Exhibit

10.33




 




EXECUTION COPY






















 




WILLIS

LEASE FINANCE CORPORATION




 




AND




 




WILLIS

ENGINE FUNDING LLC




 




SERVICING

AGREEMENT




 




Dated as

of September 12, 2002




 




 




ALL

RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT ON THE PART OF WILLIS ENGINE

FUNDING LLC HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR

OF THE BANK OF NEW YORK, AS INDENTURE TRUSTEE, UNDER AN INDENTURE DATED AS OF

SEPTEMBER 12, 2002 FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.




 





























 




SERVICING

AGREEMENT




 




This Servicing Agreement, dated as of September 12,

2002 (the  “Agreement”)

is entered into by and between Willis Lease Finance Corporation (the “Servicer”)  and

Willis Engine Funding LLC (the  “Issuer”).




 




RECITALS




 




A.            Pursuant

to the Contribution and Sale Agreement (the “Contribution and Sale Agreement”),

dated as of September 12, 2002 between the Servicer and the Issuer, the

Servicer as the Seller will sell from time-to-time to the Issuer certain

Eligible Engines, Lease Agreements and other Contributed Assets.




 




B.            Pursuant

to the Series 2002-1 Supplement (the “Series 2002-1  Supplement”), dated as of

September 12, 2002, between the Issuer and The Bank of New York, as Indenture

Trustee (the “Indenture Trustee”),  to the Indenture (the “Indenture”),

dated as of September 12, 2002, between the Issuer and the Indenture Trustee,

the Class A Note Purchase Agreement and the Class B Note Purchase

Agreement, the Issuer is selling to the purchasers therein described its Series

2002-1 Class A Notes (the “2002-1 A Notes”) in a maximum original

principal amount of $180,000,000 and its Series 2002-1 Class B Notes (the

“2002-1 B

Notes” and, together with the 2002-1 A Notes, the “Notes”)

in a maximum original principal amount of $20,000,000.




 




C.            From

time-to-time, the Issuer and the Indenture Trustee may enter into additional

supplements to the Indenture (each such supplement, together with the Series

2002-1 Supplement, each a “Supplement”) providing for the issuance of

additional Series.




 




D.            In

consideration for the Servicing Fee provided in the applicable Supplement, the

Servicer agrees to undertake certain obligations set forth herein.




 




ARTICLE

I




 




DEFINITIONS




 




Section 1.01  Definitions.




 




Except as otherwise specified, capitalized terms used

herein shall have the meanings set forth in the Series 2002-1 Supplement, the

Indenture and the Contribution and Sale Agreement, and the definitions of such

terms are applicable to the singular as well as the plural forms of such terms

and to the masculine as well as to the feminine and neutral gender of such terms.




 




ARTICLE

II




 




REPRESENTATIONS

AND WARRANTIES OF THE SERVICER




 




The Servicer hereby represents and warrants to the

Issuer as of the Effective Date (unless otherwise indicated herein) that:




 




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Section 2.01  Corporate Organization and Authority.




 




The Servicer:




 




(a)           is

a corporation duly organized, validly existing and in good standing under the

laws of its state of incorporation;




 




(b)           has

all requisite power and authority and all necessary licenses and permits to own

and operate its properties and to carry on its business as now conducted

(except where the failure to have such licenses and permits could not

individually or in the aggregate (i) have a material adverse effect on the

business or financial condition of the Servicer; or (ii) impair the

enforceability of any of its obligations under this Agreement and the

transactions contemplated hereby);




 




(c)           is

duly qualified and is authorized to do business and is in good standing as a

foreign corporation in each jurisdiction where the character of its properties

or the nature of its activities makes such qualification necessary (except

where the failure to be so qualified or in good standing would not individually

or in the aggregate (i) have a material adverse effect on the business or

financial condition of the Servicer; or (ii) impair the enforceability of

any of the obligations under this Agreement and the transactions contemplated

hereby); and




 




(d)           has

duly authorized, executed and delivered this Agreement and all other documents

delivered in connection herewith, and this Agreement is the legal, valid and

binding obligation of the Servicer enforceable against the Servicer in

accordance with the terms hereof except as enforcement of such terms may be

limited by bankruptcy, insolvency, moratorium or other similar laws affecting

the rights of creditors generally and by equitable principles (regardless of

whether such enforcement is in a proceeding in equity or at law).




 




Section 2.02  Pending Litigation.




 




There are no actions, suits, proceedings,

investigations or injunctive or other orders pending, or, to the knowledge

(after due inquiry) of the Servicer, threatened, against or affecting the

Servicer or any subsidiary in or before any court, governmental authority or

agency or arbitration board or tribunal which, individually or in the

aggregate, involve the possibility of materially and adversely affecting the

properties, business, or financial condition of the Servicer and its

subsidiaries, or the ability of the Servicer to perform its obligations under

this Agreement.  The Servicer is not in

default with respect to any order of any court, governmental authority or

agency or arbitration board or tribunal.




 




Section 2.03  No Material Event.




 




No event has occurred which materially adversely

affects the Servicer’s operations, including, but not limited to, its ability

to perform its obligations hereunder.




 




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Section 2.04  Transactions Legal and Authorized.




 




This Agreement:




 




(a)           has

been duly authorized by all necessary corporate action on the part of the

Servicer, and does not and will not require any stockholder approval, or

approval or consent of any trustee or holders of any indebtedness or

obligations of the Servicer, except as has been obtained;




 




(b)           is

within the corporate powers of the Servicer; and




 




(c)           is

legal and will not conflict with, result in any material breach in any of the

provisions of, constitute a default under, or result in the creation of any lien

upon any property of the Servicer under the provisions of, any agreement,

charter instrument, by-law or other instrument to which the Servicer is or will

be a party or by which it or its property may be bound or result in the

violation of any law, regulation, rule, order or judgment applicable to the

Servicer or its properties, or any order to which the Servicer or its

properties is subject, or of any government or governmental agency or

authority.




 




Section 2.05  Governmental Consent.




 




No consent, approval or authorization of, or filing

registration or qualification with, any governmental authority is or will be

necessary or required on the part of the Servicer in connection with the

execution, delivery and performance of this Agreement.




 




Section 2.06  Compliance with Law.




 




The Servicer:




 




(a)           is not in violation of any laws,

ordinances, governmental rules or regulations or court orders to which it is

subject;




 




(b)           has not failed to obtain any

licenses, permits, franchises or other governmental authorizations necessary to

the ownership of its property or to the conduct of its business, the absence of

which would materially and adversely affect the properties, business or

condition of the Servicer and its subsidiaries or the ability of the Servicer

to perform its obligations under this Agreement; and




 




(c)           is

not in violation in any respect of any material term of any agreement, charter

instrument, by-law or other instrument to which it is a party or by which it

may be bound, which violation might, individually or in the aggregate,

materially adversely affect the business or condition of the Servicer and its

subsidiaries.




 




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ARTICLE

III




 




ADMINISTRATION

AND SERVICING OF COLLATERAL




 




Section 3.01  Responsibilities of Servicer; Appointment

of Servicer.




 




(a)           General

Responsibilities.    The Servicer,

with respect to all Lease Agreements, Contributed Engines and any other

Collateral, as an independent contractor acting solely as an agent for the

Issuer, shall:




 




(i)            manage,

service, administer, collect and enforce the rights of the Issuer or each Owner

Trust, as the case may be, under the Lease Agreements, the Contributed Engines

and any insurance policies required by the Lease Agreements to be maintained or

otherwise maintained with respect to the Contributed Engines (the “Insurance

Policies”),




 




(ii)           enforce

the Indenture Trustee’s security interest in the Lease Agreements, the

Contributed Engines or any other Collateral,




 




(iii)          hold,

sell and re-lease the Contributed Engines upon the expiration or other

termination of the related Lease Agreement,




 




(iv)          hold,

sell and the re-lease the Contributed Engines transferred to the Issuer not

subject to Lease Agreements,




 




(v)           maintain

(or cause to be maintained) all Insurance Policies, in full force and effect,




 




(vi)          maintain

(or cause to be maintained) and re-condition the Contributed Engines,




 




(vii)         collect

and post all payments made on account of Lease Agreements and respond to all

inquiries of obligors under Lease Agreements (“Lessees”),




 




(viii)        investigate

delinquencies, account for collections and furnish monthly and annual

statements to the Indenture Trustee with respect to distributions,




 




(ix)           provide

to the Noteholders appropriate federal income tax information,




 




(x)            collect

and remit any sales, use, property and other taxes due with respect to the

Contributed Engines to the appropriate taxing authorities,




 




(xi)           take

all commercially reasonable efforts to maintain the perfected security interest

of the Indenture Trustee in the Lease Agreements, the Contributed Engines and

the other items of Collateral,




 




(xii)          subject

to the limitations set forth in this Agreement, have full power and authority

to carry out the obligations imposed upon it by this Agreement in any manner

that it may deem necessary or desirable, including the delegation of such

responsibilities to a




 




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subservicer chosen with due care; provided, however, that

no such delegation shall relieve the Servicer of liability hereunder,




 




(xiii)         at

all times act in accordance with the provisions of each Lease Agreement, and

observe and comply with all requirements of law applicable to it,




 




(xiv)        at

all times hold itself out to the public and to the parties with whom it deals

as acting as an agent of the Issuer,




 




(xv)         except

as permitted by the terms of any Lease Agreement, not take any action which

would result in the interference with the Lessee’s right to quiet enjoyment of

the Contributed Engines subject to the Lease Agreement during the term thereof,

and




 




(xvi)        maintain

its customary practices regarding internal credit rating and underwriting

standards.




 




Without limiting the generality of the foregoing, the

Servicer, as agent for the Issuer, shall, and is hereby irrevocably authorized

and empowered by the Issuer (subject to the standard of care set forth in

Section 3.02 and to the representations and covenants set forth in

Section 5.12)  to, execute and deliver on behalf of the Issuer all

instruments of satisfaction or cancellation, or of partial or full release or

discharge, and all other comparable instruments, with respect to the Lease

Agreements and the other Collateral as shall be permitted under the terms of

this Agreement and, in addition, to evidence that any item is not included in

the Collateral.




 




(b)           Specific

Responsibilities.    The Servicer

(whether acting alone or through a subservicer), acting as an agent of the

Issuer, shall perform the duties imposed upon it by

Section 3.01(a)(i) in the following manner:




 




(i)            Enforcement

Actions Against the User.  The

Servicer shall sue to enforce or collect upon the Lease Agreements if the

Servicer believes that such enforcement or collection suits are reasonably

likely to increase the amount ultimately collected on the Lease Agreements and

the Issuer has delivered to the Servicer its prior written consent to such

action.  Upon the commencement of such a

legal proceeding, the Issuer shall, at the request of the Servicer, assign such

Lease Agreement to the Servicer for purposes of collection only.  In any such proceeding, the Servicer shall

have the right, with the prior written consent of the Issuer, to

(1) settle any such proceeding, (2) compromise any claims brought by

a Lessee against the Servicer and (3) give a general release in connection

with any proceeding by or against the Lessee arising out of or in connection

with a Lease Agreement.  The Servicer

shall be entitled to receive prompt reimbursement for extraordinary

out-of-pocket expenses payable pursuant to Section 3.04 and incurred in

connection with the enforcement and collection of a Lease Agreement to the

extent provided from funds on deposit in the Trust Account from time-to-time; provided,

however, that the Servicer shall incur such out-of-pocket expenses only

if the Servicer, in its commercially reasonable judgment, believes that the

incurrence of such expense is reasonably likely to increase the net amount

ultimately collected on such Lease Agreement after giving effect to such

out-of-pocket expenses;




 




(ii)           Enforcement

of Recourse Against Third Parties. 

Except as hereinafter provided, and in each case with the prior written

consent of the Issuer, the Servicer shall exercise




 




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any rights of recourse against third parties that exist with respect to

any Lease Agreement in accordance with standards it applies in servicing

aircraft engine lease agreements held for its own account.  In any such proceeding, the Servicer, as

agent of the Issuer, shall have the right, with the prior written consent of

the Issuer, to (x) settle any such proceeding, (y) compromise any

claims brought by a Lessee against the Servicer or the Issuer and (z) give

a general release in connection with any proceeding by or against the Lessee arising

out of or in connection with a Lease Agreement.  In exercising such recourse rights, the Servicer is authorized on

the Issuer’s and the Indenture Trustee’s behalf to reassign the Lease Agreement

to the Person against whom recourse exists to the extent necessary, and on the

terms set forth, in the document creating such recourse rights.  Except as hereinafter provided, the Servicer

will not reduce or diminish such recourse rights, unless (i) the Lease

Agreement is in default, or the Servicer reasonably believes that a default is

imminent, (ii) the Issuer delivers its prior written consent and

(iii) the Servicer believes, in its good faith judgment, that such

reduction or diminution in recourse rights is reasonably likely to maximize the

net amount ultimately collected on such Lease Agreement after giving effect to

reimbursement of any extraordinary out-of-pocket expenses payable pursuant to

Section 3.04 and incurred by the Servicer in connection with the reduction

or diminution of such recourse rights;




 




(iii)          Voluntary

Prepayments  by Lessees.  The Servicer may grant to the Lessee under

any Lease Agreement any rebate, refund or adjustment that the Servicer, in its

commercially reasonable judgment, believes is required because of a prepayment

of a Lease Agreement; provided, however, that the Servicer will

not permit any rescission or cancellation of any Lease Agreement, nor will it

take any action with respect to any Lease Agreement which is reasonably likely

to materially impair the rights of the Noteholders, the Indenture Trustee or

the Issuer in the Lease Agreement or the related Contributed Engine or the

proceeds thereof without the prior written consent of the Issuer and the

Indenture Trustee.  The Servicer shall

direct the Lessee to remit any such prepayment amount directly to the Trust

Account.  For purposes of this

subparagraph (iii), a voluntary prepayment is any prepayment by a Lessee

not required pursuant to the terms of the related Lease Agreement;




 




(iv)          Waiver

and Modifications to Lease Agreement. 

The Servicer, as agent of the Issuer, may, in each case with the prior

written consent of the Issuer and subject to the limitations set forth in this

subparagraph (iv), waive, modify or vary any term of any Lease Agreement

or consent to the postponement of strict compliance with any such terms if, in

the Servicer’s commercially reasonable judgment, such waiver, modification,

variation or postponement is reasonably likely to maximize the net amount which

will be ultimately realized from such Lease Agreement or the value of the

related Contributed Engine after giving effect to the reimbursement of any

extraordinary out-of-pocket expenses payable pursuant to Section 3.04 and

incurred by the Servicer in connection therewith.  With respect to the foregoing, the following conditions and

limitations shall apply with respect to any waivers, modifications, variations

or postponements granted pursuant to this subparagraph (iv):




 




(A)          the

Servicer shall not forgive any payment under a Lease Agreement unless

(1) (x) the Lease Agreement is in default, or the Servicer believes

that such default is imminent, and (y) the Servicer believes, in its

commercially reasonable judgment, that the forgiveness of the payments is

reasonably likely to maximize the net amount ultimately collected on such Lease

Agreement after giving effect to the reimbursement of any extraordinary




 




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out-of-pocket expenses payable pursuant to Section 3.04 and

incurred by the Servicer in connection therewith or (2) only under the

circumstances required by the Contribution and Sale Agreement, the Servicer

either (x) repurchases such Lease Agreement by depositing an amount equal

to the Warranty Purchase Amount of such Lease Agreement in the Trust Account or

(y) provides a substitute qualifying Lease Agreement for such Lease

Agreement prior to the effective date of any such forgiveness; and




 




(B)           the

Servicer shall not enter into any agreement which would have the effect of

releasing the Lessee from its obligations pursuant to a Lease Agreement or of

releasing the security interest in the related Contributed Engines except

(a) to the extent provided in the Lease Agreement or (b) in

connection with a prepayment contemplated in Section 3.01

(b)(iii) hereof;




 




(v)           Acceleration

of Lease Agreement After Lease Agreement Default.  Notwithstanding any provision to the contrary contained in this

Agreement, the Servicer may with the prior written consent of the Issuer

exercise any right under a Lease Agreement to accelerate the unpaid payments

due or to become due under a Lease Agreement; provided, however,

that the Servicer shall not accelerate any Scheduled Payment unless permitted

to do so by the terms of the related Lease Agreement and under applicable law;




 




(vi)          Reserved.




 




(vii)         Remarketing.  In the event that the Servicer as an agent

of the Issuer reclaims possession of Contributed Engines from a Lessee in the

enforcement of or upon termination of any Lease Agreement, the Servicer shall

sell, re-condition and/or re-lease each such Contributed Engine consistent with

the standard of care set forth in Section 3.02.  The foregoing is subject to the provision that the Servicer shall

not expend funds in connection with any repair or re-conditioning or towards

the repossession of such Contributed Engines unless such repair and/or

repossession is reasonably likely to increase the amount realized from such

Contributed Engines by an amount greater than the amount of such expenses.  On an Engine by Engine basis, the Servicer

shall be entitled to withdraw and apply funds from the Engine Reserve Account

for the purpose of any permitted repair or reconditioning of such Engine

hereunder (provided that the Lease Agreement relating to such Engine permits

the lessor thereunder to retain maintenance reserves under such Lease Agreement

upon termination of such Lease Agreement);




 




(viii)        Collection

of Payments.  The Servicer shall

direct all Lessees to remit payments to the Trust Account; and




 




(ix)           Billing

of Lease Agreement Payments.  As of

the initial Transfer Date, the Servicer shall implement a system for mailing

periodic invoices, which may be in electronic form, for Lease Agreement

payments directly to the Lessees.




 




Notwithstanding any other provision of this Agreement

to the contrary, the Servicer shall at all times observe the servicing standard

set forth in Section 3.02 hereto.




 




(c)           Credit

Policies.  The Servicer shall follow

such credit policies with respect to the leasing of the Contributed Engines not

subject to a Lease Agreement in accordance with the




 




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standard of care set forth in Section 3.02 and, subject to such

credit policies, the Servicer may in its sole discretion as agent for the

Issuer determine and approve the creditworthiness of any lessee (though the

Servicer makes no representation or warranty to the Issuer, the Indenture

Trustee or the Noteholders as to the solvency or financial stability of any

lessee).




 




(d)           Prosecution

of Claims.  The Servicer as an agent

of the Issuer may institute and prosecute claims against the manufacturers of,

sellers of, or Persons having repaired such Contributed Engines as the Servicer

may consider advisable for breach of warranty or representation, any defect in

condition, design, operation, fitness or repair, or any other nonconformity

with the terms of manufacture, sale or repair, as applicable.




 




(e)           Maintenance

and Repair.  The Servicer as agent

for the Issuer shall maintain and repair (or cause to be maintained and

repaired) each Contributed Engine in accordance with the standard of care set

forth in Section 3.02 and, in the case of Contributed Engines subject to a

Lease Agreement, in accordance with the terms of the related Lease

Agreement.  On an Engine by Engine

basis, the Servicer shall be entitled to withdraw and apply funds from the

Engine Reserve Account for the purpose of any permitted repair or

reconditioning of such Engine hereunder.




 




(f)            Capital

Improvements.  The Servicer as agent

for the Issuer shall make (or cause to be made) any capital improvements to any

Contributed Engine that are necessary to conform with applicable governmental,

manufacturer or industry standards and may make (or cause to be made) any

capital improvements to any Contributed Engine that are otherwise desirable in

the Servicer’s reasonable opinion.




 




(g)           Lost

or Destroyed Engines.  If any

Contributed Engine suffers a Casualty Loss (as defined in the Indenture), the

Servicer, as agent for the Issuer, shall remit to the Trust Account the

Casualty Proceeds, if any, therefrom.




 




(h)           Maintenance

of Insurance.  The Servicer, as

agent for the Issuer, shall maintain or cause to be maintained contingent

liability insurance in an amount representing coverage of at least $500,000,000

and otherwise with coverage and with terms and conditions consistent with

industry practices.




 




(i)            The

Issuer hereby appoints Willis Lease Finance Corporation as the initial Servicer

under this Agreement.  The term of such

appointment shall commence on the Effective Date and shall terminate on the

date on which the Servicer or the Issuer receives a notice of termination

pursuant to Section 7.02 hereof.




 




Section 3.02  Standard of Care.




 




In entering into, managing, administering, servicing,

enforcing and making collections on the Lease Agreements, the Contributed Engines

and the other items of Collateral as agent for the Issuer pursuant to this

Agreement, the Servicer will employ such servicing procedures as are prudent

and customary in the industry for lease agreements or aircraft engines of a

type similar to the Contributed Engines and in any event employ not less than

that degree of skill and care that the Servicer exercises with respect to any

similar aircraft engines or lease agreements owned by it.  The Servicer shall maintain all state and

federal licenses and franchises necessary for it to




 




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perform its servicing responsibilities hereunder, shall not materially

impair the rights of the Issuer, the Indenture Trustee or the Noteholders in

any Lease Agreement, the related Contributed Engines or payments therefrom,

except as expressly permitted herein, and shall comply in all material respects

with all applicable federal and state laws and regulations.




 




Section 3.03  Maintenance of Rights in Collateral.




 




The Servicer shall record documents with the FAA and

shall file the UCC financing statements and other documents or instruments set

forth in Section 2.03 of the Contribution and Sale Agreement within the

time frames set forth therein and thereafter will file such additional UCC

financing statements and continuation statements and assignments and other

documents or instruments so that the security interest in favor of the

Indenture Trustee in the Collateral will be perfected by such filings with the

appropriate UCC filing offices and other Governmental Authorities.




 




Section 3.04  Costs of Servicing; Servicing Fee.




 




Except with respect to funds withdrawn and applied by

the Servicer pursuant to Sections 6.03 and 6.04 hereof, all costs of

administering and servicing the Collateral in the manner required by this

Agreement shall be borne by the Servicer. 

As compensation to the Servicer for its servicing of the Collateral, the

Servicer will be entitled to receive the Servicing Fee as set forth in the

related Supplements from amounts on deposit in the Trust Account.  Such Servicing Fee shall be paid at the

times and in the priority set forth in the Supplements.  The Servicer shall also be entitled to

receive reimbursement of extraordinary out-of-pocket expenses incurred by the Servicer

in connection with its activities hereunder which have been authorized by the

Administrative Agent.




 




Section 3.05  Servicer Report.




 




On or prior to each Determination Date, provided

however, no later than 1:00 P.M. (New York City time), the Servicer

shall deliver a written Servicer Report, substantially in the form of Exhibit A

hereto, to the Indenture Trustee and the Rating Agency, if any.




 




Section 3.06  Reserved.




 




Section 3.07  Other Information.




 




The Servicer shall, at the Indenture Trustee’s reasonable

written request, furnish to the Indenture Trustee from time-to-time such

information and make such calculations as may be relevant to the performance of

the Indenture Trustee’s duties as set forth in the Indenture.




 




Section 3.08  Issuer to Cooperate.




 




(a)           Upon

the Issuer’s written consent to any enforcement of any remedies or rights

provided by the Lease Agreements on its behalf by the Servicer, the Issuer

shall thereafter upon written request of the Servicer execute and deliver to

the Servicer any court pleadings, requests for trustee’s sale or other

documents necessary with respect to any such enforcement.  Together with such documents or pleadings,

the Servicer shall deliver to the Issuer a certificate of a




 




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servicing officer requesting that such pleadings or documents be

executed by the Issuer and certifying as to the reason such documents or

pleadings are required.




 




(b)           The

Issuer shall furnish the Servicer with any powers of attorney and other

documents necessary or appropriate to enable the Servicer to carry out its

duties and to exercise its authority hereunder.




 




(c)           If

in any action or legal proceeding it is held that the Servicer may not enforce

a Lease Agreement on the ground that the Servicer is not a real party in

interest or a holder entitled to enforce the Lease Agreement, then the

Indenture Trustee and the Issuer shall, at the Servicer’s request and expense,

take such steps as the Servicer deems reasonably necessary and shall have been

set forth in writing to the Indenture Trustee or the Issuer, as appropriate, to

enforce the Lease Agreement, including bringing suit in the name of the Issuer,

the Indenture Trustee, or on behalf of the Noteholders, as appropriate.




 




Section 3.09  Gross Revenues.




 




As of any date of determination, at least 66.67% of

the Servicer’s gross revenues shall be derived from the ownership, leasing or

trading of, and management for third parties of, aircraft engines, other power

producing engines, air frames and related equipment.




 




Section 3.10  Remarketing of Engines; Designation of

Re-Leasing.




 




(a)           The

Servicer as agent for the Issuer shall use reasonable efforts to sell or

re-lease any Contributed Engine upon the expiration or early termination of a

Lease Agreement relating to a Contributed Engine (unless the Lessee shall have

exercised the purchase option under such Lease Agreement and made payment

therefor) on the best terms then available. 

Any such sale or re-lease of Contributed Engines shall be conducted in accordance

with the standards set forth in Section 3.02. 

In the event that the Servicer receives more than one offer for the sale

or re-lease of a Contributed Engine, the Servicer will be required to select

the sale or re-lease proposal which, in its reasonable judgment, is most likely

to maximize the total future proceeds.




 




(b)           Any

re-lease of a Contributed Engine shall be designated by the Servicer as

such.  Upon such designation, the

Servicer shall amend the List of Lease Agreements and, if necessary, all

applicable UCC financing statements and other filings, as appropriate and shall

record the Lease Agreement related to such Engine with the FAA and any other

applicable Governmental Authorities.




 




Section 3.11  Assignment of Lease Agreements.




 




Except as set forth in a Lease Agreement, the Servicer

shall not, without the prior written consent of the Issuer and the consent of a

Global Requisite Majority of Noteholders, enter into any agreement which

permits a Lessee to assign its obligations under such Lease Agreement.




 




Section 3.12  Interest Rate Hedge Agreements.




 




The Servicer on behalf of the Issuer may enter into

Interest Rate Hedge Agreements on such terms as the Issuer may approve.  The Servicer will not enter into any

Interest Rate Hedge




 




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Agreement under which the Issuer assumes liability without the consent

of a Global Requisite Majority, other than any Interest Rate Hedge Agreement in

effect on the Transfer Date, which consent shall not be unreasonably withheld.




 




Section 3.13  Evidence of Insurance.




 




The Servicer will provide confirmation of the renewal

of the insurance required by Section 3.01(a)(i) and (v) and

Section 3.01(h) hereof annually and will forward copies of all

certificates evidencing cancellation, nonrenewal, expiration, replacement or

renewal to the Indenture Trustee, promptly after receipt.




 




Section 3.14  Servicer Advances.




 




All extraordinary out-of-pocket payments payable

pursuant to Section 3.04 and made by the Servicer hereunder which have

been authorized by the Administrative Agent shall constitute a “Servicer

Advance”  and be reimbursable to the Servicer from

funds on deposit in the Trust Account prior to any distributions pursuant to

the Supplements.




 




Section 3.15  Lessee Acknowledgements.




 




On each Transfer Date, the Servicer as agent for the

Issuer shall send to each Lessee under each Lease Agreement that will be the

subject of a Loan a written certificate in substantially the form as may be

required in the relevant Lease Supplement or such other form as may be agreed

by the Administration Agent.




 




ARTICLE

IV




 




INDEMNIFICATION




 




Section 4.01  Indemnification.




 




The Servicer agrees to indemnify and hold harmless the

Issuer, the Administrative Agent, the Indenture Trustee, the Noteholders and

their respective directors, officers, employees and agents (each, an “Indemnified

Party”)  against any and all liabilities, claims,

losses, damages, penalties, costs and expenses (including costs of defense and

legal fees and expenses) which may be incurred or suffered by such Indemnified

Party (except to the extent caused by gross negligence or willful misconduct on

the part of the Indemnified Party) in connection with any action provided for

in this Agreement, including those provided in Sections 3.08 and 5.06 hereof,

and otherwise arising out of, or based upon, a breach by the Servicer of its

obligations under this Agreement or any other Related Document or any

information certified in any schedule, Servicer Report or other document

delivered by the Servicer being untrue in any material respect as of the date

of such certification; provided that the foregoing indemnity shall in no way be

deemed to impose on the Servicer any obligation to make any payment with

respect to principal or interest on the Notes or to reimburse the Issuer for

any payments on account of the Notes. 

The obligations of the Servicer under this Section shall survive

the termination of this Agreement, the resignation or removal of the Indenture

Trustee (to the degree that such claim arose prior to the date of such

resignation or removal), and the termination of the Servicer pursuant to the

terms hereof.




 




12





























 




ARTICLE

V




 




COVENANTS

OF THE SERVICER




 




Section 5.01  Existence of the Servicer.




 




On and after the Effective Date, and subject to the

next succeeding paragraph, the Servicer will keep in full force and effect its

existence, rights and franchise as a corporation under the laws of its

jurisdiction of incorporation and will preserve its qualification to do

business as a foreign corporation in each jurisdiction to the extent necessary

to protect the validity and enforceability of the Collateral or to permit

performance of the Servicer’s obligations under this Agreement where the

absence of such qualification would materially and adversely affect the

properties, business or condition of the Servicer and its subsidiaries or the

ability of the Servicer to perform its obligations under this Agreement.




 




On and after the Effective Date, the Servicer shall

not merge or consolidate with another Person unless (i) the surviving

entity, if not the Servicer, shall execute and deliver to the Issuer and the

Indenture Trustee, in form and substance satisfactory to each of them,

(x) an instrument expressly assuming all of the obligations of the

Servicer hereunder, and (y) an opinion of counsel to the effect that such

entity has effectively assumed the obligations of the Servicer hereunder, that

all conditions precedent provided for in this Agreement relating to such

transaction have been complied with, that in the opinion of such counsel, all

financing statements and continuation statements and amendments thereto have

been executed and filed that are necessary fully to preserve and protect the

interest of the Issuer and the Indenture Trustee in the Collateral, and

reciting the details of such filings, or stating that no such action shall be

necessary to preserve and protect such interest, (ii) the Guarantor shall

acknowledge to the Indenture Trustee in writing that the Guaranty remains in

full force and effect, (iii) immediately after giving effect to such

transaction, no Servicer Event of Default, and no event which, after notice or

lapse of time, or both, would become a Servicer Event of Default shall have

occurred and be continuing, (iv) the surviving entity shall have a minimum

net worth of not less than the amount which the Servicer was required to

maintain immediately prior to such transfer pursuant to Section 7.01(ix),

(v) the Servicer shall deliver to the Indenture Trustee a letter from the

Rating Agency, if any, to the effect that such consolidation, merger or

succession will not result in a downgrading of the rating of any Notes, if such

a rating existed immediately prior to such consolidation, merger or succession

and (vi) at least 66.67% of the surviving entity’s gross revenues must be

derived from the ownership, leasing and trading of, and management for third

parties of, aircraft engines, other power producing engines, airframes and

related equipment.




 




Section 5.02  Limitation on Liability of the Servicer

and Others.




 




(a)           Neither

the Servicer nor any of the directors, officers, employees or agents of the

Servicer shall incur any liability to the Issuer, the Indenture Trustee or the

Noteholders, for any reasonable action taken or not taken in good faith

pursuant to the terms of this Agreement with respect to any portion of the

Collateral; provided, however, that this provision shall not

protect the Servicer or any such Person against any breach of representations

or warranties made by it herein or in any certificate delivered in conjunction

with the purchase of the Notes or for any liability that would otherwise be

imposed by reason of willful misfeasance or gross negligence in




 




13





























 




the performance of its duties hereunder or by reason of reckless

disregard of obligations and duties hereunder.




 




(b)           Except

as provided in this Agreement, the Servicer shall not be under any obligation

to appear in, prosecute, or defend any legal action that shall not be

incidental to its duties to service the Collateral in accordance with this

Agreement, and that in its opinion may involve it in any extraordinary expense

or liability; provided, however, that the Servicer may undertake,

at its expense, any reasonable action that it may deem necessary or desirable

in respect of this Agreement and the rights and duties of the parties to this

Agreement and the interests of the Noteholders under this Agreement.




 




(c)           Subject

to Section 5.02(a), the Servicer and any director or officer or employee

or agent of the Servicer may rely in good faith on the advice of counsel,

outside accounting firm or other agent selected by it with due care or on any

document of any kind, prima facie properly executed and

submitted by any Person respecting any matters arising hereunder.




 




Section 5.03  Servicer Not to Resign or be Removed.




 




On and after the Effective Date, the Servicer shall

not resign from the servicing obligations and duties hereby imposed on it

except in connection with an assignment permitted by Section 8.02 or upon

determination that such obligations or duties hereunder are no longer

permissible under applicable law.  Any

such determination permitting the resignation of the Servicer shall be

evidenced by an Opinion of Counsel, in form and substance satisfactory to the

Control Party, to such effect delivered to the Indenture Trustee.




 




Except as provided in Sections 7.02 and 8.02, the

Servicer shall not be removed or be replaced as Servicer with respect to the

Collateral or any portion thereof.




 




No resignation or removal of the Servicer shall in any

event become effective until the successor Servicer shall have assumed the

Servicer’s servicing responsibilities and obligations in accordance with Section 7.03.




 




Section 5.04  Financial and Business Information.




 




On and after the initial Transfer Date, the Servicer

shall deliver to the Issuer, the Indenture Trustee and each Noteholder:




 




(a)           promptly

upon their becoming available, but in no event later than 120 days, in the case

of the Forms 10-K, and 60 days, in the case of the Forms 10-Q after the end of

the period covered by such Form, one copy of each annual report to

shareholders, reports on Forms 8-K, 10-K, and 10-Q, proxy statement, registration

statement, prospectus and notices filed with or delivered to any securities

exchange, the Securities and Exchange Commission or any successor agencies, in

each case relating to the Servicer or the Notes;




 




(b)           immediately

upon any officer of the Servicer becoming aware of the existence of any

condition or event which constitutes (or with the passage of time and/or the

giving of notice would constitute) a Servicer Event of Default, a written

notice describing its nature and period of existence and what action the

Servicer is taking or proposes to take with respect thereto;




 




14





























 




(c)           written

notice of the following, promptly upon the Servicer’s becoming aware of such

events or conditions:




 




(i)            any

proposed or pending investigation of it by any Governmental Authority or

agency, or




 




(ii)           any

court or administrative proceeding which individually or in the aggregate

involves a likelihood of material and adverse effect upon the properties,

business, profits or condition (financial or otherwise) of the Servicer, a

written notice specifying the nature of such investigation or proceeding and

what action the Servicer is taking or proposes to take with respect thereto and

evaluating its merits;




 




(d)           immediately

upon becoming aware of the existence of any condition that would constitute a

Servicer Event of Default with respect to any item of the Collateral, a written

notice describing its nature and period of existence and what action the

Servicer is taking or proposes to take with respect thereto; and




 




(e)           upon

written request, the Servicer shall furnish to the Issuer, the Indenture

Trustee and the Administrative Agent, within five (5) Business Days of receipt

of such request: a list of all Contributed Engines and related Lease Agreements

held as part of the Collateral as of the end of the most recent Collection

Period and with reasonable promptness, any other data and information which may

be reasonably requested from time-to-time.




 




Section 5.05  Officer’s Certificates.




 




With each set of documents delivered pursuant to

Section 5.04(a) the Servicer will deliver an Officer’s Certificate

substantially in the form of Exhibit B hereto stating (i) that the officer

signing such Officer’s Certificate has reviewed the relevant terms of this

Agreement and has made, or caused to be made under such officer’s supervision,

a review of the activities of the Servicer during the period covered by the

statements then being furnished, (ii) that the review has not disclosed

the existence of any Servicer Event of Default or, if a Servicer Event of

Default exists, describing its nature and what action the Servicer has taken

and is taking with respect thereto, and (iii) that on the basis of such

review the officer signing such certificate is of the opinion that during such

period the Servicer has serviced the Collateral in compliance with the

procedures hereof except as described in such certificate.




 




Section 5.06  Inspection.




 




On and after the initial Transfer Date, the Servicer

shall make available to the Issuer, the Indenture Trustee, the Noteholders or

their respective duly authorized representatives, attorneys or auditors the

accounts, records and computer systems maintained by the Servicer with respect

to the Collateral at such times during normal operating hours as the Indenture

Trustee shall reasonably request which do not unreasonably interfere with the

Servicer’s normal operations or customer or employee relations.  Nothing in this Section 5.06 shall

affect the obligation of the Servicer to observe any applicable law or contract

prohibiting disclosure of information, and the failure of the Servicer to

provide access to information as a result of such obligation shall not

constitute a breach of this Section 5.06. 

All reasonable out-of-pocket expenses incurred during the exercise of

any rights by any Person under this Section 5.06 during the continuance of

a




 




15





























 




Servicer Event of Default (or any condition or event which with the

giving of notice or the lapse of time or both would become a Servicer Event of

Default) shall be paid by the Servicer.




 




Section 5.07  Servicer Records.




 




On or before the initial Transfer Date, the Servicer

will indicate in its records that it is servicing and administering the

Collateral in its capacity as Servicer hereunder, at the request and for the

benefit of the Issuer and subject to the provisions of the Indenture.




 




Section 5.08  No Bankruptcy Petition Against the Issuer.




 




The Servicer covenants and agrees it will not, prior

to the date that is one year and one day after the payment in full of the Notes

and all other amounts owing pursuant to the Indenture, institute against, or

join any other Person in instituting against, the Issuer, any bankruptcy,

reorganization, receivership, arrangement, insolvency or liquidation

proceedings or other similar proceedings under any federal or state bankruptcy

or similar law.  This Section 5.08

shall survive the termination of this Agreement.




 




Section 5.09  Compliance with Lease Agreements.




 




The Servicer will comply with, and shall cause each of

its Affiliates to comply with, all of their respective covenants and agreements

contained in each of the Lease Agreements to which it is a party or by which it

is bound.




 




Section 5.10  Annual Independent Public Accountants’

Servicing Report.




 




On or before April 30 of each year, beginning

April 30, 2003, the Servicer at its expense shall cause a firm of

independent public accountants to furnish a statement to the Indenture Trustee

to the effect that such firm has examined certain documents and records

relating to the servicing of the Collateral and the reporting requirements with

respect thereto with respect to the prior calendar year and that, on the basis

of such examination, the allocation of payments has been made in compliance

with this Agreement, except for (i) such exceptions as such firm shall

believe to be immaterial and (ii) such other exceptions as shall be set

forth in such statement.




 




Section 5.11  Liens.




 




The Servicer agrees not to create, incur, assume or

grant, or suffer to exist, directly or indirectly, any lien, security interest,

pledge or hypothecation of any kind on or concerning the Collateral, including

the Lease Agreements and Contributed Engines, title thereto or any interest therein

or in this Agreement to any Person other than the Indenture Trustee, except for

Permitted Encumbrances.  The Servicer

will promptly take or cause to be taken such actions as may be necessary to

discharge any such lien in accordance with the standards set forth in

Section 3.02.




 




Section 5.12  Non-Consolidation with Issuer.




 




The Servicer represents, warrants and covenants to

take the following actions to maintain its existence separate and apart from

any other Person:




 




16





























 




(a)           maintain

books of account in accordance with generally accepted accounting principles

and maintain its accounts, books and records separate from any other person or

entity; provided, that the Issuer’s assets and liabilities may be included in a

consolidated financial statement issued by an affiliate of the Issuer; provided,

however, that any such consolidated financial statement will make clear

that the Issuer’s assets are not available to satisfy the obligations of such

affiliate;




 




(b)           not

commingle its funds or assets with those of any other entity;




 




(c)           hold

its assets in its own name;




 




(d)           conduct

its business solely in its own name;




 




(e)           pay

its own liabilities out of its own funds and assets;




 




(f)            observe

all corporate formalities;




 




(g)           maintain

an arm’s-length relationship with its affiliates;




 




(h)           not

assume or guarantee or become obligated for the debts of the Issuer or any

Owner Trust or hold out its credit as being available to satisfy the

obligations of the Issuer or any Owner Trust except with respect to (i)

obligations in connection with the Guaranty in connection with its capacity as

the Seller and (ii) obligations in connection with Lessees arising by operation

of law under Eligible Leases with respect to which the consent of such Lessees

has not been obtained prior to the transfer of such Eligible Leases to the

Issuer in connection with its capacity as the Seller;




 




(i)            allocate

fairly and reasonably overhead or other expenses that are properly shared with

the Issuer, including without limitation, shared office space, and use separate

stationery, invoices and checks from the Issuer;




 




(j)            identify

and hold itself out as separate and distinct from the Issuer and will not hold

the Issuer out as a division or part of itself;




 




(k)           correct

any known misunderstanding regarding the Issuer’s separate identity from it;




 




(l)            not

enter into, or be a party to, any transaction with the Issuer or its

affiliates, except in the ordinary course of its business and on terms which,

are intrinsically fair and are no less favorable to it than would be obtained

in a comparable arms-length transaction with an unrelated third party; and




 




(m)          not

pay the salaries of the Issuer’s employees, if any.




 




17





























 




ARTICLE

VI




 




PAYMENTS

RELATING TO THE COLLATERAL




 




Section 6.01  Direction to Lessees.




 




On or prior to each Transfer Date, the Servicer, as

agent for the Issuer, shall mail a notice to each Lessee under the Lease

Agreements contributed to the Issuer pursuant to the Contribution and Sale

Agreement on such Transfer Date informing such Lessee that all payments with

respect to such Lease Agreements made on or after such Transfer Date,

including, without limitation, all Scheduled Payments, Maintenance Reserve Payments

and Security Deposits should be submitted directly to the Trust Account; provided,

however, that such notice shall provide that any indemnification

payments and liability insurance payments shall not be deposited in the Trust

Account but shall be paid directly to the person entitled to such

indemnification or insurance payment.




 




Section 6.02  Trust Account.




 




(a)           Promptly

upon receipt thereof (but in no event later than two (2) Business Days after

receipt), the Servicer, as agent for the Issuer, shall deposit into the Trust

Account those amounts that have been remitted to the Servicer that the Servicer

ascertains to be Scheduled Payments, prepayments and other payments, including

but not limited to, Engine Revenues, Sales Proceeds or Casualty Proceeds in

respect of any of the Eligible Engines; provided, however, that

indemnification payments and liability insurance payments received by the

Servicer shall not be deposited in the Trust Account but shall be paid directly

to the person entitled to such indemnification or insurance payment; provided,

further, that the Servicer shall not be obligated to remit all, or any portion

of, the foregoing amount from which the Servicer shall be entitled hereunder to

reimburse itself for Servicer Advances.




 




(b)           Promptly

upon receipt thereof (but in no event later than two (2) Business Days after

receipt), the Servicer shall deposit into the Trust Account the aggregate

Warranty Purchase Amount due and payable by the Seller pursuant to the

Contribution and Sale Agreement.




 




(c)           Notwithstanding

the foregoing, the Servicer shall not be obligated to deposit the amounts set

forth in Sections 6.02(a) or (b) in respect of Lease Agreements and

the related Contributed Engines for which the Warranty Purchase Amount or

prepayment has been deposited previously and may deduct from amounts otherwise

payable by it to the Trust Account, or request in writing the Indenture Trustee

to deduct from the Trust Account and pay to the Servicer, an amount equal to

amounts previously deposited by the Servicer or a subservicer into the Trust

Account but which are later determined by the Servicer to have resulted from

mistaken deposits.




 




(d)           By

not later than each Determination Date, the Servicer, as agent for the Issuer,

shall instruct in writing the Indenture Trustee to allocate all Collections and

Prepayments for the related Collection Period then on deposit in the Trust

Account to each Series Account (provided, however, that the

Servicer shall instruct in writing the Indenture Trustee to allocate any

Maintenance Reserve Payments and Security Deposits directly to each Engine

Reserve Account




 




18





























 




and Security Account, respectively, for each Series) by specifically

identifying such Collections and Prepayments (and such Maintenance Reserve

Payments and Security Deposits) to a particular Eligible Engine and then

instructing in writing the Indenture Trustee to allocate all of such amounts to

the Series Account, the Engine Reserve Account and the Security Deposit

Account for the Series of which such Eligible Engine is pledged.  In addition, the Servicer shall instruct in

writing the Indenture Trustee to allocate any earnings on Eligible Investments

in the Trust Account to the Series Account for each Series then Outstanding

in the same proportion as the ratio of the Outstanding Obligations of such

Series to the Aggregate Outstanding Obligations.




 




(e)           The

Servicer shall maintain accurate records of the source of each payment received

by it or deposited into the Trust Account in order to allocate such payment to

the Series to which it relates, if more than one Series is outstanding.




 




Section 6.03  Engine Reserve Account.




 




The Servicer shall maintain records that will identify

amounts on deposit in the Engine Reserve Account subaccount to a specific

Eligible Engine.  The Servicer, as agent

for the Issuer, shall be entitled to withdraw and apply funds from the Engine

Reserve Account for the payment of maintenance expenses with respect to the

related Eligible Engine or otherwise in accordance with the terms of the

applicable Lease Agreement with respect to the related Eligible Engine; provided,

however, that so long as a Servicer Default is then in effect, the

Issuer shall not be entitled to instruct the Servicer to make such withdrawal

except upon presentation of supporting documentation reasonably determined by

the Administrative Agent to comply with the terms of the applicable Lease

Agreement (which shall evidence such determination by written instrument

delivered to the Indenture Trustee).




 




Section 6.04  Security Deposit Account.




 




The Servicer shall maintain records that will identify

amounts on deposit in the Security Deposit Account subaccount to a specific

Eligible Engine.  The Servicer, as agent

for the Issuer, shall be entitled to withdraw and apply funds from the Security

Deposit Account in accordance with the terms of the applicable Lease Agreement

with respect to the related Eligible Engine; provided, however,

that so long as a Servicer Default is then in effect, the Issuer shall not be

entitled to instruct the Servicer to make such withdrawal except upon

presentation of supporting documentation reasonably determined by the

Administrative Agent to comply with the terms of the applicable Lease Agreement

(which shall evidence such determination by written instrument delivered to the

Indenture Trustee).




 




Section

6.05  Investment of Monies Held in

the Trust Account, Series Account, Engine Reserve Account, Restricted Cash

Account and the Security Deposit Account.




 




The Servicer shall direct the Indenture Trustee to

invest the amounts on deposit in the Trust Account, the Series Account,

the Engine Reserve Account, the Restricted Cash Account and the Security

Deposit Account as provided in Section 304 of the Indenture.  Investment Earnings on Eligible Investments

in the Series Account shall be available for distribution on each Payment

Date in accordance with the provisions of the related Supplement.  Investment Earnings on Eligible Investments

in the Restricted Cash Account, the Engine Reserve Account and the




 




19





























 




Security Deposit Account shall be retained in such Account and shall be

distributed in accordance with the provisions of the Indenture and the related

Supplements.




 




ARTICLE

VII




 




SERVICER

EVENTS OF DEFAULT; TERMINATION




 




Section 7.01  Servicer Events of Default.




 




The following events and conditions shall constitute “Servicer

Events  of Default”  upon their occurrence at any

time on or after the initial Transfer Date:




 




(i)            failure

on the part of the Servicer to remit to the Indenture Trustee any amount

required to be remitted under this Agreement within the time period required

under this Agreement; provided, however that the failure of the

Indenture Trustee to accept any remittance from the Servicer shall not

constitute a Servicer Event of Default;




 




(ii)           failure

on the part of the Servicer to deliver to the appropriate party any financial

statement or management report required to be delivered under this Agreement

within fifteen (15)  Business Days of when required to be

delivered under this Agreement;




 




(iii)          (A) failure

on the part of the Servicer to deliver a Servicer Report within five (5)

Business Days of the date required pursuant to Section 3.05 hereof or

(B) the Servicer delivers a Servicer Report which is materially incorrect

and the Servicer fails to correct such inaccuracy for a period of five (5)

Business Days after the earlier of (x) the Servicer becoming aware of such

inaccuracy or (y) the giving of written notice of such inaccuracy

(I) to the Servicer by the Indenture Trustee or (II) to the Servicer

and the Indenture Trustee by a Global Requisite Majority of Noteholders;




 




(iv)          failure

on the part of the Servicer duly to observe or perform in any material respect

any other of its respective covenants or agreements in this Agreement which

failure continues unremedied for a period of thirty (30) days after the earlier

of (x) any officer of the Servicer becoming aware of such failure or

(y) the giving of written notice of such failure (I) to the Servicer

by the Indenture Trustee or (II) to the Servicer and the Indenture Trustee

by a Global Requisite Majority of Noteholders;




 




(v)           if

any representation or warranty of the Servicer made in this Agreement or in any

certificate or other writing delivered pursuant hereto or any other Related

Documents is incorrect in any material respect as of the time when the same

shall have been made;




 




(vi)          the

entry by a court having jurisdiction in the premises of (A) a decree or

order for relief in respect of the Servicer in an involuntary case or

proceeding under any applicable federal or state bankruptcy, insolvency,

reorganization, or other similar law or (B) a decree or order adjudging

the Servicer bankrupt or insolvent, or approving as properly filed a petition

seeking reorganization of the Servicer, or arrangement or adjustment of the

Servicer’s assets, of or in respect of the Servicer under any applicable

federal or state law, or appointing a custodian, receiver, liquidator, assignee,

trustee, sequestrator, or other similar official of the Servicer or of any

substantial part of its property, or ordering the winding-up or liquidation of

the




 




20





























 




affairs of the Servicer, and the continuance of any such decree or

order for relief or any such other decree or order unstayed and in effect for a

period of ninety (90) consecutive days;




 




(vii)         the

commencement by the Servicer of a voluntary case or proceeding under any

applicable federal or state bankruptcy, insolvency, reorganization, or other

similar law or of any other case or proceeding to be adjudicated a bankrupt or

insolvent, or the consent by the Servicer to the entry of a decree or order for

relief in respect of the Servicer in an involuntary case or proceeding under

any applicable federal or state bankruptcy, insolvency, reorganization, or

other similar law or to the commencement of any bankruptcy or insolvency case

or proceeding against the Servicer, or the filing by the Servicer of a petition

or answer or consent seeking reorganization or relief under any applicable

federal or state law, or the consent by the Servicer to the filing of such

petition or to the appointment of or taking possession by a custodian,

receiver, liquidator, assignee, trustee, sequestrator, or similar official of

the Servicer or of any substantial part of its property, or the making by the

Servicer of an assignment for the benefit of creditors, or the failure by the

Servicer to pay its debts generally as they become due, or the taking of

corporate action by the Servicer in furtherance of any such action;




 




(viii)        any

assignment by the Servicer, or any attempt by the Servicer to assign its duties

or rights hereunder, except as specifically permitted hereunder;




 




(ix)           Tangible

Net Worth of the Willis Companies shall at any time be less than the sum of:

(i)  $75,000,000; plus (ii) if positive,

75% of the cumulative Net Income of the Willis Companies for each fiscal

quarter earned from and after December 31, 2000 (without any deduction for net

losses for any fiscal quarter); plus (iii) 75% of the net proceeds received by

Servicer from the issuance of common stock or preferred stock of Servicer after

January 1, 2001;




 




(for purposes of this clause (ix), the following terms shall have the

following meanings:




 




“Intangible Assets” shall mean all

assets which would be classified as intangible assets under GAPP consistently

applied, including without limitation, goodwill (whether representing the

excess of cost over book value of assets acquired or otherwise), patents,

trademarks, trade names, copyrights, franchises, and deferred charges

(including, without limitation, unamortized debt discount and expense,

organization costs, and research and development costs).  For purposes of this definition, prepayments

of taxes, license fees and other expenses shall not be deemed Intangible

Assets.




 




“Net Income” shall mean net income of

the Willis Companies after taxes, determined in accordance with GAAP.




 




“Net Worth” shall mean, at any particular

time, all amounts in conformity with GAAP, that would be included as

stockholder’s equity on a consolidated balance sheet of the Willis Companies

excluding other comprehensive income or loss resulting from the implementation

of SFAS 133.




 




“Subsidiary” shall mean a corporation or

other entity the shares of stock or other equity interests of which having

ordinary voting power (other than stock or other equity interests having such

power only by reason of the happening of a contingency) to elect a majority of

the board of directors or other managers of such corporation are at the time

owned, or the management of




 




21





























 




which is otherwise controlled, directly or indirectly through one or

more intermediaries or both, by the Servicer.




 




“Tangible Net Worth” shall mean Net

Worth minus Intangible Assets.




 




“Willis Companies” shall mean the

Servicer and its consolidated Subsidiaries.




 




(x)            failure

on the part of the Servicer to maintain a total debt-to-equity ratio of less

than or equal to 5.0 to 1.0;




 




(xi)           failure

on the part of the Servicer to maintain an EBIT Ratio equal to at least 1.20 to

1.0 on a rolling four (4) quarter basis;




 




(xii)          occurrence

of an “Event of Default” (as defined in the related agreements) under any debt

obligations of the Servicer (other than debt obligations which are nonrecourse

to the credit of the Servicer) in an amount greater than $5,000,000;




 




(xiii)         the

Servicer is consolidated with, merged with, or sells its properties and assets

substantially as an entity to another entity, unless the Servicer is the

surviving entity;




 




(xiv)        Reserved;




 




(xv)         Charles

F. Willis, IV ceases to be either an officer or director of the Servicer; provided,

however, that a Servicer Event of Default shall not have occurred if in

the event of the death or disability of Charles F. Willis, IV, the Servicer

notifies the Administrative Agent and takes the appropriate action as specified

by the Administrative Agent, but in no event later than 90 days after such

death or disability; or




 




(xvi)        the

Servicer shall fail to own one hundred percent of the beneficial ownership of

the Issuer.




 




Prior to the declaration of a Servicer Event of

Default, as provided in Section 7.01 above, a Global Requisite Majority of

Noteholders may waive in writing any past Servicer Event of Default.  Upon any such written waiver, any such

Servicer Event of Default shall be deemed to have been cured.  No such waiver shall extend to any

subsequent or other Servicer Event of Default or impair any right consequent to

it.




 




Section 7.02  Termination.




 




If a Servicer Event of Default, except for a Servicer

Event of Default as described in Section 7.0 l(xvi), shall have occurred

and be continuing, the Indenture Trustee shall, following the request of a

Global Requisite Majority of Noteholders, give written notice to the Servicer

and the Issuer of the termination of all of the rights and obligations of the

Servicer under this Agreement.  On the

receipt by the Servicer of such written notice and the acceptance by a successor

Servicer (the “Successor Servicer”) of its appointment, all rights and

obligations of the Servicer under this Agreement, including without limitation

the Servicer’s right hereunder to receive Servicing Fees accruing subsequent to

such termination date, shall cease and the same shall pass to and be vested in,

and assumed by, the Successor Servicer pursuant to and under this




 




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Agreement.  The Successor

Servicer is hereby authorized and empowered to execute and deliver, on behalf

of the Servicer, as attorney-in-fact or otherwise, any and all other

instruments or things necessary or appropriate to effect the purposes of such

notice of termination.




 




Notwithstanding any other provision of this Agreement,

the provisions of this Agreement are terminable by the Issuer, with or without

cause and without regard to whether a Servicer Event of Default has occurred,

upon thirty (30) day’s prior written notice to the Servicer; provided, however,  that

any such termination shall require the prior written consent of the Indenture

Trustee.




 




Section 7.03  Appointment of Successor.




 




(a)           After

the date on which the Servicer has received a notice of termination pursuant to

Section 7.02, the Indenture Trustee shall, at the direction of a Global

Requisite Majority of Noteholders, appoint a Successor Servicer designated by

such Global Requisite Majority of Noteholders.




 




(b)           Pending

appointment of a Successor Servicer hereunder, the Indenture Trustee shall

prepare the Servicer Report in accordance with Section 3.05 hereof.  So long as the Indenture Trustee actually

prepares such Servicer Report, the Indenture Trustee shall be entitled to

receive as additional compensation the Servicing Fee set forth in

Section 3.04 hereof.  Nothing

contained in this Section 7.03(b) shall be construed to require the

Indenture Trustee to perform any other obligation of the Servicer set forth in

this Agreement.




 




Section 7.04  Servicer to Cooperate.




 




The Servicer hereby agrees to cooperate with the Successor

Servicer appointed in accordance with Section 7.02 or Section 7.03

hereof, as applicable, in effecting the termination and transfer of the

responsibilities and rights of the Servicer hereunder to the Successor

Servicer, including, without limitation, the execution and delivery of

assignments of UCC financing statements, and the transfer to the Successor

Servicer for administration by it of all cash amounts then held by the Servicer

or thereafter received with respect to the Collateral.  The Servicer hereby agrees to transfer to

any Successor Servicer its electronic records and all other records,

correspondence and documents relating to the Collateral in the manner and at

such times as the Successor Servicer shall reasonably request.  The Servicer hereby designates the Successor

Servicer its agent and attorney-in-fact to execute transfers of UCC financing

statements and any other filings or instruments which may be necessary or

advisable to effect such transfer of the Servicer’s responsibilities and rights

hereunder.




 




Section 7.05  Remedies Not Exclusive.




 




Nothing in the preceding provisions of this

Article VII shall be interpreted as limiting or restricting the rights or

remedies which the Issuer, any Owner Trust, the Indenture Trustee, the

Noteholders, the Indemnified Parties or any other Person would otherwise have

at law or in equity against the Servicer on account of the breach or violation

of any provision of this Agreement, including without limitation the right to

recover full and complete damages on account thereof to the extent not

inconsistent with Section 5.02 hereof.




 




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ARTICLE

VIII




 




ASSIGNMENT




 




Section 8.01  Assignment to Indenture Trustee.




 




It is understood that this Agreement and all rights of

the Issuer hereunder will be assigned by the Issuer to the Indenture Trustee,

for the benefit of the Indenture Trustee and the Noteholders, and may be

subsequently assigned by the Indenture Trustee to any successor Indenture

Trustee.  The Servicer hereby expressly

agrees to each such assignment and agrees that all of its duties, obligations,

representations and warranties hereunder shall be for the benefit of, and may

be enforced by, the Indenture Trustee, and, if provided in the Indenture, by

the Noteholders.




 




Section 8.02  Assignment by Servicer.




 




None of the rights or obligations of the Servicer

hereunder may be assigned without the prior written consent of the Issuer and

the Indenture Trustee (acting upon the instructions of a Global Requisite Majority

of Noteholders; provided  that nothing herein shall preclude the

Servicer from performing its duties hereunder through the use of agents to the

extent that such use is consistent with the Servicer’s business practices in

dealing with similar assets held for its own account; and provided, further, that

the use of an agent shall not relieve the Servicer from any of its obligations

hereunder.




 




ARTICLE

IX




 




MISCELLANEOUS

PROVISIONS




 




Section 9.01  Amendment.




 




(a)           This

Agreement may be amended from time-to-time by the Servicer and the Issuer, but

without the consent of any of the Noteholders, to cure any ambiguity, to

correct or supplement any provision herein that may be inconsistent with any

other provisions herein, or to add or amend any other provisions with respect

to matters or questions arising under this Agreement; provided, however, that

such action shall not, as evidenced by an Opinion of Counsel, adversely affect

in any material respect the interests of the Noteholders, the Indenture

Trustee, the Administrative Agent or any other Indemnified Party.




 




(b)           This

Agreement may also be amended from time-to-time by written amendment duly

executed by the parties hereto with the consent of a Global Requisite Majority

of Noteholders; provided, however, that such amendment may

not, without the consent of all of the Noteholders (i) reduce in any

manner the amount of, or accelerate or delay the timing of, collections of

payments on the Collateral or distributions that are required to be made for

the benefit of the Noteholders, (ii) reduce the aforesaid percentage of

Noteholders which are required to consent to any such amendment or take any

other action hereunder, or (iii) modify this Section 9.01.  The Servicer shall deliver copies of any

amendment to this Agreement to the Indenture Trustee.




 




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Section 9.02  Waivers.




 




No failure of delay on the part of the Issuer or any

Owner Trust in  exercising any power, right or remedy under this Agreement

shall operate as a waiver thereof, nor shall any single or partial exercise of

any such power, right or remedy preclude any other or further exercise thereof

or the exercise of any other power, right or remedy.




 




Section 9.03  Notices.




 




All communications and notices pursuant hereto to any

party shall be in writing or by telegraph or telecopy and addressed or

delivered to it at its address (or in case of telecopy, at its telecopy number

at such address) as follows or at such other address as may be designated by it

by notice to the other party and, if mailed or sent by telegraph, shall be

deemed given when mailed, communicated to the telegraph office or telecopy:




 




(a)           in

the case of the Servicer:




 




Willis Lease Finance

Corporation


2320 Marinship Way, Suite 300


Sausalito, California 94965


Telecopy:  (415) 331-0607


Attention:  Counsel




 




(b)           in

the case of the Issuer:




Willis Engine Funding LLC


2320 Marinship Way


Sausalito, California 94965


Telecopy:  (415) 331-0607


Attention: Chief Financial Officer




 




with a copy to:




 




Gibson, Dunn & Crutcher LLP


333 South Grand Avenue


Los Angeles, California 90071


Attention: Brian D. Kilb




 




Section 9.04  Costs and Expenses.




 




The Servicer will pay all expenses incident to the

performance of its obligations under this Agreement and the Servicer agrees to

pay all reasonable out-of-pocket costs and expenses of the Issuer and each

Owner Trust,  including fees and expenses of counsel, in connection with

the enforcement of any obligation of the Servicer hereunder.




 




Section 9.05  Third Party Beneficiaries.




 




The Indenture Trustee, the Noteholders, the

Administrative Agent and each Indemnified Party and each Owner Trust are  express

third party beneficiaries to this Agreement.




 




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Section 9.06  Survival of Representations.




 




The respective agreements, representations, warranties

and other statements by the Issuer and the Servicer set forth in or made

pursuant to this Agreement shall remain in full force and effect and will

survive the Closing Date.




 




Section 9.07  Headings and Cross-References.




 




The various headings in this Agreement are included

for convenience only and shall not affect the meaning or interpretation of any

provision of this Agreement.  References

in this Agreement to Section names or numbers are to such Sections of this

Agreement.




 




Section 9.08  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

conflicts of law principles thereof.




 




Section 9.09  Consent to Jurisdiction.




 




Each of the parties hereto irrevocably submits to the

non-exclusive jurisdiction of any state or Federal court sitting in New York

County over any suit, action or proceeding arising out of or relating to this

Agreement.  Each of the parties hereto

irrevocably waives, to the fullest extent permitted by law, any objection which

it may have to the laying of the venue of any such suit, action or proceeding

brought in such a court and any claim that any such suit, action or proceeding

brought in such a court has been brought in an inconvenient forum.  Each of the parties hereto agrees that the

final judgment in any such suit, action or proceeding brought in such a court

shall be conclusive and binding upon each of the parties hereto and may be

enforced by the courts of New York (or any other courts to the jurisdiction of

which it is subject) by a suit upon such judgment, provided that service of

process is effected upon it as permitted by law; provided, however, that

each of the parties hereto does not waive, and the foregoing provisions of this

sentence shall not constitute or be deemed to constitute a waiver of,

(i) any right to appeal any such judgment, to seek any stay or otherwise

to seek reconsideration or review of any such judgment or (ii) any stay of

execution or levy pending an appeal from, or a suit, action or proceeding for

reconsideration or review of, any such judgment.




 




Section 9.10  Counterparts.




 




This Agreement may be executed in two or more

counterparts and by different parties on separate counterparts, each of which

shall be an original, but all of which together shall constitute one and the

same instrument.




 




Section 9.11  General Interpretive Principles.




 




For purposes of this Agreement, except as otherwise

expressly provided or unless the context otherwise requires:




 




(a)           accounting

terms not otherwise defined herein have the meanings assigned to them in

accordance with generally accepted accounting principles as in effect on the

date hereof,




 




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(b)           references

herein to “Articles”, “Sections”, “Subsections”, “paragraphs”, and other

subdivisions without reference to a document are to designated Articles,

Sections, Subsections, paragraphs and other subdivisions of this

Agreement;




 




(c)           a

reference to a Subsection section without further reference to a

Section is a reference to such Subsection section as contained in the same

Section in which the reference appears, and this rule shall also apply to

paragraphs and other subdivisions;




 




(d)           the

words “herein”, “hereof”, “hereunder” and other words of similar import refer

to this Agreement as a whole and not to any particular provision; and




 




the term “include” or “including” shall mean without

limitation by reason of enumeration.




 




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IN WITNESS WHEREOF, the undersigned have caused this

Agreement to be duly executed by their respective officers thereunto duly

authorized as of the date first above written.




 




	

   


  	

  WILLIS LEASE FINANCE CORPORATION


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/ DONALD A. NUNEMAKER


  	

   


  
	

   


  	

   


  	

  Name: Donald A. Nunemaker


  
	

   


  	

   


  	

  Title: Executive Vice

  President,


  Chief Operating Officer


  
	

   


  	

   


  	

   


  
	

   


  	

  WILLIS ENGINE FUNDING LLC


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/ MONICA J. BURKE


  	

   


  
	

   


  	

   


  	

  Name: Monica J. Burke


  
	

   


  	

   


  	

  Title: Chief Financial Officer


  





 




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