0.00 (0.13) (0.13) (0.13)
Total Adjustments 0.70 0.20 0.17 0.32
Adjusted Base Value 63.01 33.81 32.38 32.99
- --------------------------------------------------------------------------------------------------
Maintenance Data as of 01/15/99 01/08/99 07/31/98 07/31/98
- --------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 620,000 335,000 320,000 325,000
1999 615,000 330,000 315,000 320,000
2000 610,000 330,000 315,000 320,000
2001 605,000 325,000 310,000 315,000
2002 600,000 320,000 305,000 310,000
2003 595,000 320,000 305,000 310,000
2004 590,000 315,000 300,000 305,000
2005 585,000 310,000 295,000 300,000
2006 580,000 305,000 290,000 295,000
2007 575,000 305,000 290,000 295,000
2008 570,000 300,000 285,000 290,000
2009 565,000 295,000 280,000 285,000
2010 560,000 295,000 280,000 280,000
2011 555,000 290,000 275,000 280,000
2012 550,000 285,000 270,000 275,000
2013 545,000 280,000 265,000 270,000
2014 540,000 275,000 260,000 265,000
2015 535,000 275,000 260,000 260,000
2016 530,000 270,000 255,000 260,000
2017 525,000 265,000 250,000 255,000
2018 520,000 260,000 245,000 250,000
2019 515,000 255,000 240,000 245,000
2020 510,000 250,000 235,000 240,000
2021 505,000 250,000 235,000 240,000
2022 500,000 245,000 230,000 235,000
2023 495,000 240,000 225,000 230,000
<CAPTION>
British Midland Canadian Canadian
B737-300 A320-200 A320-200
28558 210 231
4/1/97 7/1/91 9/1/91
G-OJTW C-GQCA C-FPWD
=========================================================================
<S> <C> <C> <C>
Base Value ($000,000) 31.47 29.92 29.92
Newness 0.46 0.72 0.95
Gross Wt ADJ 0.89 0.26 0.26
Airframe Adjustment 0.30 (0.56) (0.39)
Engine Adjustment 0.12 (0.83) (0.77)
Landing Gear 0.00 0.00 0.00
TCAS 0.00 (0.13) (0.13)
Windshear (0.13) (0.13) (0.13)
Total Adjustments 0.29 (1.63) (1.41)
Adjusted Base Value 33.11 29.27 29.72
- -------------------------------------------------------------------------
Maintenance Data as of 07/31/98 07/31/98 07/31/98
- -------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 325,000 310,000 315,000
1999 320,000 305,000 310,000
2000 320,000 300,000 305,000
2001 315,000 300,000 300,000
2002 310,000 295,000 300,000
2003 310,000 290,000 295,000
2004 305,000 290,000 290,000
2005 300,000 285,000 290,000
2006 295,000 275,000 285,000
2007 295,000 275,000 280,000
2008 290,000 270,000 275,000
2009 285,000 265,000 275,000
2010 280,000 260,000 270,000
2011 280,000 255,000 265,000
2012 275,000 255,000 260,000
2013 270,000 250,000 255,000
2014 265,000 245,000 250,000
2015 260,000 240,000 250,000
2016 260,000 235,000 245,000
2017 255,000 230,000 240,000
2018 250,000 225,000 235,000
2019 245,000 225,000 230,000
2020 240,000 220,000 225,000
2021 240,000 215,000 225,000
2022 235,000 210,000 220,000
2023 230,000 205,000 215,000
</TABLE>
<PAGE> 19
[LOGO]
<TABLE>
<CAPTION>
China Airlines China Airlines China General China General Continental Continental Eurofly
B-737-400 B-737-400 B737-300 B737-300 DC10-30 DC10-30 MD83
28490 28491 2856l 28562 46584 48292 53199
11/1/96 11/1/96 6/1/97 7/1/97 2/15/80 2/15/82 3/1/92
B-18672 B-18673 B-2978 B-2979 N15069 N87070 SE-DLU
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Base Value ($000,O00) 32.51 32.51 31.47 31.47 19.62 20.70 24.62
Newness 1.21 1.21 0.77 0.93 0.18 0.15 0.21
Gross Wt ADJ 0.68 0.68 0.62 0.62 0.00 0.47 0.00
Airframe Adjustment 0.23 0.24 0.38 0.39 (0.03) 0.17 (0.14)
Engine Adjustment (0.02) (0.02) 0.65 0.75 (0.74) (0.29) (0.77)
Landing Gear 0.00 0.00 0.00 0.00 0.00 0.00 0.00
TCAS (0.13) (0.13) 0.00 0.00 0.00 0.00 (0.13)
Windshear (0.13) (0.13) (0.13) (0.13) 0.00 0.00 0.00
Total Adjustments (0.04) (0.03) 0.91 1.02 (0.77) (0.12) (1.04)
Adjusted Base Value 34.36 34.37 33.77 34.03 19.03 21.20 23.79
- -----------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of 01/15/99 01/15/99 08/21/97 08/21/97 12/13/96 12/13/96 07/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 345,000 345,000 330,000 330,000 200,000 220,000 250,000
1999 340,000 340,000 325,000 325,000 195,000 215,000 245,000
2000 335,000 335,000 325,000 325,000 190,000 210,000 245,000
2001 330,000 330,000 320,000 320,000 185,000 205,000 240,000
2002 330,000 330,000 315,000 315,000 180,000 200,000 235,000
2003 325,000 325,000 315,000 315,000 175,000 195,000 230,000
2004 320,000 320,000 310,000 310,000 170,000 190,000 230,000
2005 315,000 315,000 305,000 305,000 165,000 185,000 225,000
2006 315,000 315,000 300,000 300,000 160,000 180,000 220,000
2007 310,000 310,000 295,000 295,000 155,000 175,000 220,000
2008 305,000 305,000 290,000 290,000 150,000 170,000 215,000
2009 300,000 300,000 285,000 285,000 145,000 165,000 215,000
2010 295,000 295,000 280,000 280,000 140,000 160,000 210,000
2011 295,000 295,000 280,000 280,000 135,000 155,000 205,000
2012 290,000 290,000 275,000 275,000 130,000 150,000 205,000
2013 285,000 285,000 270,000 270,000 125,000 145,000 200,000
2014 280,000 280,000 265,000 265,000 120,000 140,000 195,000
2015 275,000 275,000 260,000 260,000 115,000 135,000 195,000
2016 270,000 270,000 260,000 260,000 110,000 130,000 190,000
2017 265,000 265,000 255,000 255,000 105,000 125,000 185,000
2018 260,000 260,000 250,000 250,000 100,000 120,000 180,000
2019 260,000 260,000 245,000 245,000 100,000 115,000 180,000
2020 255,000 255,000 240,000 240,000 95,000 110,000 175,000
2021 250,000 250,000 240,000 240,000 95,000 105,000 175,000
2022 245,000 245,000 235,000 235,000 90,000 100,000 170,000
2023 240,000 240,000 230,000 230,000 85,000 100,000 170,000
</TABLE>
<PAGE> 20
[LOGO]
<TABLE>
<CAPTION>
Frontier Jet Airways Jet Airways Midway
B737-300 B-737-400 B-737-400 A320-200
28563 25663 25664 373
8/1/97 11/1/92 11/1/92 1/1/93
N306FL VT-JAP VT-JAQ N304ML
====================================================================================
<S> <C> <C> <C> <C>
Base Value ($000,000) 31.47 27.29 27.29 32.85
Newness 1.08 1.02 1.02 0.00
Gross Wt ADJ 0.62 (0.00) (0.00) 0.25
Airframe Adjustment 0.28 (0.09) (0.31) 0.00
Engine Adjustment 0.51 (0.88) (0.88) 0.00
Landing Gear 0.00 0.00 0.00 (0.07)
TCAS 0.00 0.00 0.00 0.00
Windshear (0.13) 0.00 0.00 0.00
Total Adjustments 0.67 (0.97) (1.19) (0.07)
Adjusted Base Value 33.84 27.34 27.12 33.03
- ------------------------------------------------------------------------------------
Maintenance Data as of 07/31/98 07/31/98 07/3l/98 11/10/97
- ------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 330,000 285,000 285,000 415,000
1999 325,000 280,000 280,000 410,000
2000 325,000 275,000 275,000 405,000
2001 320,000 275,000 275,000 400,000
2002 315,000 270,000 270,000 395,000
2003 315,000 265,000 265,000 395,000
2004 310,000 265,000 265,000 390,000
2005 305,000 260,000 260,000 385,000
2006 300,000 255,000 255,000 380,000
2007 295,000 255,000 255,000 375,000
2008 290,000 250,000 250,000 370,000
2009 285,000 245,000 245,000 365,000
2010 280,000 245,000 245,000 360,000
2011 280,000 240,000 240,000 355,000
2012 275,000 235,000 235,000 350,000
2013 270,000 235,000 235,000 345,000
2014 265,000 230,000 230,000 340,000
2015 260,000 225,000 225,000 335,000
2016 260,000 220,000 220,000 330,000
2017 255,000 215,000 215,000 325,000
2018 250,000 210,000 210,000 320,000
2019 245,000 205,000 205,000 315,000
2020 240,000 200,000 200,000 315,000
2021 240,000 200,000 200,000 310,000
2022 235,000 195,000 195,000 305,000
2023 230,000 190,000 190,000 300,000
<CAPTION>
Royal Aviation Spanair Spanair Spanair
A310-300 MD83 MD83 MD83
448 49398 49791 53198
2/15/88 11/1/86 10/1/89 3/1/91
C-GYRA EC-245 EC-GGV SE-DLS
========================================================================================
<S> <C> <C> <C> <C>
Base Value ($000,000) 35.55 19.89 22.83 25.02
Newness 0.40 0.78 0.80 0.20
Gross Wt ADJ (1.36) 0.00 0.00 0.00
Airframe Adjustment 0.15 0.31 (0.20) (0.24)
Engine Adjustment 0.56 (0.83) (0.83) (0.83)
Landing Gear 0.00 0.00 0.00 0.00
TCAS 0.00 0.00 (0.13) (0.13)
Windshear (0.13) 0.00 (0.13) 0.00
Total Adjustments 0.59 (0.51) (1.28) (1.19)
Adjusted Base Value 35.18 20.16 22.36 24.02
- ----------------------------------------------------------------------------------------
Maintenance Data as of 05/13/98 07/31/98 07/31/98 07/31/98
- ----------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 345,000 190,000 220,000 235,000
1999 340,000 190,000 220,000 235,000
2000 335,000 185,000 215,000 230,000
2001 330,000 185,000 215,000 230,000
2002 325,000 180,000 210,000 225,000
2003 320,000 180,000 210,000 225,000
2004 315,000 180,000 205,000 220,000
2005 310,000 175,000 205,000 215,000
2006 305,000 175,000 200,000 215,000
2007 300,000 170,000 195,000 210,000
2008 295,000 170,000 195,000 210,000
2009 290,000 165,000 190,000 205,000
2010 285,000 165,000 190,000 205,000
2011 280,000 160,000 185,000 200,000
2012 275,000 155,000 185,000 l95,000
2013 270,000 155,000 180,000 195,000
2014 265,000 150,000 175,000 190,000
2015 260,000 150,000 175,000 185,000
2016 255,000 145,000 170,000 185,000
2017 250,000 140,000 165,000 180,000
2018 245,000 140,000 165,000 175,000
2019 240,000 135,000 160,000 175,000
2020 235,000 135,000 160,000 170,000
2021 230,000 130,000 155,000 170,000
2022 225,000 130,000 155,000 165,000
2023 220,000 130,000 150,000 165,000
</TABLE>
<PAGE> 21
[LOGO]
<TABLE>
<CAPTION>
STAR Airlines STAR Airlines Transbrasil Varig
A320-200 A320-200 B737-300 B-767-200ER
737 749 28564 23805
11/1/97 9/1/97 11/1/97 7/1/87
F-GRSG F-GRSH PT-TEP PP-VNR
=======================================================================================
<S> <C> <C> <C> <C>
Base Value ($000,000) 39.59 39.59 31.47 31.52
Newness 1.57 1.26 1.54 0.92
Gross Wt ADJ 0.46 0.46 0.62 (0.59)
Airframe Adjustment 0.00 0.00 0.33 (0.33)
Engine Adjustment 0.00 0.00 0.47 1.21
Landing Gear 0.00 0.00 0.00 0.00
TCAS 0.00 0.00 0.00 0.00
Windshear (0.13) (0.13) (0.13) 0.00
Total Adjustments (0.13) (0.13) 0.68 0.88
Adjusted Base Value 41.50 41.19 34.31 32.73
- ---------------------------------------------------------------------------------------
Maintenance Data as of 11/10/97 12/10/97 07/31/98 07/31/98
- ---------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 415,000 415,000 335,000 320,000
1999 410,000 410,000 330,000 315,000
2000 405,000 405,000 330,000 310,000
2001 400,000 400,000 325,000 305,000
2002 395,000 395,000 320,000 300,000
2003 395,000 395,000 320,000 295,000
2004 390,000 390,000 315,000 290,000
2005 385,000 385,000 310,000 285,000
2006 380,000 380,000 305,000 280,000
2007 375,000 375,000 305,000 275,000
2008 370,000 370,000 300,000 270,000
2009 365,000 365,000 295,000 265,000
2010 360,000 360,000 295,000 255,000
2011 355,000 355,000 290,000 250,000
2012 350,000 350,000 285,000 245,000
2013 345,000 345,000 280,000 235,000
2014 340,000 340,000 275,000 230,000
2015 335,000 335,000 275,000 220,000
2016 330,000 330,000 270,000 215,000
2017 325,000 325,000 265,000 205,000
2018 320,000 320,000 260,000 195,000
2019 315,000 315,000 255,000 190,000
2020 315,000 315,000 250,000 180,000
2021 310,000 310,000 250,000 175,000
2022 305,000 305,000 245,000 170,000
2023 300,000 300,000 240,000 165,000
<CAPTION>
Varig Virgin Express Virgin Express/China
B-767-200ER B737-400 B-737-400
23806 28333 28489
7/1/87 8/1/96 11/1/96
PP-VNS OO-VEB B-18671
================================================================================
<S> <C> <C> <C>
Base Value ($000,000) 31.52 32.51 32.51
Newness 0.92 0.85 1.21
Gross Wt ADJ (0.59) 0.62 0.68
Airframe Adjustment (0.24) 0.21 0.28
Engine Adjustment 1.11 0.03 (0.00)
Landing Gear 0.00 0.00 0.00
TCAS 0.00 (0.13) (0.13)
Windshear 0.00 (0.13) (0.13)
Total Adjustments 0.87 (0.00) 0.03
Adjusted Base Value 32.72 33.97 34.43
- --------------------------------------------------------------------------------
Maintenance Data as of 07/31/98 07/31/98 07/31/98
- --------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998 320,000 315,000 345,000
1999 315,000 310,000 340,000
2000 310,000 305,000 335,000
2001 305,000 300,000 330,000
2002 300,000 300,000 330,000
2003 295,000 295,000 325,000
2004 290,000 290,000 320,000
2005 285,000 285,000 315,000
2006 280,000 280,000 315,000
2007 275,000 280,000 310,000
2008 270,000 275,000 305,000
2009 265,000 270,000 300,000
2010 255,000 265,000 295,000
2011 250,000 265,000 295,000
2012 245,000 260,000 290,000
2013 235,000 255,000 285,000
2014 230,000 250,000 280,000
2015 220,000 245,000 275,000
2016 215,000 245,000 270,000
2017 205,000 240,000 265,000
2018 195,000 235,000 260,000
2019 190,000 230,000 255,000
2020 180,000 230,000 255,000
2021 175,000 225,000 250,000
2022 170,000 220,000 245,000
2023 165,000 215,000 240,000
</TABLE>
<PAGE> 22
- --------------------------------------------------------------------------------
A310-300 (s/n 448)
Aircraft C-GYRA was delivered in February, 1988 and is awarded a 'newness'
adjustment of $400,000. The Airframe is adjusted at a rate of $18.75 per hour --
for a positive adjustment of $150,000 for a recently completed maintenance
check. The Engines are adjusted at a rate of $200 per hour for a cumulative 2814
hours variance from half-time of 6,000 hours. This is a positive adjustment of
$560,000. A negative adjustment was made of $130,000 for no Windshear. No data
was provided for the landing gear and the APU, therefore it was assumed to be at
half time.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A320-200 (s/n 210)
Aircraft C-GQCA was delivered in July, 1991 and is awarded a 'newness'
adjustment of $720,000. The Airframe is adjusted at a rate of $479 per day for a
1,161 day variance from half-time of 1,461 days. This is a negative adjustment
of $560,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hours variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A320-200 (s/n 221)
Aircraft OY CNB was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $479 per day for a
1,101 day variance from half-time of 1,461 days. This is a positive adjustment
of $530,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
- --------------------------------------------------------------------------------
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A320-200 (s/n 222)
Aircraft OY-CNC was delivered in October, 1991 and is awarded a 'newness'
adjustment of $1,070,000. The Airframe is adjusted at a rate of $639 per day for
a 756 day variance from half-time of 1,096 days. This is a positive adjustment
of $480,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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A320-200 (s/n 231)
Aircraft C-FPWD was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $426 per day for a
913 day variance from half-time of 1,644 days. This is a negative adjustment of
$390,000. The Engines are adjusted at a rate of $103 per hour for a cumulative
7,513 hour variance from half-time of 4,000 hours. This is a negative adjustment
of $770,000. A negative adjustment was made of $260,000 for no TCAS and
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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A320-200 (s/n 373)
Aircraft N3O4ML was delivered in January, 1993. A positive adjustment was made
of $250,000 for increased MTOW. Engines were assumed to be at half-time. A
negative adjustment of $300,000 was made for C-Check Status -- less than
half-time. A negative adjustment of $77,000 was made for landing gear status.
APU was assumed to be at half-time.
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A320-200 (s/n 737)
Aircraft F-GRSG was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,570,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of $130,000 was made for no Windshear. No
current data was provided for the airframe, engines, landing gear and the APU,
therefore it was assumed to be at half time.
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A320-200 (s/n 749)
Aircraft F-GRSH was delivered in September, 1997 and is awarded a 'newness'
adjustment of $1,260,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of $130,000 was made for no Windshear. No
current data was provided for the airframe, engines, landing gear and the APU,
therefore it was assumed to be at half time.
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B737-300 (s/n 28740)
Aircraft N335AW was delivered in June, 1998 and is awarded a 'newness'
adjustment of $410,000. Due to its relatively new vintage no adjustments were
made on this aircraft.
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B737-300 (s/n 28333)
Aircraft OO-VEB was delivered in August, 1996 and is awarded a 'newness'
adjustment of $850,000. The Airframe is adjusted at a rate of $36 per day for a
5,964 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $210,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 344 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $30,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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B737-300 (s/n 28548)
Aircraft G-OAMS was delivered in December, 1997 and is awarded a 'newness'
adjustment of $1,850,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28554)
Aircraft G-ECAS was delivered in December, 1996 and is awarded a 'newness'
adjustment of $1,600,000. The Airframe is adjusted at a rate of $33 per day for
a 8,356 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 132 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $10,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28557)
Aircraft G-SMDB was delivered in March, 1997 and is awarded a 'newness'
adjustment of $310,000. The Airframe is adjusted at a rate of $33 per day for a
9,075 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,510 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $150,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28558)
Aircraft G-OJTW was delivered in April, 1997 and is awarded a 'newness'
adjustment of $460,000. The Airframe is adjusted at a rate of $33 per day for a
9,003 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,228 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $120,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28559)
Aircraft PH-OZC was delivered in May, 1997 and is awarded a 'newness' adjustment
of $620,000. The Airframe is adjusted at a rate of $36 per day for a 6,269 hour
variance from half-time of 11,200 hours. This is a positive adjustment of
$220,000. The Engines are adjusted at a rate of $97 per hour for a cumulative
4,198 hour variance from half-time of 4,000 hours. This is a positive adjustment
of $410,000. A negative adjustment of $130,000 was made for no Windshear. No
data was provided for the landing gear and the APU, therefore it was assumed to
be at half time.
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B737-300 (s/n 28561)
Aircraft B-2978 was delivered in June, 1997 and is awarded a 'newness'
adjustment of $770,000. The Airframe is adjusted at a rate of $36 per day for a
10,745 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $380,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 6,728 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $650,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28562)
Aircraft B-2979 was delivered in July, 1997 and is awarded a 'newness'
adjustment of $930,000. The Airframe is adjusted at a rate of $36 per day for a
11,025 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $390,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 7,723 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $750,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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B737-300 (s/n 28563)
Aircraft N3O6FL was delivered in August, 1997 and is awarded a 'newness'
adjustment of $1,080,000. The Airframe is adjusted at a rate of $36 per day for
a 7,934 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 5,246 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $510,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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- --------------------------------------------------------------------------------
B737-300 (s/n 28564)
Aircraft PT-TEP was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,540,000. The Airframe is adjusted at a rate of $36 per day for
a 9,318 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $330,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 4,838 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $470,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
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--------------------------------------------------------------------------
B737-400 (s/n 28490)
Aircraft serial number 28490 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of
$50 per hour for a 5,375 hour variance from half-time of 20,000 hours.
This is a positive adjustment of $270,000. The Engines are adjusted at a
rate of $97 per hour for a cumulative 152 hour variance from half-time of
4,000 hours. This is a negative adjustment of $10,000. A negative
adjustment was made of $260,000 for no TCAS and Windshear. No data was
provided for the landing gear and the APU, therefore it was assumed to be
at half time.
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B737-400 (s/n 28491)
Aircraft serial number 28491 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,375 hour variance from half-time of 20,000 hours. This is a
positive adjustment of $270,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 152 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $10,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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- --------------------------------------------------------------------------------
B737-400 (s/n 25663)
Aircraft VT-JAP was delivered new in November, 1992 and is awarded a 'newness'
adjustment of $1,020,000. The Airframe is adjusted at a rate of $45 per hour for
a 2,112 hour variance from half-time of 11,200 hours. This is a negative
adjustment of $90,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $88,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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B737-400 (s/n 28664)
Aircraft VT-JAQ was delivered new in November, 1992 and is awarded a 'newness'
adjustment of $1,020,000. The Airframe is adjusted at a rate of $63 per hour for
a 4,989 hour variance from half-time of 8,000 hours. This is a negative
adjustment of $310,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $780,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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B737-400 (s/n 28489)
Aircraft serial number 28489 was delivered in November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,653 hour variance from half-time of 10,000 hours. This is a
positive adjustment of $280,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 18 hour variance from half-time of 4,000 hours. There is
no adjustment to the engines. No data was provided for the landing gear and the
APU, therefore it was assumed to be at half time.
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B767-200ER (s/n 23805)
Aircraft PP-VNR was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per
cycle for a 1,584 cycle variance from half-time of 1,500 cycles. This is a
negative adjustment of $330,000. The Engines are adjusted at a rate of
$170 per hour for a cumulative 7,125 hour variance from half-time of 5,000
hours. This is a positive adjustment of $1,210,000. No data was provided
for the landing gear and the APU, therefore it was assumed to be at half
time.
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B767-200ER (s/n 23806)
Aircraft PP-VNS was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per cycle for
a 1,150 cycle variance from half-time of 1,500 cycles. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $170 per hour for
a cumulative 6,553 hour variance from half-time of 5,000 hours. This is a
positive adjustment of $1,150,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
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B767-300ER (s/n 25221)
Aircraft G-BXOP was delivered in August, 1991. The Airframe is adjusted at a
rate of $133.33 per cycle for a 509 cycle variance from half-time of 1,500
hours. This is a positive adjustment of $68,000. Plus an additional $584,000 for
D Check. The engines are assumed to be at half-time. A positive adjustment for
$1,000,000 was made for increased MTOW. A positive adjustment was made of
$44,000 for landing gear status. APU was assumed to be at half-time.
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B767-300ER (s/n 25403)
Aircraft CC-CEU was delivered in January, 1992. The Airframe is adjusted at a
rate of $58.33 per hour for a 10,647 hour variance from half-time of 12,000
hours. This is a positive adjustment of $80,000. The Engines are adjusted at a
rate of $170 per cycle for a cumulative 541 cycle variance from half-time of
5,000 cycles. There is an adjustment of $90,000. No data was provided for the
landing gear and the APU, therefore it was assumed to be at half time.
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B767-300ER (s/n 29617)
This aircraft will be delivered new in March of 1999. A newness adjustment was
made of $540,000 to reflect delivery.
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B767-300ER (s/n 30008)
This aircraft will be delivered new in May of 1999. A newness adjustment was
made of $900,000 to reflect delivery.
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MD83 (s/n 49398)
Aircraft EC-245 was delivered in November, 1986 and is awarded a 'newness'
adjustment of $780,000. The Airframe is adjusted at a rate of $15 per hour for a
17,396 hour variance from half-time of 15,000 hours. This is a positive
adjustment of $310,000. The Engines are adjusted at a rate of $103 per hour for
a cumulative 8,000 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
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MD83 (s/n 49791)
Aircraft EC-CGV was delivered in October, 1989 and is awarded a 'newness'
adjustment of $800,000. The Airframe is adjusted at a rate of $13 per hour for a
9,676 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $200,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment was made of $260,000 for no TCAS
and Windshear. No data was provided for the landing gear and the APU, therefore
it was assumed to be at half time.
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MD83 (s/n 53198)
Aircraft SE-DLS was delivered in March, 1991 and is awarded a 'newness'
adjustment of $200,000. The Airframe is adjusted at a rate of $12 per hour for a
8,598 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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MD83 (s/n 53199)
Aircraft SE-DLU was delivered in March, 1992 and is awarded a 'newness'
adjustment of $210,000. The Airframe is adjusted at a rate of $28 per hour for a
4,823 hour variance from half-time of 15,000 hour days. This is a negative
adjustment of $140,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 7,511 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $770,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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DC1O-30 (s/n 46584)
Aircraft N15069 was delivered in February, 1980 and is awarded a 'newness'
adjustment of $180,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 307 hour variance from half-time of 2640 hour days. This is a negative
adjustment of $29,000. The Engines are adjusted at a rate of $150 per hour for a
cumulative 4932 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $740,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
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DC10-30 (s/n 48292)
Aircraft N87070 was delivered in February, 1982 and is awarded a 'newness'
adjustment of $150,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 1824 hour variance from half-time of 2640 hour days. This is a positive
adjustment of $170,000. The Engines are adjusted at a rate of $150 per hour for
a cumulative 1956 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $290,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
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V. COVENANTS
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This report has been prepared for the exclusive use of Aircraft Finance Trust
and shall not be provided to other parties by MBA without the express consent of
Aircraft Finance Trust. MBA certifies that this report has been independently
prepared and that it fully and accurately reflects MBA's opinion as to the
Current Fair Market Values and Lease Rates. MBA further certifies that it does
not have, and does not expect to have, any financial or other interest in the
subject or similar aircraft.
This report represents the opinion of MBA as to the Current Fair Market Values
and Lease Rates of the subject aircraft and is intended to be advisory only in
nature. Therefore, MBA assumes no responsibility or legal liability for any
actions taken or not taken by Aircraft Finance Trust or any other party with
regard to the subject aircraft. By accepting this report, all parties agree that
MBA shall bear no such responsibility or legal liability.
This report has been prepared by:
/s/ Bryson P. Monteleone
Bryson P. Monteleone
Manager of Operations
Reviewed by:
/s/ Morten S. Beyer
Morten S. Beyer
Chairman and CEO
ISTAT Certified Senior Appraiser/Fellow
March 25,1999
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