SECURITIES AND EXCHANGE COMMISSION

0001104659-02-003730.txt : 20020813 0001104659-02-003730.hdr.sgml : 20020813 20020813151212 ACCESSION NUMBER: 0001104659-02-003730 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILLIS LEASE FINANCE CORP CENTRAL INDEX KEY: 0001018164 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES [5080] IRS NUMBER: 680070656 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15369 FILM NUMBER: 02729434 BUSINESS ADDRESS: STREET 1: 2320 MARINSHIP WAY STREET 2: STE 300 CITY: SAUSALITO STATE: CA ZIP: 94965 BUSINESS PHONE: 4153315281 MAIL ADDRESS: STREET 1: 2320 MARINSHIP WAY STREET 2: SUITE 300 CITY: SAUSALITO STATE: CA ZIP: 94965 10-Q 1 j4400_10q.htm 10-Q SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-28774

WILLIS LEASE FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		68-0070656
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2320 Marinship Way, Suite 300		94965
Sausalito, CA		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 331-5281

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Title of Each Class		Outstanding at August 9, 2002
Common Stock, $0.01 Par Value		8,833,978

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

INDEX


PART I		FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

		Consolidated Balance Sheets As of June 30, 2002 and December 31, 2001

		Consolidated Statements of Income Three and six months ended June 30, 2002 and 2001

		Consolidated Statements of Shareholders’ Equity and Comprehensive Income Six months ended June 30, 2001 and 2002

		Consolidated Statements of Cash Flows Six months ended June 30, 2002 and 2001

		Notes to Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II		OTHER INFORMATION

Item 4.		Submission of Matters to a Vote of Security Holders

Item 6.		Exhibits and Reports on Form 8-K

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	June 30, 2002			December 31, 2001
ASSETS
Cash and cash equivalents including restricted cash of $25,929 and $20,351 at June 30, 2002 and December 31, 2001, respectively	$	40,318		$	24,817
Equipment held for operating lease, less accumulated depreciation of $49,302 and $40,097 at June 30, 2002 and December 31, 2001, respectively	493,854			488,042
Net investment in direct finance lease	7,073			7,299
Operating lease related receivable, net of allowances of $284 and $175 at June 30, 2002 and December 31, 2001, respectively	3,219			2,488
Net assets of discontinued operations	—			1,130
Investments	1,480			1,480
Assets under derivative instruments	499			—
Other assets	6,742			7,197
Total assets	$	553,185		$	532,453

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	16,280		$	4,450
Liabilities under derivative instruments	1,990			2,906
Deferred income taxes	23,893			22,804
Notes payable	361,708			359,547
Maintenance reserves	34,908			31,761
Security deposits	5,232			4,630
Unearned lease revenue	5,586			4,774
Total liabilities	449,597			430,872

Shareholders’ equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized; none outstanding)	—			—
Common stock, ($0.01 par value, 20,000,000 shares authorized; 8,830,181 and 8,825,953 shares issued and outstanding as of June 30, 2002 and December 31, 2001, respectively)	88			88
Paid-in capital in excess of par	61,555			61,532
Accumulated other comprehensive loss, net of tax of $871 and $1,091 as of June 30, 2002 and December 31, 2001, respectively	(1,374		)	(1,815		)
Retained earnings	43,319			41,776
Total shareholders’ equity	103,588			101,581

Total liabilities and shareholders’ equity	$	553,185		$	532,453

See accompanying notes to the consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2002			2001			2002			2001
REVENUE
Lease revenue	$	13,560		$	15,605		$	27,177		$	30,127
(Loss)/gain on sale of leased equipment	(152		)	3,622			583			6,197
Total revenue	13,408			19,227			27,760			36,324

EXPENSES
Depreciation expense	4,791			4,413			9,508			8,061
General and administrative	3,087			3,665			6,778			6,879
Total expenses	7,878			8,078			16,286			14,940

Earnings from operations	5,530			11,149			11,474			21,384

Interest expense	4,774			6,469			9,298			12,754
Interest income	(145		)	(269		)	(235		)	(524		)
Residual share	—			81			—			189
Net interest and finance costs	4,629			6,281			9,063			12,419

Income from continuing operations before income taxes	901			4,868			2,411			8,965
Income taxes	(324		)	(1,899		)	(868		)	(3,496		)
Income from continuing operations	577			2,969			1,543			5,469

DISCONTINUED OPERATIONS

Income from discontinued operations (net of income tax benefit of $31 and $10 for three and six months ended June 30, 2001, respectively)	—			(48		)	—			(15		)

(Loss) on disposal of discontinued operations (net of income tax benefit of $357 and $493 for the three and six months ended June 30, 2001, respectively)	—			(558		)	—			(770		)
	—			(606		)	—			(785		)

Net income	$	577		$	2,363		$	1,543		$	4,684

Basic earnings per common share:
Income from continuing operations	$	0.07		$	0.34		$	0.17		$	0.63
Discontinued operations	—			(0.07		)	—			(0.09		)
Net income	$	0.07		$	0.27		$	0.17		$	0.54

Diluted earnings per common share:
Income from continuing operations	$	0.07		$	0.33		$	0.17		$	0.61
Discontinued operations	—			(0.06		)	—			(0.08		)
Net income	$	0.07		$	0.27		$	0.17		$	0.53

Average common shares outstanding	8,830			8,735			8,829			8,722
Diluted average common shares outstanding	8,852			8,905			8,854			8,896

See accompanying notes to the consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

Six Months Ended June 30, 2001 and 2002

(In thousands)

(Unaudited)

	Issued and outstanding shares of common stock	Common Stock		Paid-in Capital in Excess of par		Accumulated Other Comprehensive Loss (net)			Retained earnings		Total shareholders’ equity
Balances at December 31, 2000	8,705	$	87	$	60,771	$	—		$	34,832	$	95,690

Net income	—	—		—		—			4,684		4,684

Other comprehensive loss
Transition adjustment for hedging instruments as of January 1, 2001, net of tax of $290	—	—		—		(453		)	—		(453		)
Net loss on cashflow hedging instruments, net of tax of $512	—	—		—		(801		)	—		(801		)
Total comprehensive income											3,430

Shares issued	78	1		465		—			—		466

Balances at June 30, 2001	8,783	$	88	$	61,236	$	(1,254	)	$	39,516	$	99,586

Balances at December 31, 2001	8,826	$	88	$	61,532	$	(1,815	)	$	41,776	$	101,581

Net income	—	—		—		—			1,543		1,543

Other comprehensive income
Net gain on cashflow hedging instruments, net of tax of $220	—	—		—		441			—		441
Total comprehensive income											1,984

Shares issued	4	—		23		—			—		23

Balances at June 30, 2002	8,830	$	88	$	61,555	$	(1,374	)	$	43,319	$	103,588

See accompanying notes to the consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

		Six Months Ended
		2002			2001
Cash flows from operating activities:
Net income		$	1,543		$	4,684
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		9,508			8,596
Allowances and provisions		109			—
Stock option compensation		—			162
Loss on derivative instruments		35			—
Gain on sale of leased equipment		(583		)	(6,197		)
Loss on sale of discontinued operations		—			613
Changes in assets and liabilities:
Receivables		(800		)	1,923
Other assets		1,169			(235		)
Accounts payable and accrued expenses		(440		)	1,196
Deferred income taxes		868			4,783
Residual share payable		—			190
Unearned lease revenue		701			1,160
Maintenance deposits		3,147			5,002
Security deposits		589			217
Net cash provided by operating activities		15,846			22,094
Cash flows from investing activities:
Proceeds from sale of equipment held for operating lease (net of selling expenses)		13,256			26,244
Adjustment to proceeds from sale of discontinued operations		—			771
Purchase of equipment held for operating lease		(14,412		)	(84,912		)
Purchase of property, equipment and furnishings		(163		)	(498		)
Investment at cost		—			(700		)
Principal payments received on direct finance lease		226			346
Net cash used in investing activities		(1,093		)	(58,749		)
Cash flows from financing activities:
Proceeds from issuance of notes payable		7,361			94,191
Debt issuance cost		(647		)	(1,463		)
Purchase of derivative instruments		(789		)	—
Proceeds from issuance of common stock		23			304
Principal payments on notes payable		(5,200		)	(47,536		)
Net cash provided by financing activities		748			45,496
Increase in cash and cash equivalents		15,501			8,841
Cash and cash equivalents at beginning of period including restricted cash of $20,351 and $16,666 at December 31, 2001 and 2000, respectively		24,817			25,371
Cash and cash equivalents at end of period including restricted cash of $25,929 and $25,359 at June 31, 2002 and 2001, respectively		$	40,318		$	34,212

Supplemental disclosures of cash flow information:
Net cash paid for:	Interest	$	8,663		$	12,327
	Income Taxes	$	11		$	59

Supplementary disclosures of non-cash investing activities:

A liability of $12,270 was incurred in connection with the Company’s purchase of three engines.

See accompanying notes to the consolidated financial statements

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Basis of Presentation

Consolidated Financial Statements

The accompanying unaudited consolidated financial statements of Willis Lease Finance Corporation and its subsidiaries (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 2002, and December 31, 2001, and the results of its operations for the three and six month periods ended June 30, 2002 and 2001 and its cash flows for the six month periods ended June 30, 2002 and 2001. The results of operations and cash flows for the period ended June 30, 2002 are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 2002.

Management considers the continuing operations of the Company to operate in one reportable segment.

2. Management Estimates

These financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to residual values, estimated asset lives, bad debts, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

3. Commitments

The Company has two leases for its office space. The annual lease rental commitment for the Sausalito, California premises is approximately $365,000 and the lease expires on May 31, 2003. The Company also leases office space from its former parts subsidiary in San Diego, California. This annual lease rental commitment is approximately $71,000 and the lease expires on November 30, 2002.

Under the terms of the Sichuan Snecma joint venture (see note 4 below), the Company is committed to fund not more than an additional $1.5 million to the joint venture over the next three years.

4. Investments

In July 1999, the Company entered into an agreement to participate in a joint venture formed as a limited company - Sichuan Snecma Aero-engine Maintenance Co. Ltd (“Sichuan Snecma”). Sichuan Snecma focuses on providing maintenance services for CFM56 series engines. Other participants in the joint venture are China Southwest Airlines, Snecma Services and Beijing Kailan Aviation Technology Development and Services Corporation. The Company’s investment in Sichuan Snecma at June 30, 2002 is $1.5 million. This investment represents approximately a 7% interest in the venture. The investment is recorded at cost and reviewed for impairment quarterly. No adjustment to the carrying value is required at June 30, 2002.

5. Discontinued Operations

In November 2000, the Company sold its membership interests in its engine maintenance, repair and testing joint venture with Chromalloy Gas Turbine Corporation, Pacific Gas Turbine Center LLC (“PGTC LLC”), and its aircraft parts and components subsidiary, Willis Aeronautical Services, Inc. (“WASI”), to SRT Group America. SRT Group America is an affiliate of FlightTechnics, LLC, an entity that owns 15% of the Company’s common stock.

As part of these transactions, the Company agreed to retain the lease portfolio of engines maintained and managed by WASI. These engines are not generally considered part of the Company’s core portfolio and either will be sold or are subject to put option arrangements where, at the option of the Company, these engines can be sold to WASI, now renamed avioserv, an SRT Group America affiliate, for part-out at pre-determined prices.

At December 31, 2001, there were 4 engines with a book value of $1.2 million classified as Net Assets of Discontinued Operations. As of January 1, 2002 these assets have been reclassified to Equipment held for operating lease. However, the Company has given notice of its intent to exercise its put options in respect of 2 of these engines which have a book value equal to the option price. At June 30, 2002, the sale was estimated to close in the third quarter. The results of operations from these assets are included in continuing operations under the appropriate line items (previously disclosed as Discontinued Operations in 2001).

In the three and six months ended June 30, 2001, net losses from discontinued operations were $48,000 and $15,000 respectively. In the three and six months ended June 30, 2001, the losses on disposal of discontinued operations were $558,000 and $770,000, respectively.

6. Notes Payable

At June 30, 2002, notes payable consists of bank loans totaling $361.7 million payable over periods of 1 to 7 years with interest rates varying between approximately 3.8% and 8.6%.

At June 30, 2002, the Company had a $125.0 million revolving credit facility to finance the acquisition of aircraft engines, aircraft and spare parts for lease as well as for general working capital purposes. As of June 30, 2002, $11.8 million was available under this facility. The facility matures in May, 2004. The interest rate on this facility at June 30, 2002 is LIBOR plus 1.75%.

structure facilitates public or private securitized note issuances by the special purpose finance subsidiary. The subsidiary is consolidated for financial statement presentation purposes. The Company has guaranteed the obligations under the facility on a limited basis, up to an amount equal to the greater of: (i) the lesser of $5.0 million and 20% of the outstanding obligations or (ii) 10% of the outstanding obligations. At June 30, 2002, the interest rate was a commercial paper based rate plus a spread of 1.75%.

At June 30, 2002, the Company had a $25.6 million term loan facility available to a wholly-owned consolidated special purpose subsidiary of the Company, WLFC-AC1 Inc., for the financing of jet aircraft engines transferred by the Company to such subsidiary. The facility is a five-year term loan with final maturity of June 30, 2005. The interest rate is LIBOR plus 2.05%. This facility is fully drawn.

At June 30, 2002, the Company had a $35.0 million revolving credit facility with a financial institution. Borrowings under the facility accrue interest at a rate of LIBOR plus 2.00% per annum and are secured by specific engines and leases pledged to the lender. The facility has a 12-month revolving period which may be renewed annually by agreement between the Company and the lender. Borrowings under the facility have maturities that coincide with the maturities of the individual leases serving as collateral. At June 30, 2002, the Company had $12.5 million available under this facility.

At June 30, 2002, LIBOR was 1.84% and the commercial paper rate was 2.04%. At June 30, 2001, the rates were 3.86% and 6.8%, respectively.

The following is a summary of the aggregate maturities of notes payable on June 30, 2002 (dollars in thousands):

Year Ending December 31,

2002	$	30,600
2003	30,527
2004	154,705
2005	61,091
2006	28,313
2007 and thereafter	56,472

	$	361,708

7. Derivative Instruments

The Company holds a number of interest rate swaps to mitigate its exposure to changes in interest rates, in particular LIBOR, as a large portion of the Company’s borrowings are at variable rates. In addition, WLFC Funding Corporation is required under its credit agreement to hedge a portion of its borrowings. These swaps have been documented and designated as cash flow hedges under SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” (as amended by SFAS 137 and 138). At June 30, 2002, the Company was a party to interest rate swap agreements with notional outstanding amounts of $65.0 million, remaining terms of between 2 and 23 months and fixed rates of between 5.8% and 6.405%. The fair value of these swaps at June 30, 2002, was negative $2.0 million and represented the estimated amount the Company would have to pay to terminate the swaps. The Company purchased a number of forward- commencing interest rate caps, documented and designated as cash flow hedges, during the quarter. These caps have notional amounts of $60.0 million, with 3 year terms, and effective dates commencing 2003 and rates capped at 5.5%

The Company reviews the effectiveness of the swaps on a quarterly basis and adjusts the fair value of the swaps through either Other Comprehensive Income and/or Earnings for the period. For the six months ended June 30, 2002, the change in fair value of the swaps recorded to Other Comprehensive Income was $604,000 (net of tax of $312,000) and there was no change in fair value recognized in earnings. Interest expense for the three months ended June 30, 2002 and

2001, was increased due to the Company’s interest rate hedges by approximately $923,000 and $377,000, respectively. Interest expense for the six months ended June 30, 2002 and 2001 was increased due to the Company’s interest rate hedges by approximately $1.7 million and $427,000, respectively. Reclassification into earnings in future periods may occur if the effectiveness of the interest rate swaps is reduced or they are terminated ahead of their maturity. It is not possible to ascertain the effect on earnings for the remainder of 2002 of a reduction in effectiveness at this time and it is the Company’s intention to hold the swaps until their maturity.

The Company reviews the fair value of the forward-commencing caps quarterly and changes to the fair value are recorded in Other Comprehensive Income and/or Earnings. Approximately $163,000 (net of tax of $92,000) was recorded to Other Comprehensive Income during the quarter ended June 30, 2002, due to changes in the fair value attributable to the effective portion of the caps. Approximately $35,000 was charged to Interest Expense during the quarter ended June 30, 2002 due to the change in fair value attributable to the ineffective portion of the caps. At June 30, 2002, the fair value of the caps was positive $499,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company’s core business is acquiring and leasing, primarily pursuant to operating leases, commercial aircraft spare engines and related aircraft equipment; and the selective purchase, sale and resale of commercial aircraft engines (collectively “equipment”).

Critical Accounting Policies and Estimates

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:

Leasing Related Activities: Revenue from leasing of equipment is recognized as operating lease or finance lease revenue over the terms of the applicable lease agreements. Where collection cannot be reasonably assured, for example, upon a lessee bankruptcy, the Company does not recognize revenue. The Company also estimates and charges to income a provision for bad debts based on its experience in the business and with each specific customer and the level of past due accounts. The financial condition of the Company’s customers may deteriorate and result in actual losses exceeding the estimated allowances. In addition, any deterioration in the financial condition of the Company’s customers may adversely affect future lease revenues. The vast majority of the Company’s leases are accounted for as operating leases. Under an operating lease, the Company retains title to the leased equipment, thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment.

The Company generally depreciates engines on a straight-line basis over 15 years to a 55% residual value. Spare parts packages are generally depreciated on a straight-line basis over 15 years to a 25% residual value. Aircraft are generally depreciated on a straight-line basis over 13-20 years to a 15%-17% residual value. For equipment that is leased with the intent to disassemble upon lease termination, the Company depreciates the equipment over its estimated lease term to a residual value based on an estimate of the wholesale value of the parts after disassembly. If useful lives or residual values are lower than those estimated by the Company, upon sale of the equipment, a loss may be realized.

At the commencement of a lease, the Company often collects security deposits (normally equal to at least one month’s lease payment) and, both at lease commencement and on an on-going basis, maintenance reserves from the lessee based on the creditworthiness of the lessee. The security deposit is returned to the lessee after all lease conditions have been met. Maintenance reserves are accumulated in accounts maintained by the Company or the Company’s lenders and are used when normal repair associated with engine use or maintenance is required. In many cases, to the extent that cumulative maintenance reserves are inadequate to fund normal repairs required prior to return of the engine to the Company, the lessee is obligated to cover the shortfall. Recovery is therefore dependent on the financial condition of the lessee.

Sales Related Activities: For equipment sold out of the Company’s lease portfolio or which was acquired for resale, the Company recognizes the gain or loss associated with the sale or the gross proceeds from equipment acquired for resale as revenue. Gain consists of sales proceeds less the net book value of the equipment sold and any costs directly associated with the sale. Additionally, to the extent that any deposits or reserves are not included in the sale and the purchaser of the equipment assumes any liabilities associated therewith, such deposits and reserves are included in the gain on sale. If useful lives or residual values (which estimates effect the net book value of the equipment) are lower than those estimated by the Company, upon sale of the equipment, a loss may be realized.

Asset Valuation: The Company regularly reviews its portfolio of equipment for impairment in accordance with SFAS144, “Accounting for the Impairment or Disposal of Long-lived Assets”. Such review necessitates estimates of future cash flows over the useful life of the asset including residual values and component values. The estimates are based on currently available market data and are subject to fluctuation from time to time. The Company initiates its review whenever events or changes in circumstances indicate that the carrying amount of equipment that is a long-lived asset may not be recoverable. Recoverability of equipment is measured by comparison of its carrying amount to the expected future undiscounted cash flows (without interest charges) that the equipment is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the equipment exceeds it fair market value. Significant management judgment is required in the forecasting of future operating results which are used in the preparation of projected undiscounted cash flows and should different conditions prevail, material write downs may occur.

Results of Operations

Three months ended June 30, 2002 compared to the three months ended June 30, 2001:

Leasing Related Activities. Lease related revenue for continuing operations for the quarter ended June 30, 2002 decreased 13% to $13.6 million from $15.6 million for the comparable period in 2001. This decrease mainly reflects an increased amount of equipment off-lease, offset by an increase in the lease portfolio. At June 30, 2002 and 2001, respectively, approximately 20% and 7% of equipment by book value were off-lease. The aggregate of net book value of leased equipment and net investment in direct finance lease at June 30, 2002 and 2001 was $500.9 million and $473.3 million, respectively.

During the quarter ended June 30, 2002, one engine from the lease portfolio was sold, and a loss of $0.2 million was realized. During the quarter ended June 30, 2002, the Company added $23.4 million of equipment and capitalizable costs to its lease portfolio.

During the quarter ended June 30, 2001, 7 engines were added to the Company’s lease portfolio at a cost of $43.0 million. The Company sold two engines to third parties from the lease portfolio. The engines sold had a net book value of $9.6 million and realized a gain of $3.6 million.

Depreciation Expense. Depreciation expense for continuing operations increased 8% to $4.8 million for the quarter ended June 30, 2002 from the comparable period in 2001 mainly due to the increase in the lease portfolio and the reclassification of engines previously disclosed as discontinued operations.

General and Administrative Expenses. General and administrative expenses decreased 16% to $3.1 million for the quarter ended June 30, 2002, from the comparable period in 2001 mainly due to decreased staffing and marketing costs.

Net interest and finance costs. Overall, net interest and finance costs, which comprises interest expense, residual sharing expense and interest income, decreased 26% to $4.6 million for the quarter ended June 30, 2002 from the comparable period in 2001. Interest expense decreased 26% to $4.8 million for the quarter ended June 30, 2002 from the comparable period in 2001, due to a decrease in interest rates, partially offset by an increase in average debt. Residual sharing expense related to debt was $0.0 million for the quarter ended June 30, 2002 compared with $0.1 million for the same period in 2001. There were no residual sharing arrangements applicable to the Company’s engines as of June 30, 2002 (in 2001, two engines were subject to residual sharing arrangements). Interest income for the quarter ended June 30, 2002 was $0.1 million compared to $0.3 million for the comparable period in 2001 due mainly to the reduction in interest rates. Interest is earned on cash and deposits held.

Income Taxes. Income tax expense for continuing operations for the quarter ended June 30, 2002 was $0.3 million compared to $1.9 million for the comparable period in 2001. The effective tax rate for the quarters ended June 30, 2002 and 2001 was 36% and 39%, respectively due to the Company’s election, in the fourth quarter of 2001, for Extraterritorial Income Exclusion relief relating to certain qualifying assets.

Six months ended June 30, 2002 compared to the six months ended June 30, 2001:

Leasing Related Activities. Lease related revenue for continuing operations for the six months ended June 30, 2002 decreased 10% to $27.2 million from $30.1 million for the comparable period in 2001. This decrease mainly reflects an increased amount of equipment off-lease, offset by an increase in the lease portfolio. At June 30, 2002 and 2001, respectively, approximately 20% and 7% of equipment by book value were off-lease. The aggregate of net book value of leased equipment and net investment in direct finance lease at June 30, 2002 and 2001 was $500.9 million and $473.3 million, respectively.

During the six months ended June 30, 2002, three engines from the lease portfolio were sold. The engines sold had a total net book value of $12.7 million and realized a gain of $0.6 million. During the six months ended June 30, 2002, the Company added $26.7 million of equipment and capitalizable costs to its lease portfolio.

During the six months ended June 30, 2001, 15 engines were added to the Company’s lease portfolio at a cost of $84.9 million. The Company sold 4 engines from the lease portfolio to third parties. The engines sold had a net book value of $20.0 million and realized a gain of $6.2 million.

Depreciation Expense. Depreciation expense for continuing operations increased 18% to $9.5 million for the six months ended June 30, 2002 from the comparable period in 2001 mainly due to the increase in the lease portfolio and the reclassification of engines previously disclosed as discontinued operations.

General and Administrative Expenses. General and administrative expenses decreased 1% to $6.8 million for the six months ended June 30, 2002, from the comparable period in 2001.

Net interest and finance costs. Overall, net interest and finance costs, which comprises interest expense, residual sharing expense and interest income, decreased 27% to $9.1 million for the six months ended June 30, 2002 from the comparable period in 2001. Interest expense decreased 27% to $9.3 million for the six months ended June 30, 2002 from the comparable period in 2001, due to a decrease in interest rates, partially offset by an increase in average debt. Residual sharing expense related to debt was $0.0 million for the six months ended June 30, 2002 compared with $0.2 million for the same period in 2001. There were no residual sharing arrangements applicable to the Company’s engines as of June 30, 2002 (in 2001, two engines were subject to residual sharing arrangements). Interest income for the six months ended June 30, 2002 was $0.2 million compared to $0.5

million for the comparable period in 2001 due mainly to the reduction in interest rates. Interest is earned on cash and deposits held.

Income Taxes. Income tax expense for continuing operations for the six months ended June 30, 2002 was $0.9 million compared to $3.5 million for the comparable period in 2001. The effective tax rate for the six months ended June 30, 2002 and 2001 was 36% and 39%, respectively due to the Company’s election, in the fourth quarter of 2001, for Extraterritorial Income Exclusion relief relating to certain qualifying assets.

Accounting Pronouncements

In June 2001, FASB issued SFAS 141, “Business Combinations,” SFAS 142, “Goodwill and Other Intangible Assets” and SFAS 143 “Accounting for Asset Retirement Obligations.” Statement 141 addresses financial accounting and reporting for business combinations and supercedes APB Opinion No. 16, “Business Combinations,” and SFAS 38, “Accounting for Preacquisition Contingencies of Purchased Enterprises.” Under Statement 141, all business combinations are to be accounted for using one method, the purchase method. The provisions of Statement 141 apply to all business combinations instituted after June 30, 2001.

Statement 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No. 17, “Intangible Assets.” Statement 142 addresses how intangible assets that are acquired individually or with a group of other assets (excluding those acquired in a business combination) should be accounted for on their acquisition and also how they should be accounted for after they have been initially recognized. The provisions of Statement 142 became effective beginning January 1, 2002, except for goodwill and intangible assets acquired after June 30, 2001 which became immediately subject to the non-amortization and amortization provisions of the Statement. Statement 142 requires that goodwill and all identifiable intangible assets that have an indeterminable life be recognized as assets but not amortized. These assets will be assessed for impairment annually.

Statement 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated retirement costs. The Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The Statement in effect is for fiscal years beginning after June 15, 2002.

The Company did not undertake any transactions during the quarter ended June 30, 2002, nor has any assets that are affected by any of these Statements.

In August 2001, FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement supercedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” and elements of APB 30, “Reporting the Results of Operations-Reporting the Effects on Disposal of a Segment of a Business, and Extraordinary, Unusual or Infrequently Occurring Events and Transactions.”

Statement 144 establishes a single-accounting model for long-lived assets to be disposed of while maintaining many of the provisions relating to impairment testing and valuation. The Statement became effective from January 1, 2002. The Company does not believe its adoption will materially change the way the Company has reviewed and calculated asset impairment charges from Statement 121. During the quarter ended June 30, 2002, as a result of its review, the Company recorded impairment charges of $154,000 (recorded under Depreciation in the Income Statement).

Liquidity and Capital Resources

Historically, the Company has financed its growth through borrowings secured by its equipment lease portfolio, operating cash flow and the issuance of stock. Cash of approximately $7.4 million and $94.2 million, in the six-month periods ended June 30, 2002 and 2001, respectively, was derived from borrowings. Cash flow from operating activities provided $15.8 million and $22.1 million in the six-month periods ended June 30, 2002 and 2001, respectively. In these same time periods, $5.2 million and $47.5 million, respectively, of cash was used to repay debt.

The Company’s primary use of funds is for the purchase of equipment for lease and other aircraft equipment. Approximately $14.4 million (including capitalized costs) and $84.9 million (including capitalized costs) of funds were used for these purposes in the six-month periods ended June 30, 2002 and 2001, respectively. An additional unpaid liability of $12.3 million was also incurred for the purchase of 3 engines.

Cash flows from operations are driven significantly by changes in revenue. While the Company has experienced some deterioration in lease rates, these have been offset by reductions in interest rates such that the spread between lease rates and interest rates has remained relatively constant throughout the period. The lease revenue stream, in the short-term, is at fixed rates while a substantial amount of the Company’s debt is at variable rates. If interest rates increase the Company may not be able to increase lease rates in the short-term and this would cause a reduction in the Company’s earnings. Utilization has also decreased with approximately 20%, by book value, of the Company’s assets off-lease at June 30, 2002, compared to approximately 7% at June 30, 2001. Further decreases in utilization, as well as deterioration in lease rates that are not offset by reductions in interest rates, will have a negative impact on earnings and cash flows from operations. It is possible in the short-term that utilization may decrease.

At June 30, 2002, notes payable consists of bank loans totaling $361.7 million payable over periods of 1 to 7 years with current interest rates varying between approximately 3.8% and 8.6%.

At June 30, 2002, the Company had a $190.0 million debt warehouse facility. The facility is available to a wholly-owned special purpose finance subsidiary of the Company, WLFC Funding Corporation, for the financing of jet aircraft engines acquired by or transferred to such finance subsidiary by the Company. On May 3, 2002, this facility was renewed and is renewable annually. The revolving period was extended to February 3, 2003, to be followed, if not renewed at that time, by a five year amortization period. This facility’s structure facilitates public or private securitized note issuances by the special purpose finance subsidiary. The subsidiary is consolidated for financial statement presentation purposes. The Company has guaranteed the obligations under the facility on a limited basis, up to an amount equal to the greater of: (i) the lesser of $5.0 million and 20% of the outstanding obligations or (ii) 10% of the outstanding obligations. At June 30, 2002, $6.3 million was available under this facility. At June 30, 2002, the interest rate was a commercial paper based rate plus a spread of 1.75%.

At June 30, 2002, LIBOR was 1.84% and the commercial paper rate was 2.04%. At June 30, 2001, the rates were 3.86% and 6.8%, respectively.

Approximately $30.6 million of the Company’s debt is repayable during 2002. Such repayments consist of scheduled installments due under term loans. The table below summarizes the Company’s contractual commitments at June 30, 2002.

Contractual Payments Due (in thousands)

	Six months ending,		Twelve months ending,
			December 31,
Contractual Obligation	2002		2003	2004	2005	2006	Thereafter	Total
Debt	$	30,600	30,527	154,705	61,091	28,313	56,472	$	361,708
Operating leases on Company premises	$	217	152	—	—	—	—	$	369

Approximately $315 million of the above debt is subject to the Company continuing to comply with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic concentration restrictions. In addition, the Company can typically borrow between 80% to 100% of an engine purchase price and between 50% to 80% of an aircraft or spare parts purchase price under these facilities, so the Company must have other available funds for the balance of the purchase price of any new equipment to be purchased or it will not be permitted to draw on these facilities for a particular purchase. The facilities are also cross-defaulted. If the Company does not comply with the covenants or eligibility requirements, the Company may not be permitted to borrow additional funds and accelerated payments may become necessary. Additionally, debt is secured by engines on lease to customers and to the extent that engines are returned from lease early or are sold, repayment of that portion of the debt could be accelerated. At June 30, 2002, the Company was in compliance with all covenants.

As a result of the floating rate structure of the majority of the Company’s borrowings, the Company’s interest expense associated with borrowings will vary with market rates. In addition, commitment fees are payable on the unused portion of the facilities.

The Company also holds a 7% interest, accounted for under the Cost method, in a joint venture in China, Sichuan Snecma Aero-Engine Maintenance Co. Ltd. The Company has invested $1.5 million to date and has a commitment to fund not more than an additional $1.5 million over the next three years.

The Company believes that its current equity base, internally generated funds and existing debt facilities are sufficient to maintain the Company’s current level of operations. A decline in either the level of internally generated funds, that could result if off-lease rates continue to increase, or the availability under the Company’s existing debt facilities would impair the

Company’s ability to sustain its current level of operations. The Company is currently discussing additions to its debt base with its commercial and investment banks. If the Company is not able to access additional debt, its ability to continue to grow its asset base consistent with historical trends will be impaired and its future growth limited to that which can be funded from internally generated capital.

Management of Interest Rate Exposure

At June 30, 2002, $346.2 million of the Company’s borrowings were on a variable rate basis at various interest rates tied to LIBOR or the commercial paper rate. The Company’s equipment leases are generally structured at fixed rental rates for specified terms. Increases in interest rates could narrow or eliminate the spread, or result in a negative spread, between the rental revenue the Company realizes under its leases and the interest rate that the Company pays under its borrowings.

To mitigate exposure to interest rate changes, the Company has entered into interest rate swap agreements which have notional outstanding amounts of $65.0 million, with remaining terms of between 2 and 23 months and fixed rates of between 5.8% and 6.405%. The Company has also purchased a number of forward-commencing caps with notional amounts totaling $60.0 million, terms of 3 years, effective dates commencing in 2003 and rates capped at 5.5%.

Interest expense for the three-month period ended June 30, 2002, was increased due to the Company’s interest rate hedges by approximately $958,000 compared to $377,000 in the comparable period in 2001. For the six months ended June 30, 2002 and 2001, interest expense has increased due to the hedges by $1.7 million and $427,000, respectively. The Company will be exposed to risk in the event of non-performance of the interest rate hedge counter-parties. The Company anticipates that it may hedge additional amounts of its floating rate debt during the next several months.

Related Party and Similar Transactions

The Company continues to use PGTC LLC’s services to repair/refurbish engines prior to sale or re-lease. The Company also sells engines to avioserv. The Company has also entered into put option arrangements regarding certain engines scheduled to be run to the end of their useful lives to sell them at the Company’s discretion, to avioserv at pre-determined prices. The Company notified avioserv of its intention in January, 2002 to exercise put options with respect to two engines and intends to close the puts during the third quarter. The Company also leases office space from avioserv with the lease term expiring November 30, 2002.

The Company entered into a business cooperation period with Flightlease and SRT ending on November 30, 2003 by which Flightlease and SRT have price discounts and lowest price guarantees on short-term and long-term engine leases from the Company. Flightlease and SRT in turn will provide the Company with access to spare engines, will promote the Company’s engine leasing efforts and the development of other products, and will facilitate business opportunities among the Company and Flightlease’s and SRT’s other business partners. Flightlease and SRT are members of FlightTechnics, LLC, an entity that owns 15% of the Company’s common stock, however Flightlease is currently in liquidation. During the three and six months ended June 30, 2002 and 2001, respectively, there were no transactions initiated by either party under the cooperation agreement.

Factors That May Affect Future Results

Except for historical information contained herein, the discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions. Forward-looking statements give the Company’s expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them to reflect changes that occur after that date. The Company’s actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below and in the Company’s report on Form 10-K for the year ended December 31, 2001. The cautionary statements made in this report should be read as being applicable to all related forward-looking statements wherever they appear in this report or in other written or oral statements by the Company.

The business in which the Company is engaged is capital intensive. Accordingly, the Company’s ability to successfully execute its business strategy and to sustain its operations is dependent, in large part, on the availability of debt and equity capital. There can be no assurance that the necessary amount of capital will continue to be available to the Company on favorable terms or at all. The Company’s inability to obtain sufficient capital, or to renew its credit facilities could result in increased funding costs and would limit the Company’s ability to: (i) add new equipment to its portfolio, (ii) fund its working capital needs, and (iii) finance possible future acquisitions. The Company’s inability to obtain sufficient capital would have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The Company retains title to the equipment that it leases to third parties. Upon termination of a lease, the Company will seek to re-lease or sell the equipment. The Company also engages in the selective purchase and resale of commercial aircraft engines. On occasion, the Company purchases engines without having a firm commitment for their lease or sale. Numerous factors, many of which are beyond the Company’s control, may have an impact on the Company’s ability to re-lease or sell equipment on a timely basis, including the following: (i) general market conditions, (ii) the condition of the equipment upon termination of the lease, (iii) the maintenance services performed during the lease term and, as applicable, the number of hours remaining until the next major maintenance is required, (iv) regulatory changes (particularly those imposing environmental, maintenance and other requirements on the operation of aircraft engines), (v) changes in the supply of, or demand for, or cost of aircraft engines, and (vi) technological developments. There is no assurance that the Company will be able to re-lease or sell equipment on a timely basis or on favorable terms. The failure to re-lease or sell aircraft equipment on a timely basis or on favorable terms could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The Company experiences fluctuations in its operating results. Such fluctuations may be due to a number of factors, including: (i) general economic conditions, (ii) the timing of sales of engines, (iii) financial difficulties experienced by airlines, (iv) interest rates, (v) downturns in the air transportation industry, (vi) unanticipated early lease termination or a default by a lessee, (vii) the timing of engine acquisitions, (viii) engine marketing activities, (ix) fluctuations in market prices for the Company’s assets. The Company anticipates that fluctuations from period to period will continue in the future. As a result, the Company believes that comparisons to results of operations for preceding periods are not necessarily meaningful and that results of prior periods should not be relied upon as an indication of future performance.

The Company’s future operating results may be adversely impacted by the continuing effects of the terrorist attacks on September 11, 2001, and the worldwide economic slowdown that began last year. Airlines are facing various increased costs, and at the same time many continue to suffer from reduction in demand by air travelers that have led to various cutbacks in services and even several bankruptcies. This has had some effects on the Company, and may continue to negatively impact the Company. Some of the impacts on the Company’s business include the following: (i) financing sources may be less willing to lend additional money to the Company because of the uncertainty currently surrounding the airline industry, (ii) the Company’s equipment utilization levels may further decrease whilst demand remains uncertain, (iii) the Company may be subject to payment delays from its customers, (iv) prices that the Company receives for sales of engines could be negatively impacted, or the Company may be unable to sell engines at prices that it deems acceptable, as the demand for certain spare engines may decrease, and (v) values of engines retained in the portfolio may be negatively impacted. Because of the foregoing risks and the uncertainties surrounding the airline industry the Company cannot forecast with any degree of accuracy what the future impacts on it will be.

SR Technics, the Company’s largest customer, is for sale following the bankruptcy of its parent in 2001, and is presently attempting to locate additional investors to ensure its long-term future through a new ownership structure. Whilst the Company faces various risks if SR Technics’ financial condition deteriorates (as outlined in other sections of this report), it has remained current on all its obligations to the Company. SR Technics leases five engines with a book value of approximately $41 million from the Company with lease terms expiring in up to eight years.

On July 30, 2002, Vanguard Airlines, a lessee that leased 3 engines with a book value of approximately $10.0 million, on short-term leases, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. It has suspended all scheduled flights indefinitely. As a result of this announcement the Company potentially faces a variety of risks and possible costs, outlined elsewhere in this section, associated with recovering engines from a bankrupt customer and remarketing “off-lease” engines.

A lessee may default in performance of its lease obligations and the Company may be unable to enforce its remedies under a lease. The Company’s inability to collect receivables due under a lease or to repossess aircraft equipment in the event of a default by a lessee could have a material adverse effect on the Company’s business, financial condition and/or results of operations. Various airlines have experienced financial difficulties in the past, certain airlines have filed for bankruptcy and a number of such airlines have ceased operations. In the United States where a debtor seeks protection under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code), creditors are automatically stayed from enforcing their rights. In the case of United States certified airlines, Section 1110 of the Bankruptcy Code provides certain relief to lessors of aircraft equipment. The scope of Section 1110 has been the subject of significant litigation and there is no assurance that the provisions of Section 1110 will protect the Company’s investment in an aircraft, aircraft engines or parts in the event of a lessee’s bankruptcy. In addition, Section 1110 does not apply to lessees located outside of the United States and applicable foreign laws may not provide comparable protection. Leases of spare parts may involve additional risks. For example, it is likely to be more difficult to recover parts in the event of a lessee default and the residual value of parts may be less ascertainable than an engine.

The Company’s leases are generally structured at fixed rental rates for specified terms while many of the Company’s borrowings are at floating rates. Increases in interest rates could narrow or eliminate the spread, or result in a negative spread, between the rental revenue the Company realizes under its leases and the interest rate the Company pays under its borrowings, and have a material adverse effect on the Company’s business, financial condition and/or results of operations.

For the six months ended June 30, 2002, 83% of the Company’s lease revenue was generated by leases to foreign customers. Such international leases may present greater risks to the Company because certain foreign laws, regulations and judicial procedures may not be as protective of lessor rights as those which apply in the United States. All leases require payment in United States (U.S.) currency. If these lessees’ currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making the U.S. dollar denominated payment. The Company is also subject to the timing and access to courts and the remedies local laws impose in order to collect its lease payments and recover its assets. In addition, political instability abroad and changes in international policy also present risk of expropriation of the Company’s leased engines. Furthermore, many foreign countries have currency and exchange laws regulating the international transfer of currencies.

The Company’s lease portfolio has grown significantly in recent years. The Company’s growth has placed, and is expected to continue to place, a significant strain on the Company’s managerial, operational and financial resources. There is no assurance that the Company will be able to effectively manage the expansion of its operations, or that the Company’s systems, procedures or controls will be adequate to support the Company’s operations, in which event the Company’s business, financial condition and/or results of operations could be adversely

affected. The Company may also acquire businesses that would complement or expand the Company’s existing businesses. Any acquisition or expansion made by the Company may result in one or more of the following events: (i) the incurrence of additional debt, (ii) future charges to earnings related to the impairment of goodwill and other intangible assets, (iii) difficulties in the assimilation of operations, services, products and personnel, (iv) an inability to sustain or improve historical revenue levels, (v) diversion of management’s attention from ongoing business operations, and (vi) potential loss of key employees. Any of the foregoing factors could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The markets for the Company’s products and services are extremely competitive, and the Company faces competition from a number of sources. These include aircraft, engine and aircraft parts manufacturers, aircraft and aircraft engine lessors and airline and aircraft service and repair companies. Certain of the Company’s competitors have substantially greater resources than the Company, including greater name recognition, a broader range of material, complementary lines of business and greater financial, marketing and other resources. In addition, equipment manufacturers, and other aviation aftermarket suppliers may vertically integrate into the markets that the Company serves, thereby significantly increasing industry competition. There can be no assurance that competitive pressures will not materially and adversely affect the Company’s business, financial condition and/or results of operations.

The Company’s leasing activities generate significant depreciation allowances that provide the Company with substantial tax benefits on an ongoing basis. In addition, the Company’s lessees currently enjoy favorable accounting and tax treatment by entering into operating leases. Any change to current tax laws or accounting principles that make operating lease financing less attractive or affect the Company’s recognition of revenue or expense would have a material impact on the Company’s business, financial condition and/or results of operations.

The Company obtains a substantial portion of its inventories of aircraft and engines from airlines, overhaul facilities and other suppliers. There is no organized market for aircraft and engines, and the Company must rely on field representatives and personnel, advertisements and its reputation as a buyer of surplus inventory in order to generate opportunities to purchase such equipment. The market for bulk sales of surplus aircraft and engines is highly competitive, in some instances involving a bidding process. While the Company has been able to purchase surplus inventory in this manner successfully in the past, there is no assurance that surplus aircraft and engines of the type required by the Company’s customers will be available on acceptable terms when needed in the future or that the Company will continue to compete effectively in the purchase of such surplus equipment.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk exposure is that of interest rate risk. A change in the U.S. prime interest rate, LIBOR rate, or cost of funds based on commercial paper market rates, would affect the rate at which the Company could borrow funds under its various borrowing facilities. Increases in interest rates to the Company, which may cause the Company to raise the implicit rates charged to its customers, could result in a reduction in demand for the Company’s leases. Certain of the Company’s credit facilities are variable rate debt. The Company estimates a one percent increase or decrease in the Company’s variable rate debt would result in an increase or decrease (net of hedges), respectively, in interest expense of $2.6 million per annum (in 2001, the effect would have been $3.0 million). The Company estimates a two percent increase or decrease in the Company’s variable rate debt would result in an increase or decrease (net of hedges), respectively, in interest expense of $5.1 million per annum (in 2001, the effect would have been $6.0 million). The foregoing effect of interest rate changes, net of interest rate hedges, on per annum interest expense is estimated as constant due to the terms of the Company’s variable rate borrowings, which generally provide for the maintenance of borrowing levels given adequacy of collateral and compliance with other loan conditions.

The Company hedges a portion of its borrowings, effectively fixing the rate of these borrowings (refer to “Management of Interest Rate Exposure” for more details of the Company’s hedging arrangements and Note 7 for its accounting treatment). Such hedging activities may limit the Company’s ability to participate in the benefits of any decrease in interest rates, but may also protect the Company from increases in interest rates. Other financial assets and liabilities are at fixed rates.

The Company is also exposed to currency devaluation risk. During the six month period ended June 30, 2002, 83% of the Company’s total lease revenues came from non-United States domiciled lessees. All of the leases require payment in United States (U.S.) currency. If these lessees’ currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making the U.S. dollar denominated lease payments.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:

August 9, 2002

	Willis Lease Finance Corporation

	By:	/s/ Donald A. Nunemaker

		Donald A. Nunemaker
		Chief Operating Officer

		/s/ Andrew Stokes

		Andrew Stokes
		Chief Accounting Officer

PART II - OTHER INFORMATION

Item 4. Submission of Matter to a Vote of Security Holders

At the May 22, 2002 Annual Meeting of Shareholders of Willis Lease Finance Corporation, the following matter was voted upon:

Description	Votes
Election of Class I Directors

Hans Jorg Hunziker	8,355,945	For
	51,825	Against

William M. LeRoy	8,355,945	For
	51,825	Against

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit Number		Description
3.1		Certificate of Incorporation, filed on March 12, 1998 together with Certificate of Amendment of Certificate of Incorporation filed on May 6, 1998. Incorporated by reference to Exhibits 4.01 and 4.02 of the Company’s report on Form 8-K filed on June 23, 1998.

3.2		Bylaws. Incorporated by reference to Exhibit 4.03 of the Company’s report on Form 8-K filed on June 23, 1998.

4.1		Specimen of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Company’s report on Form 10-Q for the quarter ended June 30, 1998.

4.2		Rights Agreement dated September 30, 1999, by and between the Company and American Stock Transfer and Trust Company, as Rights Agent. Incorporated by reference to Exhibit 4.1 of the Company’s report on Form 8-K filed on October 4, 1999.

4.3		First Amendment to Rights Agreement, dated as of November 30, 2000, by and between the Company and American Stock Transfer and Trust Company. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 8-K filed December 15, 2000.

10.1		Form of Indemnification Agreement entered into between the Company and its directors and officers. Incorporated by reference to Exhibit 10.3 to Registration Statement No. 333-5126-LA filed on June 21, 1996.

10.2		Employment Agreement between the Company and Charles F. Willis IV dated November 7, 2000. Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-K for the year ended December 31, 2000.

Exhibit Number		Description
10.3		Employment Agreement between the Company and Donald A. Nunemaker dated November 21, 2000. Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10-K for the year ended December 31, 2000.

10.4		Separation Agreement dated February 28, 2002 between the Company and Nicholas J. Novasic. Incorporated by reference to Exhibit 10.7 to the Company’s report on Form 10-Q for the quarter ended March 31, 2002.

10.5		Employment contract between the Company and Monica J. Burke dated June 21, 2002.

10.6*		Indenture dated as of September 1, 1997, between WLFC Funding Corporation and The Bank of New York, as Indenture Trustee. Incorporated by reference to Exhibit 10.16 to the Company’s Report on Form 10-K for the year ended December 31, 1997.

10.7		Note Purchase Agreement (Series 1997-1 Notes) dated February 11, 1999.Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q for the quarter ended March 31, 1999.

10.8*		Amended and Restated Series 1997-1 Supplement dated February 11, 1999. Incorporated by reference to Exhibit 10.2 to the Company’s report on Form 10-Q for the quarter ended March 31, 1999.

10.9*		Administration Agreement dated as of September 1, 1997 between WLFC Funding Corporation, the Company, First Union Capital Markets Corp. and The Bank of New York. Incorporated by reference to Exhibit 10.19 to the Company’s Report on Form 10-K for the year ended December 31, 1997.

10.10		The Company’s 1996 Stock Option/Stock Issuance Plan, as amended and restated as of May 22, 2001. Incorporated by reference to the Company’s Proxy Statement dated May 1, 2001.

10.11*		Second Amendment to Amended and Restated Series 1997-1 Supplement. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q for the quarter ended March 31, 2000.*

10.12		Amended and Restated Credit Agreement as of February 10, 2000. Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-Q for the quarter ended March 31, 2000.

10.13		Investment Agreement, dated as of November 7, 2000, by and among the Company, FlightTechnics LLC, Flightlease AG, SR Technics Group and SR Technics Group America, Inc. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 8-K filed on November 13, 2000.

10.14		Membership Interest Purchase Agreement, dated as of November 7, 2000, by and between the Company and SR Technics Group America, Inc. Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 8-K filed on November 13, 2000.

10.15		Share Purchase Agreement, dated as of November 7, 2000, by and between the Company and SR Technics Group America, Inc. Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 8-K filed on November 13, 2000.

Exhibit Number		Description
10.16*		Cooperation Agreement, dated as of November 7, 2000, by and among the Company, Flightlease AG and SR Technics Group. Incorporated by reference to Exhibit 10.6 of the Company’s report on Form 8-K filed on November 13, 2000.

10.17		Stockholders’ Agreement, dated as of November 7, 2000, by and among the Company, Charles F. Willis, IV, CFW Partners, L.P., Austin Chandler Willis 1995 Irrevocable Trust and FlightTechnics LLC. Incorporated by reference to Exhibit 10.8 on Form 8-K filed on November 13, 2000.

10.18		Third Amendment to Note Purchase Agreement dated February 7, 2001. Incorporated by reference to Exhibit 10.21 of the Company’s report on Form 10-Q for the quarter ended June 30, 2001.

10.19*		Third Amended and Restated Series 1997-1 Supplement dated February 7, 2001. Incorporated by reference to Exhibit 10.22 of the Company’s report on Form 10-Q for the quarter ended June 30, 2001.

10.20		Fourth Amendment to Amended and Restated Series 1997-1 Supplement dated May 31, 2001. Incorporated by reference to Exhibit 10.23 of the Company’s report on Form 10-Q for the quarter ended June 30, 2001.

10.21*		Credit Agreement dated May 1, 2001 among Willis Lease Finance Corporation, certain banking institutions, National City Bank and Fortis Bank (Netherland) N.V. Incorporated by reference to Exhibit 10.24 of the Company’s report on Form 10-Q for the quarter ended June 30, 2001.

10.22*		Credit Agreement dated September 21, 2001 between Willis Lease Finance Corporation and ABB Credit Finance AB (publ.). Incorporated by reference to Exhibit 10.25 to the Company’s report on Form 10-Q for the quarter ended September 30, 2001.

10.23*		Amended and Restated Eighth Amendment to Amended and Restated Series 1997-1 Supplement dated May 3, 2002.

10.24*		Eighth Amendment to the Note Purchase Agreement, dated as of May 3, 2002, by and among the Company, WLFC Funding Corporation and Variable Funding Capital Corporation.

11.1		Statement regarding computation of per share earnings.

99.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment and the redacted material has been filed separately with the Commission.

(b) Reports on Form 8-K

None

EX-10.5 3 j4400_ex10d5.htm EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 21st day of June, 2002, by and between Willis Lease Finance Corporation, a Delaware corporation (“Employer”), and Monica J. Burke (“Employee”).

RECITALS

WHEREAS, Employer desires to offer Employee the position, compensation, amenities and other benefits set forth herein;

WHEREAS, Employee desires to be employed by Employer and to assume the position of Executive Vice President and Chief Financial Officer on the terms and conditions set forth herein; and

WHEREAS, Employee acknowledges that she has had an opportunity to consider this Agreement and consult with independent advisors of her choosing with regard to the terms of this Agreement, and enters this Agreement voluntarily and with a full understanding of its terms.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises of the parties and the mutual benefits they will gain by the performance thereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Employment. Employer hereby employs Employee and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth, as the Executive Vice President and Chief Financial Officer of Employer. Employee shall devote her full time and attention, with undivided loyalty, to the business and affairs of Employer during the Employment Term. Employee shall not engage in any other business or job activity during the Employment Term without Employer’s prior written consent.

2. Term.

(a) The term of Employee’s employment under this Agreement shall be for a two (2) year period commencing on or about July 15, 2002 (“Start Date”) and ending on July 15, 2004 (as may be extended hereunder, the “Employment Term”), unless otherwise terminated pursuant to the terms hereof. Each full twelve-month period Employee is employed by Employer shall be referred to herein as an “Employment Year.”

(b) After the expiration of the initial Employment Term and until the Termination Date (as defined below), Employee’s employment will automatically renew for a period of one year, each year, on the same terms and conditions as are set forth herein, modified

for any increases to Employee’s salary which may be made from time to time, unless either party gives the other written notice of nonrenewal at least six (6) months prior to the end of the last applicable Employment Year. Employee shall be entitled to the payments set forth in Section 7 or Section 8 hereof in the event either party gives the other such a notice of nonrenewal.

(c) Upon the occurrence of a Change in Control, this Agreement shall be automatically extended for a period equal to the greater of: (I) the remaining Employment Term, or (II) the eighteen month period commencing on the date of the Change in Control event and ending on the eighteen month anniversary of the Change in Control event (the “Change in Control Extension”). “Change in Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than Charles F. Willis IV or an Affiliate (as defined in Section 13) of Charles F. Willis IV, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Employer representing at least fifty percent (50%) of the total voting power represented by Employer’s then outstanding voting securities; or (ii) the stockholders of Employer approve a merger or consolidation of Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty (50%) of the total voting power represented by the voting securities of Employer or such surviving entity outstanding immediately after such a merger or consolidation, or the stockholders of Employer approve a plan of complete liquidation or dissolution of Employer or an agreement for the sale or disposition by Employer of all or substantially all of Employer’s assets, provided, however, that if such merger, consolidation, liquidation, dissolution, sale or disposition does not subsequently close, a Change in Control shall not be deemed to have occurred; or (iii) individuals who are directors of Employer as of the date hereof cease for any reason to constitute a majority of Employer’s Board of Directors (the “Board”) unless such change(s) is approved by a majority of the directors of Employer as of the date thereof.

3. Duties.

(a) Employee shall in good faith perform those duties and functions as are required by her position, including but not limited to responsibility for funding, treasury, cash management, accounting, financial reporting, risk management, taxes, management information systems (MIS), investor relations, and such other duties as may be determined and assigned to her from time to time by the Chief Executive Officer (“CEO”) or the President or Chief Operating Officer (“COO”). Notwithstanding the foregoing or any other provision in this Agreement, Employer shall have the right to modify from time to time the title and duties assigned to Employee so long as such title and duties are consistent with the usual and customary expectations of the type of position and function of Employee.

(b) Employee agrees to serve Employer faithfully and to the best of her ability; to devote her full time and attention, with undivided loyalty, during normal business hours to the business and affairs of Employer, except during reasonable vacation periods and periods of illness and incapacity; and to perform such duties as the CEO or his/her designate(s) may assign, such duties to be of a character and dignity appropriate to the Executive Vice President and Chief Financial Officer. Employee shall not engage in any other business or job

activity during the Employment Term without Employer’s prior written consent. Notwithstanding the foregoing, Employee may engage in civic and not-for-profit activities so long as such activities do not materially interfere with Employee’s performance of her duties hereunder.

4. Compensation. Employer agrees to provide as compensation to Employee the following salary, incentive, and benefits in exchange for the services described in Section 3 of this Agreement:

(a) Base Salary. Employer agrees to pay to Employee during the Employment Term an annual base salary in the amount of Two Hundred Twenty-five Thousand Dollars ($225,000) per Employment Year less payroll deductions and all required withholdings, or such higher amount as the Compensation Committee of the Board shall from time to time determine. Employee’s base salary shall be paid not less frequently than semi-monthly in accordance with Employer’s usual payroll practices. The Compensation Committee of the Board will review Employee’s base salary no less than once annually, and shall have sole discretion to increase or decrease (subject to the next sentence hereof) the base salary. Employee’s base salary only may be decreased in connection with a salary reduction program approved by the Compensation Committee of the Board which affects all executive officers of Employer.

(b) Incentive Compensation. In addition to Employee’s base salary, Employee shall participate in and, to the extent earned or otherwise payable thereunder, receive periodic incentive cash bonuses pursuant to any incentive plans currently maintained or hereafter established by Employer and applicable to an employee of Employee’s position, which presently is the 2002 Incentive Compensation Plan. Employee’s entitlement to incentive bonuses is discretionary and shall be determined by the Compensation Committee of the Board in good faith based upon the extent to which Employee’s individual performance objectives and Employer’s performance objectives were achieved during the applicable bonus period. Employee is eligible to receive a cash bonus of up to 50% of Employee’s base salary (“Incentive Bonus”). The first 70% of the Incentive Bonus shall be conditioned upon Employer’s performance. The remaining 30% shall be conditioned upon achieving individual milestones and/or objectives established by the CEO, the President, or COO for Employee. The Compensation Committee of the Board will annually set the Employer’s performance targets and approve the incentive compensation plan For 2002 only, the Employee will be eligible to receive a pro-rated Incentive Bonus based on the number of weeks she is employed from the Start Date through December 31, 2002 divided by the total number of weeks between July 1, 2002 and December 31, 2002.

5. Benefits and Perquisites.

(a) Benefits. Employer shall provide Employee such employment benefits, equipment and support as are generally available to executive officers of Employer, including without limitation reimbursement of reasonable expenses incurred in performing her duties under this Agreement (including, but not limited to, expenses for entertainment, long distance telephone calls, lodging, meals, transportation and travel), coverage under medical, dental, long-term

disability and group life insurance plans, and rights and benefits for which Employee is eligible under Employer’s 401(k) and employee stock purchase plans.

(b) Vacation and Sick Pay. Employee shall be eligible for vacation and sick leave in accordance with the policies of Employer in effect from time to time during the Employment Term. Employee shall be entitled to a period of annual vacation time equal to four (4) weeks during each Employment Year, to accrue pro rata during the course of the Employment Term. All accrued vacation and sick pay shall be paid to Employee in a lump sum payment on the date of a Change in Control or Retirement or termination of employment with Employer. For purposes of this Agreement, “Retirement” means Employee’s voluntary termination on a date after which Employee has reached the age of 55 and after which Employee has provided Employer with at least 10 years of service.

6. Stock Options.

(a) Employee shall participate in Employer’s Stock Option Plan (“Plan”) on the same terms as are generally available to executive officers of Employer and on terms which are in accordance with comparative market practices. At the earliest possible date but not later than thirty (30) days after the Start Date, Employer shall grant Employee options to purchase thirty-five thousand (35,000) shares of the common stock of Employer (the “Option”) at an exercise price equal to the then current market price of Employer’s common stock. One-fourth of the Option shall become vested and exercisable in equal increments on each one-year anniversary of the Start Date through the fourth such anniversary, provided that Employee is employed by Employer on each such anniversary date.

(b) The parties agree that any additional grant of stock options under the Plan or any similar plan is subject to the discretion of the Compensation Committee of the Board based upon the duties of Employee’s position, the extent to which Employee’s individual performance objectives and Employer’s profitability objectives and other financial and non-financial objectives were achieved during the applicable period, and comparative market practices.

(c) In addition to any rights Employee may have under the Plan or specific option grants under the Plan, all stock options granted to Employee which would have otherwise vested following the occurrence of a Change in Control shall immediately vest and become exercisable in the event of a Change in Control.

7. Termination/Nonrenewal by Employer. The date on which Employee’s employment by Employer ceases, under any of the following circumstances, shall be defined herein as the “Termination Date.” The employment of Employee may be terminated by Employer or Employer may decide not to renew this Agreement for any reason or no reason, with or without cause or justification, subject to the following:

(a) Termination For Cause. If (i) Employee’s employment is terminated by Employer for Cause (as defined below), or (ii) Employer gives Employee a notice of nonrenewal pursuant to Section 2(b) hereof for Cause, Employer’s total liability to Employee or her heirs shall be limited to payment of any unpaid base salary and any annual incentive compensation to

which Employee is entitled as of the Termination Date, and accrued vacation and sick pay, and Employee shall not be entitled to any further compensation or benefits provided under this Agreement, including, without limitation, any severance paymentsIf Employer adopts an incentive compensation plan applicable to Employee’s position which provides for an annual payout, it is understood that throughout this Agreement the words “any annual incentive compensation to which Employee is entitled as of the Termination Date” shall mean that Employee shall be eligible to receive, on a pro-rata basis, any incentive compensation Employee would have received had Employee’s Termination Date been December 31^st of the year of termination, provided that the actual Termination Date is after June 30^th of the year of termination and further provided that the maximum pro-rata incentive compensation payment shall be limited to 50% of the annual incentive compensation Employee would have received had Employee’s Termination Date been December 31^st of the year of termination, with the timing of any such incentive compensation payment to be at the same time such incentive compensation is paid to all other employees of Employer. “Cause” includes, but shall not be limited to: (1) Employee’s conviction of or plea of nolo contendere to any felony or gross misdemeanor charges brought in any court of competent jurisdiction; (2) any fraud, material misrepresentation or gross misconduct by Employee against Employer; and (3) Employee’s breach of this Agreement.

(b) Termination Without Cause. If (i) Employee’s employment is terminated by Employer without Cause, or (ii) Employer provides Employee with a notice of nonrenewal pursuant to Section 2(b) hereof without Cause, Employer will (A) in the case of termination, provide not less than six (6) months notice of termination or an amount equal to six (6) months of Employee’s base salary in lieu of notice, or (B) in the case of nonrenewal, provide notice of nonrenewal at least six (6) months prior to the end of the last applicable Employment Year or an amount equal to six months base salary in lieu of notice. In addition, in each of the foregoing scenarios, Employee will be paid the severance which is described in Section 9 below.

8. Termination/Nonrenewal by Employee. The employment of Employee may be terminated by Employee or Employee may decide not to renew this Agreement for any reason or no reason, with or without cause or justification, subject to the following:

(a) Voluntary Resignation. If (i) Employee’s employment terminates by reason of Employee’s voluntary resignation (and is not a resignation for Good Reason), or (ii) Employee gives Employer a notice of nonrenewal pursuant to Section 2(b) hereof (which is not given for Good Reason), Employer’s total liability to Employee shall be limited to payment of any unpaid base salary and any annual incentive compensation to which Employee is entitled as of the Termination Date, and accrued vacation and sick pay, and Employee shall not be entitled to any further compensation or benefits provided under this Agreement, including, without limitation, any severance payments.

(b) Resignation for Good Reason. If (i) Employee’s employment terminates by reason of Employee’s voluntary resignation for Good Reason, or (ii) Employee provides Employer with a notice of nonrenewal pursuant to Section 2(b) hereof for Good Reason, Employee will be paid the severance which is described in Section 9 below. “Good Reason” means: Employee’s voluntary termination following (i) a reduction in compensation which is not in proportion to any salary reduction program approved by the Compensation Committee of the

Board which affects all executive officers of Employer; (ii) a reduction in material benefits; (iii) not maintaining Employee’s positions, title, duties and status or changing Employee’s reporting obligations without Employee’s written consent; (iv) requiring Employee to work at a location more than 25 “road” miles from the location of Employer’s corporate headquarters as of the date of this Agreement; or (v) any willful and material breach by Employer of its obligations under this Agreement.

Employee agrees to give Employer at least ninety (90) days prior written notice of termination of her employment and at least six (6) months prior written notice of nonrenewal of this Agreement. Employer shall have the right in its sole discretion to continue to employ Employee for ninety days or six months, as applicable, or for a shorter period with pay in lieu of notice to Employee in the amount to which Employee would have been entitled if employed for the ninety-day or six month notice period.

9. Severance Payment.

(a) Amount. In the event severance is payable hereunder, such severance shall be in an amount equal to

(i) one-half times Employee’s annual base salary at the time of termination, or if during a Change in Control Extension, one times Employee’s annual base salary at the time of termination, plus

(ii) any unpaid base salary and any annual incentive compensation to which Employee is entitled as of the Termination Date and accrued vacation and sick pay, plus

(iii) if during a Change in Control Extension, one times the average annual incentives paid to Employee attributable to the two years prior to the year of termination, plus

(iv) distribution of unpaid deferred compensation, plus

(v) accelerated vesting of the stock options scheduled to vest during the two (2) years following the Termination Date, plus

(vi) continued coverage under all group benefit plans (e.g., medical, dental and life insurance) for a period of six months following the Termination Date, or if during a Change in Control Extension, continued coverage under all group benefit plans (e.g., medical, dental and life insurance) for a period of twelve months following the Termination Date, in each case at the same cost to Employee as prior to the Termination Date.

(b) Payment. All cash components of the above-described severance payments (with the exception of any payments pursuant to the words “any annual incentive compensation” in Section 9 (a) (ii) above, which shall be paid at the same time such incentive compensation is paid to all other employees) shall be paid in a lump sum within thirty (30) days of the date of termination of Employee’s employment or at the option of the Employee, in four

equal installments, payable every three months, commencing on the date that is 30 days after the date of termination of employment.

(c) Limitation on Payments. If any payment or benefit Employee would receive from Employer or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless Employee elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date on which the event that triggers the Payment occurs): reduction of cash payments; cancellation of accelerated vesting of stock awards; and reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Employee’s stock awards unless Employee elects in writing a different order for cancellation.

The accounting firm engaged by Employer for general audit purposes as of the day prior to the effective date of the event that triggers the Payment shall perform the foregoing calculations. If the accounting firm so engaged by Employer is serving as accountant or auditor for the individual, entity or group effecting the “change in ownership” as described in Section 280G(b)(2)(A)(i) of the Code, Employer shall appoint a nationally recognized accounting firm to make the determinations required hereunder. Employer shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to Employer and Employee within fifteen (15) calendar days after the date on which Employee’s right to a Payment is triggered (if requested at that time by Employer or Employee) or such other time as requested by Employer or Employee. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish Employer and Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon Employer and Employee.

10. Benefits Upon Termination. Except as otherwise expressly provided by this Agreement and without limiting any rights granted to Employee hereunder, all insurance benefits provided under Section 5 of this Agreement shall be extended, at Employee’s election and cost, to the extent permitted by Employer’s insurance policies and benefit plans, for one year after

Employee’s Termination Date, except (a) as required by law (e.g., COBRA health insurance continuation election) or (b) in the event of a termination described in Section 7 or 8.

11. Death/Disability.

(a) In the event (during the Employment Term) of Employee’s death, (i) this Agreement shall terminate, (ii) Employer shall pay to Employee’s estate or heirs any unpaid base salary and any annual incentive compensation to which Employee may be entitled as of the Termination Date, and (iii) Employee’s estate and heirs shall not be entitled to any severance payments hereunder. In addition, the stock options scheduled to vest during the two (2) years following the date of Employee’s death shall receive accelerated vesting and shall become exercisable upon Employee’s death. Employee’s estate shall have the right to exercise such options for the shorter of (i) two (2) years from the date of death, and (ii) the term of the option.

(b) In the event (during the Employment Term) of Employee’s long term disability (as defined in Employee’s Group Disability Plan) and the passing of the Elimination Period (as defined in Employee’s Group Disability Plan), (i) this Agreement shall terminate, (ii) Employer shall pay to Employee any unpaid base salary and any annual incentive compensation to which Employee is entitled as of the Termination Date, and (iii) Employee shall not be entitled to any severance payments hereunder. In addition, the stock options scheduled to vest during the two (2) years after the date of Employee’s disability shall receive accelerated vesting and shall become exercisable upon the termination of this Agreement due to Employee’s disability. Employee shall have the right to exercise such options for the shorter of (i) two (2) years from the date of disability, and (ii) the term of the option.

12. Maintenance of Confidentiality and Duty of Loyalty.

(a) General. Employee acknowledges that, pursuant to her employment with Employer, she will necessarily have access to trade secrets and information that is confidential and proprietary to Employer in connection with the performance of her duties. In consideration for the disclosure to Employee of, and the grant to Employee of access to such valuable and confidential information and in consideration of her employment, Employee shall comply in all respects with the provisions of this Section 12.

(b) Nondisclosure. During the Employment Term and for a period of three (3) years thereafter, Confidential and Proprietary Information of Employer of which Employee gains knowledge during the Employment Term shall be used by Employee only for the benefit of Employer in connection with Employee’s performance of her employment duties, and Employee shall not, and shall not allow any other person that gains access to such information in any manner to, without the prior written consent of Employer, disclose, communicate, divulge or otherwise make available, or use, any such information, other than for the immediate benefit of Employer. For purposes of this Agreement, the term “Confidential and Proprietary Information” means information not generally known to the public and which is proprietary to Employer and relates to Employer’s existing or reasonably foreseeable business or operations, including but not limited to trade secrets, business plans, advertising or public relations strategies, financial information, budgets, personnel information, customer information and lists, and information pertaining to research, development, manufacturing, engineering, processing,

product designs (whether or not patented or patentable), purchasing and licensing, and which may be embodied in reports or other writings or in blue prints or in other tangible forms such as equipment and models. Employee will refrain from any acts or omissions that would jeopardize the confidentiality or reduce the value of any Employer Confidential and Proprietary Information.

(c) Covenant of Loyalty. During the Employment Term, Employee shall not, on her own account or as an employee, agent, promoter, consultant, partner, officer, director, or as a more than 1% shareholder of any other person, firm, entity, partnership or corporation, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any business in the continental United States that is in any way competitive with or similar to the business that is conducted by Employer or is in the same general field or industry as Employer. Without limiting the generality of the foregoing, Employee does hereby covenant that she will not, during the Employment Term:

(i) solicit, accept or receive any compensation from any customer of Employer or any business competitive to that of Employer; or

(ii) contact, solicit or call upon any customer or supplier of Employer on behalf of any person or entity other than Employer for the purpose of selling, providing or performing any services of the type normally provided or performed by Employer; or

(iii) induce or attempt to induce any person or entity to curtail or cancel any business or contracts which such person or entity has with Employer; or

(iv) induce or attempt to induce any person or entity to terminate, cancel or breach any contract which such person or entity has with Employer, or receive or accept any benefits from such termination, cancellation or breach.

(d) No Solicitation. During the Employment Term and for a period of three (3) years thereafter, Employee agrees not to interfere with the business of Employer or any Affiliate of Employer by directly or indirectly soliciting, attempting to solicit, inducing or otherwise causing any employee of Employer or any Affiliate of Employer to terminate his or her employment with Employer in order to become an employee, consultant or independent contractor to or for any other person or entity.

(e) Injunctive Relief. Employee expressly agrees that the covenants set forth in this Section 12 are reasonable and necessary to protect Employer and its legitimate business interests, and to prevent the unauthorized dissemination of Confidential and Proprietary Information to competitors of Employer. Employee also agrees that Employer will be irreparably harmed and that damages alone cannot adequately compensate Employer if there is a violation of this Section 12 by Employee, and that injunctive relief against Employee is essential for the protection of Employer. Therefore, in the event of any such breach, it is agreed that, in addition to any other remedies available, Employer shall be entitled as a matter of right to injunctive relief in any court of competent jurisdiction, plus attorneys’ fees actually incurred in seeking such relief. Furthermore, Employee agrees that Employer shall not be required to post a

bond or other collateral security with the court if Employer seeks injunctive relief. To the extent any provision of this Section 12 is deemed unenforceable by virtue of its scope or limitation, Employee and Employer agree that the scope and limitation provisions shall nevertheless be enforceable to the fullest extent permissible under the laws and public policies applied in such jurisdiction where enforcement is sought.

13. Affiliate. “Affiliate” means a person that, directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with the first mentioned person.

14. Notices. Any notice which either party may wish or be required to give to the other party pursuant to this Agreement shall be in writing and shall be either personally served or deposited in the United States mail, registered or certified, and with proper postage prepaid. Mailed notices to Employee shall be addressed to Employee at the home address which Employee most recently communicated to Employer in writing. In the case of Employer, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of corporate counsel. Notice given by personal service shall be deemed effective upon service. Notice given by registered or certified mail shall be deemed effective three (3) days after deposit in the mail.

15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective legal representatives, and their successors and assigns. As used in this Agreement, the term “successor” shall include any person, firm, corporation or other business entity which at any time, whether by merger, purchase, consolidation, or otherwise, acquired all or substantially all of the assets or business of Employer. This Agreement shall be deemed to be willfully breached by Employer if any such successor does not absolutely and unconditionally assume all of Employer’s obligations under this Agreement and agree expressly to perform the obligations in the same manner and to the same extent as Employer would be required to perform such obligations in the absence of the succession. Employee may not assign any of her duties hereunder and she may not assign any of her rights hereunder without the written consent of Employer, which shall not be unreasonably withheld.

16. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes and replaces all prior agreements and understandings between the parties relating to the subject matter hereof.

17. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (without reference to choice or conflict of laws) of the State of California.

18. Arbitration. Employer and Employee agree that, to the extent permitted by law and to the extent that the enforceability of this Agreement is not thereby impaired, any and all disputes, controversies or claims between Employee and Employer that arise with respect to this agreement, except disputes concerning the use or disclosure of trade secrets, proprietary and/or confidential information, or otherwise arising under Section 12 hereof, shall be determined exclusively by final and binding arbitration in the County of San Francisco, California, in accordance with the employment rules of the American Arbitration Association then in effect.

The controversy or claim shall be submitted to three arbitrators, one of whom shall be chosen by Employer, one of whom shall be chosen by Employee, and the third of whom shall be chosen by the two arbitrators so selected. The party desiring arbitration shall give written notice to the other party of its desire to arbitrate the particular matter in question, naming the arbitrator selected by it. If the other party shall fail within a period of 15 days after such notice shall have been given to reply in writing naming the arbitrator selected by it, then the party not in default may apply to the American Arbitration Association for the appointment of the second arbitrator. If the two arbitrators chosen as above shall fail within 15 days after their selection to agree upon a third arbitrator, then either party may apply to the American Arbitration Association for the appointment of an arbitrator to fill the place so remaining vacant. Employer shall pay the fees of the arbitrators so selected. The decision of any two of the arbitrators shall be final and binding upon the parties hereto and shall be delivered in writing signed in triplicate by the concurring arbitrators to each of the parties hereto. The parties agree that both parties will be allowed to engage in adequate discovery consistent with the nature of the claims in dispute. The arbitrators shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrators shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrators deem appropriate. The arbitrators also shall have discretion to award the prevailing party reasonable costs and attorneys’ fees incurred in bringing or defending an action under this Section 18, as permitted by applicable law. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction.

Nothing in this Section 18 shall limit the Employer’s ability to seek injunctive relief for any violation of Employee’s obligations concerning nondisclosure, loyalty and nonsolicitation as set forth in Section 12 hereof. Any such injunctive relief proceeding shall be without prejudice to any rights Employer or Employee may have under this Agreement to obtain relief in arbitration with respect to such matters.

19. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

20. Amendments and Waivers. This Agreement may be modified only by a written instrument duly executed by each party hereto. No breach of any covenant, agreement, warranty or representation shall be deemed waived unless expressly waived in writing by the party who might assert such breach. No waiver of any right hereunder shall operate as a waiver of any other right or of the same or a similar right on another occasion.

21. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

22. Section Headings. The headings of each Section, subsection or other subdivision of this Agreement are for reference only and shall not limit or control the meaning thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	“Employer”

	WILLIS LEASE FINANCE CORPORATION


	By:
		Charles F. Willis, IV
		President and Chief Executive Officer


	“Employee”


	Monica J. Burke

EX-10.23 4 j4400_ex10d23.htm EX-10.23

Exhibit 10.23*

AMENDED AND RESTATED EIGHTH AMENDMENT TO
AMENDED AND RESTATED SERIES 1997-1
SUPPLEMENT*

This AMENDED AND RESTATED EIGHTH AMENDMENT TO AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT, dated as of May 3, 2002 (this “Eighth Amendment”), is entered into by and among WLFC FUNDING CORPORATION, as issuer (the “Issuer”) and THE BANK OF NEW YORK, as indenture trustee (the “Indenture Trustee”). Capitalized terms used and not otherwise defined herein are used as defined in the Supplement (as defined below).

WHEREAS, the parties hereto entered into that certain Amended and Restated Series 1997-1 Supplement, dated as of February 11, 1999, as amended by a First Amendment, dated as of May 12, 1999, a Second Amendment, dated as of February 9, 2000, a Third Amendment, dated as of February 7, 2001, a Fourth Amendment, dated as of May 31, 2001, a Fifth Amendment, dated as of February 5, 2002, a Sixth Amendment, dated as of March 5, 2002 and a Seventh Amendment, dated as of April 5, 2002 (the “Supplement”);

WHEREAS, the parties hereto entered into an Eighth Amendment, dated as of May 3, 2002 (the “Original Eighth Amendment”); and

WHEREAS, the parties hereto desire to amend and restate the Original Eighth Amendment so as to amend the Supplement in certain respects as provided herein;

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

SECTION 1. Amendments.

(a) The following definition is hereby added in its entirety to Section 1.l of the Supplement:

“Amended and Restated Eighth Amendment Date” shall mean the date on which the Amended and Restated Eighth Amendment to this Supplement shall become effective.

* Portions of the material in this Exhibit have been redacted pursuant to a request for confidential treatment and the redacted material has been filed separately with the Commission. An asterisk has been placed in the precise places in this Agreement where we have redacted information, and the asterisk is keyed to a legend which states that the material has been omitted pursuant to a request for confidential treatment.

(b) The definition of “Conversion Date” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Conversion Date” means February 5, 2003; provided, however, that such Conversion Date may be extended for a period of no longer than 364 days, if approved by all of the Holders of the Class A Notes.

(c) Clause (A) of the definition of “Class A Note Principal Payment” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

(A) (i) If no Early Amortization Event has occurred or is continuing on such Payment Date, an amount equal to the excess, if any, of (1) the Class A Note Principal Balance over (2) the Asset Base; plus

(ii) On or after the Conversion Date, if no Early Amortization Event has occurred or is continuing on such Payment Date, an amount equal to the excess, if any, of (1) the sum of (A) the product of (i) ninety percent (90%) and (ii) all Engine Revenues actually received by, or on behalf of, the Issuer during the related Collection Period with respect to the Series 1997-1 Engines and (B) the product of (x) a fraction, expressed as a percentage, the numerator of which shall equal the Class A Note Principal Balance (prior to giving effect to any payments of principal on such Payment Date) and the denominator of which shall equal the sum of the Net Book Values of all Series 1997-1 Engines (calculated as of the last day of the immediately preceding month) and (y) the greater of (i) the sum of the Net Book Values of all Series 1997-1 Engines sold during the related Collection Period (which Net Book Values will be determined as of the last day of the month immediately preceding such sale), and (ii) the aggregate Sales Proceeds of all Series 1997-1 Engines sold during the related Collection Period, over (2) the amount paid pursuant to clauses (A) through (G) inclusive, of Section 3.2(I) hereof minus the amount as calculated pursuant to clause (A)(i) above; or

(d) Clause 16 of the definition of “Eligible Engine” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

“(16) Non-U.S. Lessees. If the Lessee of such Engine is domiciled or principally located in a non-U.S. jurisdiction, (a) such Engine shall be owned by and leased from an Owner Trustee (acting under a Trust Agreement), (b) such Owner Trustee shall have executed and delivered to the Collateral Custodian a facsimile copy of an Owner Trustee Guaranty (the original counterpart of which shall be delivered to the Collateral Custodian within ten Business Days after such execution and delivery), (c) such Owner Trustee shall have executed and delivered to the Collateral Custodian a facsimile copy of an Owner Trustee Mortgage covering, among other things, such Engine and Lease Agreement (the original counterpart of which shall be delivered to the Collateral Custodian within three (3) Business Days after the filing thereof with the FAA), and (d) the Issuer

shall have executed and delivered to the Collateral Custodian a facsimile copy of a Beneficial Interest Pledge Agreement covering, among other things, the Issuer’s beneficial interest in the Owner Trust (the original counterpart of which shall be delivered to the Collateral Custodian within ten Business Days after such execution and delivery), provided that this clause (16) shall only apply to Subsequent Lease Transactions.”

(e) The definition of “Final Payment Date” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Final Payment Date” means, with respect to Series 1997-1 Notes, the date which is the fifth anniversary of the Conversion Date, or if such date is not a Business Day, the Business Day immediately succeeding such date.

(f) The definition of “Issuer Fee Letter” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Issuer Fee Letter” means the Third Amended and Restated Issuer Fee Letter, dated May 3, 2002, between the Issuer and the Deal Agent.

(g) The definition of “Subsequent Lease Transactions” in Section 1.1 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Subsequent Lease Transactions” shall mean those Leases of any Engine, which Leases shall, on or after the Amendment Date, be added to the Asset Base.

(h) The following definition is hereby added in its entirety to Section 1.1 of the Supplement:

“Collateral Custodian” shall mean BNY Midwest Trust Company, an Illinois corporation, or any successor thereto satisfactory to the Deal Agent.

(i) The following definition is hereby added in its entirety to Section 1.1 of the Supplement:

“Collateral Custody Agreement” shall mean a custodial agreement among the Collateral Custodian, the Issuer, the Servicer, the Indenture Trustee and the Deal Agent, as amended from time to time, relating to the transactions contemplated hereby.

(j) The following definition is hereby added in its entirety to Section 1.1 of the Supplement:

“FAA Counsel” shall mean McAfee & Taft or such other reputable counsel with offices in Oklahoma City, OK as Issuer and Servicer may from time to time select.

(k) The following definition is hereby added in its entirety to Section 1.1 of the Supplement:

“Step-Up Program Fee” shall have the meaning assigned to such term in the Issuer Fee Letter.

(l) The following definition is hereby added in its entirety to Section 1.1 of the Supplement:

“Step-Up Program Fee Rate” shall have the meaning assigned to such term in the Issuer Fee Letter.

(m) Section 3.2 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Section 3.2 Distributions from Series 1997-1 Series Account on each Payment Date.

On each Payment Date, the Indenture Trustee shall, in accordance with the Servicer Report, distribute funds then on deposit in the Series 1997-1 Series Account to the following Persons and in the following order of priority:

(I) If an Early Amortization Event shall not then be continuing:

(A) To the Indenture Trustee by wire transfer of immediately available funds, all Indenture Trustee’s Fees then due and payable for Series 1997-1 to the extent not paid by the Servicer;

(B) (i) if the Indenture Trustee has received the Servicer Report for the related Collection Period, to the Servicer by wire transfer of immediately available funds, an amount equal to the sum of any (x) Servicing Fee Arrearage and (y) Servicing Fee then due and payable and (ii) to the Servicer by wire transfer of immediately available funds, an amount equal to the Servicer Advance then due and payable;

(C) To the Administrative Agent, any fees and expenses then payable to the Administrative Agent approved by the Requisite Global Majority pursuant to Section 405(b) of the Indenture;

(D) To an Interest Rate Hedge Provider, any payments owing under an Interest Rate Hedge Agreement other than termination payments;

(E) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of first, any Class A Note Interest Arrearage, and second, the Class A Note Interest Payment for such Payment Date, excluding in each case any portion thereof representing the 2.0% margin described in clause (ii) of the definition of Overdue Rate;

(F) To the Series 1997-1 Restricted Cash Account, an amount sufficient so that the total amount on deposit therein is equal to the Series 1997-1 Restricted Cash Amount for such Payment Date;

(G) (i) To the Deal Agent an amount equal to the sum of (x) the Facility Fee and the Program Fee then due and payable and (y) any unpaid Facility Fee and Program Fee from all prior Payment Dates and (ii) to the Administrative Agent an amount equal to the sum of (x) the Administrative Agent Fee then due and payable and (y) any unpaid Administrative Agent Fee from all prior Payment Dates;

(H) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of prepayments on the Notes deposited in the Series 1997-1 Series Account for the related Collection Period;

(I) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of the Class A Note Principal Payment;

(J) To the Deal Agent an amount equal to the sum of (x) the Step-Up Program Fee then due and payable and (y) any unpaid Step-Up Program Fee from all prior Payment Dates;

(K) To each Holder of a Class A Note on the immediately preceding Determination Date, pro rata, the portion of any Default Interest then due and payable which represents the 2% margin described in clause (ii) of the definition of Overdue Rate;

(L) To each Holder of a Class A Note on the immediately preceding Determination Date, pro rata, an amount equal to Taxes, Other Taxes, Increased Costs and amounts due pursuant to Sections 2.5, 2.6 and 2.7 hereof, if any, then due and payable with respect to such Class A Note and any other costs, expenses, taxes and indemnities payable by the Issuer pursuant to the Class A Note Purchase Agreement;

(M) To an Interest Rate Hedge Provider any termination payments owing under any Interest Rate Hedge Agreement;

(N) To the Indenture Trustee for distribution pursuant to Section 401(d) of the Indenture, as Excess Cash Available for Distribution, to the extent that any Deficient Series is Outstanding on such Payment Date; and

(O) To the Issuer by wire transfer of immediately available funds, any remaining amount on deposit in the Series 1997-1 Series Account on such Payment Date.

Notwithstanding the foregoing, the amounts set forth in clause (O) shall be payable only at such times as no Deficient Series then exists.

(II) If an Early Amortization Event shall then be continuing:

(A) To the Indenture Trustee by wire transfer of immediately available funds, all Indenture Trustee’s Fees then due and payable for Series 1997-1 to the extent not paid by the Servicer;

(B) (i) If the Indenture Trustee has received the Servicer Report for the related Collection Period, to the Servicer by wire transfer of immediately available funds, an amount equal to the sum of any (x) Servicer Fee Arrearage and (y) Servicer Fee then due and payable and (ii) to the Servicer by wire transfer of immediately available funds, an amount equal to the Servicer Advance then due and payable;

(C) To the Administrative Agent, any fees and expenses then payable to the Administrative Agent approved by the Requisite Global Majority pursuant to Section 405(b) of the Indenture;

(D) To an Interest Rate Hedge Provider, any payments owing under an Interest Rate Hedge Agreement other than termination payments;

(E) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of first, any Class A Note Interest Arrearage and second, the Class A Note Interest Payment for such Payment Date excluding any portion thereof representing Default Interest calculated at the Overdue Rate;

(F) (i) to the Deal Agent, an amount equal to the sum of (x) the Facility Fee and Program Fee then due and payable and (y) any unpaid Facility Fee and Program Fee from all prior Payment Dates and (ii) to the Administrative Agent an amount equal to the sum of (x) the Administrative Agent Fee then due and payable and (y) any unpaid Administrative Agent Fee from all prior Payment Dates;

(G) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of prepayments on the Notes deposited in the Series 1997-1 Series Account for the related Collection Period;

(H) To each Holder of a Class A Note on the immediately preceding Determination Date, an amount equal to its pro rata portion of the Class A Note Principal Payment;

(I) To the Deal Agent, an amount equal to the sum of (x) the Step-Up Program Fee then due and payable and (y) any unpaid Step-Up

Program Fee from all prior Payment Dates, including any portion of Default Interest thereon calculated at the Overdue Rate;

(J) To each Holder of a Class A Note on the immediately preceding Determination Date, pro rata, an amount equal to Taxes, Other Taxes, Increased Costs and amounts due pursuant to Sections 2.5, 2.6 and 2.7 hereof, if any, then due and payable with respect to such Class A Note and any other costs, expenses, taxes and indemnities payable by the Issuer pursuant to the Class A Note Purchase Agreement;

(K) To an Interest Rate Hedge Provider any termination payments owing under any Interest Rate Hedge Agreement;

(L) To the Indenture Trustee for distribution pursuant to Section 401(d) of the Indenture, as Excess Cash Available for Distribution, to the extent that any Deficient Series is Outstanding on such Payment Date; and

(M) To the Issuer by wire transfer of immediately available funds, any remaining amount on deposit in the Series 1997-1 Series Account on such Payment Date.

Notwithstanding the foregoing, if an Event of Default has occurred and the Indenture Trustee has sold or otherwise liquidated any Series Collateral or any other asset of the Issuer, then solely with respect to funds realized by the Indenture Trustee from such sale or liquidation, the amounts set forth in clause (K) shall be payable pari passu with the amounts set forth in clause (I) in proportion to the amounts due under clauses (K) and (I), respectively.

Any amounts payable to a Purchaser shall be made by wire transfer of immediately available funds to the account that such Noteholder has designated to the Indenture Trustee in writing on or prior to the Business Day immediately preceding the Payment Date.”

(n) Section 3.5(b) of the Supplement is hereby amended and restated to read in its entirety as follows:

“(b) The Issuer shall maintain (or shall cause the Servicer to maintain) records that will identify amounts on deposit in the Series 1997-1 Engine Reserve Account to a specific Eligible Engine. The Servicer shall be entitled to withdraw funds from the Series 1997-1 Engine Reserve Account for the payment of maintenance expenses with respect to the related Eligible Engine, at the times and subject to the further conditions set forth in the Servicing Agreement; provided, however, that the Servicer may not make any such withdrawal in an amount greater than $1,000,000 unless the Deal Agent determines (or is deemed to determine) that the use of proceeds of such withdrawal complies with the Maintenance Reserve Withdrawal Conditions (as defined below).

The Servicer shall give the Indenture Trustee and the Deal Agent prior written notice of any such requested withdrawal in excess of $1,000,000, accompanied by supporting documentation showing compliance with the Maintenance Reserve Withdrawal Conditions. Such request shall be accompanied by a notice in the form of Exhibit E to this Supplement, duly completed (a “Withdrawal Notice”). The Indenture Trustee shall, upon receipt of such notice of a requested withdrawal and supporting documentation, transmit copies thereof by telecopy to the Deal Agent. If such notice and documentation are received by the Indenture Trustee prior to 2:00 p.m. (New York time) on any Business Day, the Indenture Trustee will telecopy the same to the Deal Agent at (704) 383-7851 on the same Business Day. In all other cases the Indenture Trustee will telecopy such notice and documentation to the Deal Agent at such telecopy number on the next Business Day following the Indenture Trustee’s receipt thereof. If the Deal Agent determines that such supporting documentation does not show that such drawing complies with the Maintenance Reserve Withdrawal Conditions or that it has received insufficient supporting documentation to show such compliance, it will so indicate by signing the applicable Withdrawal Notice in the space provided, and sending such signed Withdrawal Notice to the Indenture Trustee and the Servicer no later than 5:00 p.m. (New York time) on the second Business Day after the day on which the Deal Agent received such telecopy from the Indenture Trustee. Such notice by the Deal Agent, if given, will be sent to the Indenture Trustee by telecopy at (212) 328–7623. If the Indenture Trustee does not receive such notice by 5:00 p.m. (New York time) on such second Business Day at such telecopy number, the Deal Agent will be deemed to have determined that such withdrawal complies with the Maintenance Reserve Withdrawal Conditions. If the Indenture Trustee timely receives such Withdrawal Notice signed by the Deal Agent, it will not permit the applicable withdrawal from the Series 1997-1 Engine Reserve Account. If the Indenture Trustee does not timely receive such Withdrawal Notice signed by the Deal Agent, it will permit the applicable withdrawal.

The “Maintenance Reserve Withdrawal Conditions” applicable to any Withdrawal Notice are that

(i) the amount requested to be withdrawn must be no greater than the aggregate amount of the invoices for work done on the applicable Eligible Engine, copies of which are delivered as part of the supporting documentation for such Withdrawal Notice, and

(ii) the amount requested to be withdrawn must be no greater than the aggregate amount of all Maintenance Reserve Payments on deposit in the Series 1997-1 Engine Reserve Account which were shown as being allocated to the applicable Eligible Engine in the most recently delivered Servicer Report.

Notwithstanding the foregoing, so long as a Servicer Default is then in effect, the Servicer shall not be entitled to make any such withdrawal (irrespective

of the amount thereof) except upon presentation of supporting documentation reasonably determined by the Deal Agent to comply with the Maintenance Reserve Withdrawal Conditions and the terms of the applicable Lease Agreement (which shall evidence its determination by written instrument delivered to the Indenture Trustee).”

(o) Section 4.6 of the Supplement is hereby amended and restated to read in its entirety as follows:

“Section 4.6 Insurance. Within 45 days of the Closing Date or the Transfer Date related to the transfer of any additional Transferred Assets, in the case of any Transferred Assets received from an Affiliate of the Issuer, and on or before such Closing Date or Transfer Date, in the case of all other Transferred Assets, and on the date of the applicable Subsequent Lease Transaction, the Issuer shall deliver to the Collateral Custodian certificates evidencing the applicable Lessee’s insurance coverage (in addition to any insurance coverage required under the Servicing Agreement), which shall be satisfactory to the Deal Agent, and shall name the Indenture Trustee on behalf of the Series 1997-1 Noteholders as contract party or additional loss payee, as the case may be, in the case of casualty insurance, and as additional insured in the case of liability insurance.”

(p) The following new Section 4.9 is hereby added to the Supplement:

“Section 4.9. Filing of Leases with FAA. The Issuer will cause each Lease to be duly filed with the FAA, together with any Lease assignment which may be necessary to perfect the Indenture Trustee’s security interest in such Lease, no later than the Transfer Date of the applicable Engine and, in the case of any Lease executed and delivered after such Transfer Date, no later than the date of such execution and delivery, and will deliver, or will cause to be delivered, evidence of such filing together with any “chattel paper” original of such Lease to the Collateral Custodian within three Business Days of such filing.”

(q) The first paragraph of Section 5.2 is hereby amended and restated to read in its entirety as follows:

“Section 5.2 Advances on Class A Notes. The obligation of a Purchaser to make any Loans pursuant to its Class A Note Commitment under this Supplement and the Class A Note Purchase Agreement is subject to the following further conditions; provided, however, that the Deal Agent may waive in writing those conditions set forth in subdivisions (o), (r), (s), (v) and (w) of this Section 5.2:”

(r) Section 5.2(c) of the Supplement is hereby amended by deleting the word “Purchasers” and substituting the words “Collateral Custodian, Deal Agent and VFCC” therefor.

(s) Section 5.2(d) of the Supplement is hereby amended by deleting the word “Purchasers” and substituting the words “Collateral Custodian, Deal Agent and VFCC” therefor

and is further amended by deleting the words “three (3)” and substituting the words “one (1)” therefor.

(t) Section 5.2(f) of the Supplement is hereby amended by deleting the words “Deal Agent” and substituting the words “Collateral Custodian” therefor.

(u) Section 5.2(g) of the Supplement is hereby amended by adding the words “shall have been delivered to the Collateral Custodian” immediately after the words “Servicing Agreement”.

(v) Section 5.2(h) of the Supplement is hereby amended and restated to read in its entirety as follows:

“(h) Opinions of Counsel. The Collateral Custodian shall have received Opinions of Counsel to the Issuer, other than counsel employed by the Issuer, the Seller or the Servicer, as to the filing with the FAA of the Indenture Trustee’s security interest in the Collateral, and the perfection and priority of such security interest with respect to FAA matters in form and substance satisfactory to the Series 1997-1 Noteholder.”

(w) Section 5.2(i) is hereby amended by deleting the words “Deal Agent shall have received evidence to its satisfaction” and substituting the words “Collateral Custodian shall have received evidence satisfactory to the Deal Agent” therefor.

(x) Section 5.2(j) is hereby amended by adding the words “Collateral Custodian and the” immediately before the first instance of the words “Deal Agent” therein.

(y) Section 5.2(k) of the Supplement is hereby amended and restated to read in its entirety as follows:

“(k) Chattel Paper. Any original counterpart of each Lease Agreement (other than the one held by the Lessee or filed with any relevant Governmental Authority) that will be the subject of a Loan that constitutes “chattel paper” for purposes of the UCC as in effect in the jurisdiction whose law governs the Lease Agreement has been delivered in escrow to the Issuer’s FAA Counsel on or prior to the effectiveness of such Lease Agreement, and shall have been filed with the FAA on or before the date of such Loan, provided, however, that FAA Counsel shall deliver such “chattel paper” original counterpart to the Collateral Custodian within three (3) Business Days after such filing.”

(z) Section 5.2(s) of the Supplement is hereby amended and restated to read in its entirety as follows:

“(s) Concentration of Engines for Wide Body Aircraft. After giving effect to the transfer of all Engines which are transferred on any Transfer Date, the sum of the Net Book Values of all Eligible Engines designed to power Wide Body Aircraft shall not exceed an amount equal to the product (A) the Wide Body Aircraft Percentage and (B) the Aggregate Net Book Value.”

(aa) Section 5.2(y) of the Supplement is hereby deleted in its entirety and replaced with the word “Reserved.”

(bb) Section 5.2(aa) of the Supplement is hereby amended and restated to read in its entirety as follows:

“(aa) Owner Trustee Documents. With respect to each Engine owned by an Owner Trustee, the Collateral Custodian shall have received from such Owner Trustee within three (3) Business Days of the transfer of such Engine to such Owner Trustee (i) a copy of the resolutions of the Board of Directors of the Owner Trustee, in its individual capacity, certified by the Secretary or an Assistant Secretary of the Owner Trustee, duly authorizing the execution, delivery and performance by the Owner Trustee of each of the Related Documents to which the Owner Trustee is or will be a party; (ii) an incumbency certificate of Owner Trustee, as to the persons authorized to execute and deliver the Related Documents to which it is or will be a party and the signatures of such person or persons; and (iii) a legal opinion of counsel to the Owner Trustee with respect to the due authorization, execution and delivery by the Owner Trustee of the Related Documents to which it is or will be a party.”

(cc) Section 5.2 of the Supplement is amended to add the following Section (bb) at the end thereof:

“(bb) Collateral Custody Agreement. The Issuer, the Servicer, the Indenture Trustee and the Deal Agent shall have entered into a Collateral Custody Agreement in form and substance satisfactory to the Deal Agent with the Collateral Custodian and, on or before the date of the applicable Loan, the Collateral Custodian shall have confirmed to the Deal Agent in writing that the Collateral Custodian has received the documents required by Schedule I (attached hereto as Exhibit F) of such Collateral Custody Agreement to be delivered on or before the date of such applicable Loan.”

(dd) The following new Section 5.3 is hereby added to the Supplement:

“5.3 Deliveries. The Issuer will timely file and deliver each document which is required to be filed or delivered hereunder or under any Related Document, or the filing or delivery of which is listed as a condition to the making of any Loan in Section 5.2 but which is permitted to be filed or delivered after the date of such Loan, strictly within the time period set forth herein for such filing or delivery.”

(ee) Section 6.19 of the Supplement is hereby amended and restated to read in its entirety as follows:

“6.19 Subsidiaries. At all times on or prior to the Effective Date, the Issuer has had no Subsidiaries other than WLFC Funding (Ireland) Limited, a corporation organized under the law of the Republic of Ireland.”

(ff) The Supplement is hereby amended by adding a new Exhibit F immediately following Exhibit E thereto, which Exhibit F shall read in its entirety as follows:

Exhibit F

Funding Deliverables

ITEM	RECIPIENTS	DUE DATE
Asset Base Certificate	Collateral Custodian, Deal Agent, VFCC	At least 1 day prior to the funding of any loan

Notice of Request for a Loan	Collateral Custodian, Deal Agent, VFCC	On or prior to the funding of any loan

Compliance Certificate	Collateral Custodian Deal Agent, VFCC	On or prior to the funding of any loans

Appraisal	Collateral Custodian, Deal Agent	On or prior to the funding of any loans

Certified Board resolutions of the Owner Trustee	Collateral Custodian	On or prior to the third Business Day following any transfer

Incumbency certificate of the Owner Trustee	Collateral Custodian	On or prior to the third Business Day following any transfer

Legal opinion as to execution of Loan Documents by the Owner Trustee	Collateral Custodian	On or prior to the third Business Day following any transfer

Any “chattel paper” original of each Lease Agreement	Collateral Custodian	To be provided to FAA Counsel on or prior to any transfer. FAA Counsel agrees to provide to Collateral Custodian within 3 business days

Owner Trustee Guaranty executed by Owner Trustee	Collateral Custodian	On or prior to any transfer

ITEM	RECIPIENTS	DUE DATE
Owner Trustee Mortgage executed by Owner Trustee	Collateral Custodian	To be provided to FAA Counsel on or prior to any transfer. FAA Counsel agrees to provide to Collateral Custodian within 3 business days

Beneficial Interest Pledge Agreement, executed by WLFC Funding Corporation	Collateral Custodian	On or prior to any transfer

Engine and Beneficial Interest Transfer Certificate	Collateral Custodian	On or prior to the third Business Day following any transfer

Evidence of filing Engine or Beneficial Interest registration with requisite Governmental Authority	Collateral Custodian	Promptly upon receipt

Supplement to List of Engines	Collateral Custodian	On or prior to the third Business Day following any transfer

File-stamped copies of UCC-1 financing statements naming WLFC as Debtor/Seller; Funding Corp. as Secured Party/Purchaser; and BONY as Assignee of Secured Party	Collateral Custodian	Promptly upon receipt

File-stamped copies of UCC-1 financing statements naming Funding Corp. as Debtor and BONY as Secured Party	Collateral Custodian	Promptly upon receipt

File-stamped copies of FAA recordations of the Contribution and Sale Agreement, Indenture, Series 1997-1 Supplement and each Lease Agreement for each Engine and Contributed Beneficial Interest	Collateral Custodian	Promptly upon receipt

ITEM	RECIPIENTS	DUE DATE
File-stamped copies of Security filings, if any, required by the Governmental Authority of the country of any foreign Lessee’s chief executive office	Collateral Custodian	Promptly upon receipt

File-stamped copies of UCC-1 financing statements covering any Lease Agreements being transferred and naming the lease originator as Debtor; WLFC as Secured Party and BONY as Assignee of Secured Party	Collateral Custodian	Promptly upon receipt

File-stamped copies of UCC termination statements covering the security interest of any other Person with respect to Contributed Assets or Beneficial Interests in assets being transferred	Collateral Custodian	Promptly upon receipt

Certificates of insurance coverage	Collateral Custodian	Within 45 days of the Transfer Date for Engines transferred from an Affiliate of Issuer; on the date of the applicable Loan for all other transfers and on the date of the Subsequent Lease Transaction

Consent and Agreement	Collateral Custodian	Within 90 days of the Transfer Date and within 90 days of the date of the Subsequent Lease Transaction

Servicer Certificate	Deal Agent and Collateral Custodian	On the date of the applicable Loan

Opinions of Foreign Local Counsel as to perfection, if necessary (only for foreign Lessees not set up with an Owner Trust structure)	Collateral Custodian	Within 120 days of Transfer Date

Opinion of FAA Counsel as to filing perfection and priority with respect to the FAA of Indenture Trustee’s security interest in the Collateral	Collateral Custodian	Within three Business Days after the applicable Transfer Date

(gg) The definition of “Single Lessee Percentage” in Schedule 1 to the Supplement is hereby amended and restated to read in its entirety as follows:

“Single Lessee Percentage” means * percent (*%); provided, however that with respect to any lessee which is located in an Emerging Market the Single Lessee Percentage shall mean * percent (*%).

(hh) The definition of “Three Lessee Percentage” in Schedule 1 to the Supplement is hereby amended and restated to read in its entirety as follows:

“Three Lessee Percentage” means * percent (*%).

(ii) Section 3 of Schedule 1 of the Supplement, entitled “Geographic Concentration Table” is hereby amended and restated to read in its entirety as follows:

“Section 3: Geographic Concentration Table”

Geographic Region	Maximum Geographic Percentage
Africa/Middle East/Europe	*	%
Emerging Asia	*	%
China	*	%
Developed Asia/Pacific Rim	*	%
Developed Europe	*	%
North America	*	%
Latin/South America	*	%
Total Emerging Markets	*	%

(jj) Exhibit B to the Supplement is hereby replaced in its entirety by Exhibit B to this Eighth Amendment.

(kk) Exhibit D to the Supplement is hereby replaced in its entirety with Exhibit D to this Eighth Amendment.

* The redacted material on this Schedule has been omitted pursuant to a request for confidential treatment and the material has been filed separately

(ll) Exhibit E to this Eighth Amendment is hereby added in its entirety to the Supplement as Exhibit E to the Supplement.

SECTION 2. Supplement in Full Force and Effect as Amended. Except as specifically amended hereby, the Supplement shall remain in full force and effect. All references to the Supplement shall be deemed to mean the Supplement as modified hereby. This Eighth Amendment shall not constitute a novation of the Supplement, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of the Supplement, as amended by this Eighth Amendment, as though such terms and conditions were set forth herein.

SECTION 3. Effectiveness of Eighth Amendment. This Eighth Amendment shall become effective on the date (the “Amended and Restated Eighth Amendment Date”) as of which all the parties hereto have executed the signature pages hereto.

SECTION 4. Miscellaneous.

(a) This Eighth Amendment may be executed in any number of counterparts, and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.

(b) The descriptive headings of the various sections of this Eighth Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

(d) THIS EIGHTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS EIGHTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS.

(e) First Union Securities, Inc. certifies by acknowledgment hereof that it is the sole Noteholder.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have caused this Amended and Restated Eighth Amendment to the Amended and Restated Series 1997-1 Supplement to be executed by their respective officers thereunto duly authorized, as of the date first above-written.

WLFC FUNDING CORPORATION


By:		/s/ DONALD A. NUNEMAKER
Name:					Donald A. Nunemaker
Title:					Executive Vice President Chief Operating Officer


THE BANK OF NEW YORK, as Indenture Trustee


By:	/s/ SCOTT J. TEPPER
Name:				Scott J. Tepper
Title:				Assistant Vice President


THE BANK OF NEW YORK, as Securities Intermediary


By:	/s/ SCOTT J. TEPPER
Name:			Scott J. Tepper
Title:			Assistant Vice President

Consented and agreed to:

FIRST UNION SECURITIES, INC.,
		as the sole Noteholder on
		behalf of the Purchasers


By:	/s/ DANIEL MILLER
Name:			Daniel Miller
Title:			Director

Consented and agreed to:

FORTIS BANK [NEDERLAND] N.V.,
			as Control Party

By:	/s/ M.P.A. ZONDAG
Name:					M.P.A. Zondag
Title:

By:		/s/ P.R.G. ZAMAN
Name:				P.R.G. Zaman
Title:

EX-10.24 5 j4400_ex10d24.htm EX-10.24

Exhibit 10.24

EXECUTION VERSION

EIGHTH AMENDMENT TO

NOTE PURCHASE AGREEMENT

THIS EIGHT AMENDMENT TO NOTE PURCHASE AGREEMENT, dated as of May 3, 2002 (this “Eighth Amendment”), is entered into by and among WLFC FUNDING CORPORATION, as issuer (the “Issuer”), WILLIS LEASE FINANCE CORPORATION, as servicer (the “Servicer”), VARIABLE FUNDING CAPITAL CORPORATION, as a purchaser (“VFCC”), the Investors, FIRST UNION SECURITIES, INC., as deal agent (the “Deal Agent”) and WACHOVIA BANK, NATIONAL ASSOCIATION, as liquidity agent (formerly known as First Union National Bank) (“WB”). Capitalized terms used and not otherwise defined herein are used as defined in the Agreement (as defined below).

WHEREAS, the parties hereto entered into that certain Note Purchase Agreement, dated as February 11, 1999, as amended by a First Amendment, dated as of May 12, 1999, a Second Amendment, dated as of February 9, 2000, a Third Amendment, dated as of February 7, 2001, a Fourth Amendment, dated as of May 31, 2001, a Fifth Amendment, dated as of February 5, 2002, a Sixth Amendment, dated as of March 5, 2002 and a Seventh Amendment, dated as of April 5, 2002 (the “Agreement”); and

WHEREAS, the parties hereto desire to amend the Agreement in certain respects as provided herein;

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

SECTION 1. Amendments.

(a) The definition of “Commitment Termination Date” in Section 1.1 of the Agreement is hereby modified, amended and restated to read in its entirety as follows:

“Commitment Termination Date: February 5, 2003 or such later date to which the Commitment Termination Date may be extended (if extended) in the sole discretion of the Purchases in accordance with the terms of Section 2.3(b).”

(b) The following definition is hereby added in its entirety to Section 1.1 of the Agreement:

“Eighth Amendment Date: The date on which the Eighth Amendment to the Agreement shall become effective.”

SECTION 2. Agreement in Full Force and Effect as Amended. Except as specifically amended hereby, the Agreement shall remain in full force and effect. All references to the Agreement shall be deemed to mean the Agreement as modified hereby. This Eighth Amendment shall not constitute a novation of the Agreement, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of the Agreement, as amended by this Eighth Amendment, as though such terms and conditions were set forth herein.

SECTION 3. Miscellaneous.

[Remainder of Page Intentionally left Blank]

IN WITNESS WHEREOF, the parties have caused this Eighth Amendment to the Agreement to be executed by their respective officers thereunto duly authorized as, of the date first above written.

THE ISSUER:

WLFC FUNDING CORPORATION

By:

/s/ Donald A. Nunemaker

Title:

DONALD A. NUNEMAKER
EXECUTIVE VICE PRESIDENT
CHIEF OPERATING OFFICER

THE SERVICER:

WILLIS LEASE FINANCE CORPORATION

By:

/s/ Donald A. Nunemaker

Title:

DONALD A. NUNEMAKER
EXECUTIVE VICE PRESIDENT
CHIEF OPERATING OFFICER

THE INVESTOR:

WACHOVIA BANK, NATIONAL ASSOCIATION

By:

/s/ Bill A. Shirley

Title:

BILL A.SHIRLEY
SENIOR VICE PRESIDENT

Wachovia Bank, National Association

One First Union Center, TW-9

Charlotte, North Carolina 28288

Attention: Credit Administration

Facsimile No.: (704) 374-6355

Confirmation No.: (704) 374-4001

S-1

VFCC:

VARIABLE FUNDING CAPITAL CORPORATION

By:

First Union Securities, Inc.,

as attorney-in-fact

By:

/s/ Douglas R. Wilson

Title:

DOUGLAS R. WILSON, SR.
VICE PRESIDENT

Variable Funding Capital Corporation

c/o First Union Securities, Inc.

One First Union Center, TW-9

Attention: Conduit Administration

Facsimile No.: (704) 383-6036

Confirmation No.: (704) 383-9343

with a copy to:

Lord Securities Corp.

2 Wall Street, 19^th Floor

New York, New York

Attention: Vice President

Facsimile No.: (212) 346-9012

Confirmation No.: (212) 346-9008

THE DEAL AGENT:

FIRST UNION SECURITIES, INC.

By:

/s/ Daniel Miller

Title:

DANIEL MILLER.
DIRECTOR

First Union Securities, Inc.

One First Union Center, TW-9

Charlotte, North Carolina 28288

Attention: Conduit Administration

Facsimile No.: (704) 383-6036

Telephone No.: (704) 383-9343

S-2

THE LIQUIDITY AGENT:	WACHOVIA BANK, NATIONAL ASSOCIATION


	By:	/s/ Bill A. Shirley
	Title:		BILL A. SHIRLEY SENIOR VICE PRESIDENT

	Wachovia Bank, National Association
	One First Union Center, TW-9
	Charlotte, North Carolina 28288
	Attention; Credit Administration
	Facsimile No.: (704) 374-6355
	Telephone No.: (704) 374-4001

S-3

EX-11.1 6 j4400_ex11d1.htm EX-11.1

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Exhibit 11.1

Computation of Earnings Per Share

	Three Months Ended June 30,					Six Months Ended June 30,
	2002		2001			2002		2001
	(in thousands, except per share data)
Net income
Basic
Earnings:
Income from continuing operations	$	577	$	2,969		$	1,543	$	5,469
Discontinued operations	—		(606		)	—		(785		)
Net earnings	$	577	$	2,363		$	1,543	$	4,684

Shares:
Average common shares outstanding	8,830		8,735			8,829		8,722

Basic earnings per common share
Income from continuing operations	$	0.07	$	0.34		$	0.17	$	0.63
Discontinued operations	—		(0.07		)	—		(0.09		)
Net earnings	$	0.07	$	0.27		$	0.17	$	0.54

Assuming Full Dilution
Earnings:
Income from continuing operations	$	577	$	2,969		$	1,543	$	5,469
Discontinued operations	—		(606		)	—		(785		)
Net earnings	$	577	$	2,363		$	1,543	$	4,684

Shares:
Average common shares outstanding	8,830		8,735			8,829		8,722
Potentially dilutive common shares outstanding	22		170			25		174
Diluted average common shares outstanding	8,852		8,905			8,854		8,896

Earnings per common share assuming full dilution
Income from continuing operations	$	0.07	$	0.33		$	0.17	$	0.61
Discontinued operations	—		(0.06		)	—		(0.08		)
Net earnings	$	0.07	$	0.27		$	0.17	$	0.53

Supplemental information:

The difference between average common shares outstanding to calculate basic and assuming full dilution is due to options outstanding under the 1996 Stock Options/Stock Issuance Plan and warrants issued in conjunction with the initial public offering.

EX-99.1 7 j4400_ex99d1.htm EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Willis Lease Finance Corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

• the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

• the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Dated: August 9, 2002

/s/ Charles F. Willis IV

President and Chief Executive Officer

/s/ Donald A. Nunemaker

Interim Chief Financial Officer

FORM 10-Q

Item 1. Consolidated Financial Statements

Consolidated Financial Statements