Exhibit

10.36




 




	

   


  





 




 




WILLIS LEASE

FINANCE CORPORATION




 




AND




 




WILLIS ENGINE

FUNDING LLC




 




AMENDED AND

RESTATED


SERVICING AGREEMENT




 




Dated as of

December 13, 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 AMENDED AND RESTATED INDENTURE DATED AS OF DECEMBER

13, 2002 FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.




 





























 




AMENDED AND RESTATED


SERVICING AGREEMENT




 




This Amended and

Restated Servicing Agreement, dated as of December 13, 2002 (the  “Agreement”) is entered into

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

Willis Engine Funding LLC (the  “Issuer”).




 




RECITALS




 




A.                                   The

Servicer and the Issuer are party to the Servicing Agreement dated as of

September 12, 2002 (the “Original Servicing Agreement”); and




 




B.                                     The

Servicer and the Issuer have agreed to amend and restate the Original Servicing

Agreement as provided herein.




 




ARTICLE I




 




DEFINITIONS




 




Section 1.01  Definitions.




 




Except as

otherwise specified, capitalized terms used herein shall have the meanings set

forth in Exhibit B to the Amended and Restated Indenture dated as of December

13, 2002 (as amended, restated or otherwise supplemented, the “Indenture”)

between the Issuer and The Bank of New York, as Indenture Trustee; 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:




 




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);




 




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(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.




 




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.




 




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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.




 




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,

Excess Assets, any insurance policies required by the Lease Agreements and each

Supplement to be maintained or otherwise maintained with respect to the

Contributed Engines and Excess Assets (the “Insurance Policies”),




 




(ii)                                  enforce

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

Contributed Engines, the Excess Assets and 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 Excess Assets,




 




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(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 and Excess

Assets,




 




(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 and Excess Assets 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, the

Excess Assets 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 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.




 




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(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 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 




 




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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

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.




 




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(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.  The

Servicer has implemented 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 and the Excess Assets in accordance with the

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 or Excess

Assets 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 and Excess Asset 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.




 




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(f)                                    Capital

Improvements.  The Servicer as agent

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

Contributed Engine and Excess Asset 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 and  Excess Asset that are otherwise desirable in

the Servicer’s reasonable opinion.




 




(g)                                 Lost

or Destroyed Engines.  If any

Contributed Engine or Excess Asset 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 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, the Excess Assets 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 Excess Assets 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 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, or any Excess Asset, 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.




 




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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 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.




 




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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 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 




 




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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 or before 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.




 




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.




 




12





























 




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 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.




 




13





























 




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.




 




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;




 




(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




 




14





























 




(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.




 




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 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.




 




The Servicer has

indicated in its records that it is servicing and administering the Collateral

in its capacity as Servicer hereunder and that the services provided hereunder

have been undertaken 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 




 




15





























 




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, Contributed

Engines and Excess Assets, 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:




 




(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;




 




16





























 




(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.




 




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.




 




17





























 




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 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.




 




18





























 




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 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”:




 




(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 




 




19





























 




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 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 




 




20





























 




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 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 a Servicer EBIT Ratio equal to at least

1.20 to 1.0 on a rolling four (4) quarter basis;




 




21





























 




(for purposes of

this Clause (xi), the following terms shall have the following meanings:




 




“Servicer EBIT”

shall mean, for any period, the sum of (i) Servicer Net Income less any

extraordinary gain or loss included in the calculation thereof, plus (ii)

amounts deducted for interest expense and income taxes, plus (iii) to the

extent not included in clause (ii), amounts deducted for the non-cash write-off

of $781,000 in previously paid legal and bank fees related to the former WLFC

Funding Corporation loan from Wachovia Bank, N.A.




 




“Servicer

EBIT Ratio” shall mean the ratio of (a) Servicer EBIT to

(b) Servicer Net Interest Expense, in each case for the most recently concluded

four (4) fiscal quarters (except for the first three fiscal quarters of the

Servicer following the Closing Date, Servicer EBIT and Servicer Net Interest

Expense through the end of any quarter under consideration will, for purposes

of this calculation, be calculated on an annualized basis by multiplying actual

Servicer EBIT or Servicer Net Interest Expense for the fiscal quarters which

have been completed since the Closing Date by a fraction, the numerator of

which is four (4) and the denominator of which is the number of full fiscal

quarters then completed).




 




“Servicer Net Income”

shall mean, for any period, the net income of the Servicer.




 




“Servicer Net Interest Expense” shall mean, for any period,

the interest expense of the Servicer (excluding, to the extent otherwise

included therein, amounts deducted for the non-cash write-off of $781,000 in

previously paid legal and bank fees related to the former WLFC Funding

Corporation loan from Wachovia Bank, N.A.) plus rent expenses of the Servicer.




 




(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 




 




22





























 




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 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 




 




23





























 




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.




 




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 




 




24





























 




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.




 




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




 




25





























 




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.




 




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; 




 




26





























 




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,




 




(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.




 




Section 9.12 

Effect on Original Servicing Agreement.




 




The Servicer and

the Issuer hereby agree that as of the Effective Date the terms and provisions

of the Original Servicing Agreement shall be and hereby are amended and

restated in their entirety by the terms and provisions of this Agreement.




 




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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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